Mass Tort Defense : Mass Tort Defense Lawyer & Attorney : Sean P. Wajert : Dechert Law Firm : Products Liability, Class Actions, Pharmaceutical Litigation

A federal court last week denied class certification in a lawsuit over insect parts allegedly found in baby formula, recognizing that the claims raised multiple individual issues. Brandner v. Abbott Laboratories, et al., No. 2:10-cv-03242 (E.D. La. 1/23/12).

Plaintiff filed this suit in connection with Abbott’s September, 2010 recall of Similac brand infant formula because of the concern that insect parts may have been observed in a batch of finished product.  Brandner asserted that she purchased, and her child consumed, Similac that was
part of the product recall.  Plaintiff contended that during this period her child suffered alleged gastrointestinal problems, which symptoms required numerous visits to a physician, and that she allegedly experienced severe emotional distress upon learning she had fed her child infant formula containing beetles and beetle larvae.

Plaintiff's Rule 23 (b)(2) class allegations were dismissed, but plaintiff then sought monetary damages and moved to certify a class on her products liability and redhibition claims under
Federal Rule of Civil Procedure 23(b)(3). Defendant opposed this certification motion on the grounds that she failed to satisfy the commonality, typicality, and adequacy of representation requirements of Rule 23(a), as well as the predominance and superiority requirements of Rule 23(b)(3). The court's focus was on the predominance and superiority issues, and found no need to reach all the other questions.

Predominance of individual issues under the product liability claim-

Louisiana law requires a plaintiff to demonstrate that the product was unreasonably dangerous when it left the manufacturer’s control. Whether each class member actually purchased contaminated Similac was subject to individualized, not collective proof. Second, each putative class member would need to establish that Abbott’s actions were a proximate cause of his or her injury. Jefferson v. Lead Indus. Ass’n, Inc., 106 F.3d 1245, 1247 (5th Cir. 1997).  The plaintiff's cause of action here would require proof of medical causation, which has two components, general causation, which establishes that a substance has the capability of causing the injury or disorder in humans, and specific causation, which focuses upon whether the substance caused a particular injury to a particular individual. E.g., Ridgeway v. Pfizer, Inc.,, 2010 WL 1729187, at *2 (E.D. La. Apr. 27, 2010).  Even assuming general causation, proving specific causation would require a determination of an individual’s family and medical history; age; gender; diet; the timing of ingestion of the product; whether that individual suffered an injury, when the injury occurred, the type of injury suffered, and the number of occurrences of injury; and more. See In re Vioxx Prods. Liab. Litig., 239 F.R.D. 450, 459 (E.D. La. 2006)(citing In re Phenylpropanolamine (PPA) Prods. Liab. Litig., 208 F.R.D. 625, 631-32 (W.D. Wash. 2002)).

This highly individualized inquiry led the court to conclude that issues common to the class did
not predominate.   Interestingly, the court went on to note that all plaintiffs who claimed emotional distress (an issue that plaintiff contended was common to the class) would have to establish not only the distress but also the attendant damages. The damages issue required a determination  whether plaintiffs sought medical treatment, psychiatric treatment, the degree to which plaintiffs manifested generalized fear, and the severity of plaintiffs’ emotional distress. See Howard v. Union Carbide Corp., 897 So.2d 768, 774 (La. App. 2005). Because the determination of whether each member suffered emotional distress turned on a highly individualized assessment, questions of fact regarding individual members predominated over common issues of fact.  While the individual nature of damages alone does not necessarily preclude class certification, class treatment may not be suitable where the calculation of damages is not susceptible to a mathematical or formulaic calculation. Establishing emotional damages would entail the exact type of “mini-trials” the courts have cautioned against. Indeed, the very nature of these damages, compensating plaintiffs for emotional and other intangible injuries, necessarily implicated the subjective differences of each plaintiff’s circumstances; they were an individual, not class-wide, remedy.  See Allison v. Citgo Petroleum Corp., 151 F.3d 402, 417 (5th Cir. 1998). See also In re Katrina Canal Breaches Litig., 401 Fed. Appx. 884, 887 (5th Cir. 2010) (class certification not appropriate when individualized issues, such as the nature and extent of a class member’s damages, will predominate).

Superiority- 

The court also found that plaintiff made no showing of how she would try these claims on a class-wide basis. She thus failed to demonstrate how she would overcome the manageability problems posed by claims that require such disparate proof. Accordingly, she had not satisfied the requirement that a class action be superior to other available methods of adjudicating the controversy.

Other claims-

Plaintiff's redhibition claims also could not be certified as a class because common issues did not predominate, and a class action was not a superior mechanism for trying these claims. Plaintiff argued, in essence, that defendant admitted defect in recalling lots of the product.  But the court found that the recall notice was far from an admission that every unit contained a
redhibitory defect. Indeed, the press release actually stated that there was only a “remote possibility” of contamination in the products subject to recall. Plaintiff could not show through common proof that each class member purchased a defective product.  Plaintiff's expert did not convince the court otherwise. The overall rate of contamination in tested samples was only 0.16%.  The expert admitted there was no scientific way to evaluate contamination in units that were recalled but not tested.  And even if the product was considered “adulterated” per the FDCA, a food product is adulterated, inter alia, if it has been prepared, packed, or held under insanitary
conditions whereby it may have become contaminated with filth, or whereby it may have been rendered injurious to health. So a product can be “adulterated” under the FDCA without being contaminated or defective.

Class certification denied under (b)(3).

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The Fifth Circuit last week upheld the dismissal of putative class actions filed by Mississippi and Alabama residents against the federal government alleging trailers provided to Hurricane Katrina-impacted citizens contained hazardous levels of formaldehyde. See In re: FEMA Trailer Formaldehyde Products Liability Litigation (Mississippi Plaintiffs), No. 10-30921, and In re: FEMA Trailer Formaldehyde Products Liability Litigation (Alabama Plaintiffs), No. 10-30945 (5th Cir. 2012).

Plaintiffs-Appellants brought this Federal Tort Claims Act action against the United States for injuries allegedly related to their exposure to elevated levels of formaldehyde contained in the component materials of the Emergency Housing Units (“EHUs”) provided to them by the Federal Emergency Management Agency (“FEMA”) after Hurricanes Katrina and Rita. Readers will recall we have posted about various aspects of this litigation before. In October 2007, the United States Judicial Panel on Multidistrict Litigation created MDL No. 07-1873 (In re: FEMA Trailer Formaldehyde Products Liability Litigation), and assigned the litigation to the United States District Court for the Eastern District of Louisiana.

The key facts: After the hirricanes, FEMA activated its Individual and Household Assistance Program and, from September 2005 through May 1, 2009, the agency supplied disaster victims with EHUs, at no cost, to use as temporary shelter. The EHUs were taken from FEMA’s preexisting inventory, which had been purchased from public retailers as well as manufacturers. The EHUs were small, portable, and usually placed at the disaster victims’ home sites. The trailers were installed by Government contractors who placed the units on blocks or piers, anchored them to the ground using straps or bolts, and connected them to public sewer and water lines.

In March 2006, when FEMA began receiving formaldehyde complaints, it encouraged shelter occupants to ventilate their EHUs by opening the doors and windows. In June 2006, FEMA prepared an informational brochure informing EHU occupants of the dangers of formaldehyde exposure, encouraging them to ventilate their units, and urging them to seek medical help if they developed health problems related to formaldehyde. In September 2006, FEMA began working with the Environmental Protection Agency to test the EHUs for formaldehyde, and also developed various mitigation techniques.  In July 2007, FEMA distributed another informational brochure to EHU occupants, set up a hotline and a dedicated call center to field formaldehyde complaints from
occupants, and continued to assist occupants in locating alternative housing. FEMA subsequently entered into an agreement with the CDC to conduct additional testing, the findings of which were compiled in a third informational brochure and distributed to EHU occupants in early 2008.

The federal Government filed various motions to dismiss the claims against it or in the alternative for summary judgment, based on the FTCA’s discretionary function exception.The district court denied the motions and held that the FTCA’s discretionary function exception may not apply to some or all of Appellants’ claims, the determination of which would be driven by the facts of each individual case.  The district court then denied class certification and scheduled a series of bellwether trials, but none of the FTCA claims brought by the bellwether plaintiffs against the Government advanced to the trial stage.

The Government then moved under Federal Rule 12(b)(1) to dismiss Appellants’ FTCA claims for lack of subject-matter jurisdiction on the grounds of no analogous private liability under the Mississippi and Alabama emergency statutes.  The district court granted the Government’s motion and dismissed Appellants’ FTCA claims. Plaintiffs appealed to the Fifth Circuit.

 A plaintiff may only sue the United States if a federal statute explicitly provides for a waiver of sovereign immunity. The United States must consent to be sued, and that consent is a prerequisite to federal jurisdiction. Delta Commercial Fisheries Ass’n v. Gulf of Mex. Fishery Mgmt. Council, 364 F.3d 269, 273 (5th Cir. 2004). Waivers of sovereign immunity are narrowly construed in favor of the United States. In re Supreme Beef Processors, Inc., 468 F.3d 248, 253 (5th Cir. 2006). The FTCA is recognized as providing a waiver of sovereign immunity and provides the sole basis of recovery for tort claims against the United States. See 28 U.S.C. § 1346 and § 2671, et seq.; In re Supreme Beef Processors, 468 F.3d at 252 n.4. But the Act provides that the United States shall be liable in the same manner and to the same extent as a private individual under like circumstances.
28 U.S.C. § 2674.

The "same manner" analysis is a mix of federal and state law. The FTCA requires the  Government's liability to be measured in accordance with the law of the state where the alleged act or omission occurred, so here the Appellants’ FTCA claims were limited by the relevant provisions set forth in Mississippi and Alabama tort law. See 28 U.S.C. § 1346(b)(1); Richards v. United States, 369 U.S. 1, 11-14 (1962); Cleveland ex rel. Cleveland v. United States, 457 F.3d 397, 403 (5th Cir. 2006). Whether a private person in “like circumstances” would be subject to liability is also a question of sovereign immunity and, thus, is ultimately a question of federal law. See United States v. Olson, 546 U.S. 43, 44 (2005). Because the federal government could never be exactly like a private actor, a court’s job in applying the standard is to find the most reasonable analogy. LaBarge v. Cnty. of Mariposa, 798 F.2d 364, 366-69 (9th Cir. 1986). Inherent differences between the government and a private person cannot be allowed to disrupt this analysis. The Fifth Circuit has consistently held that the Government is entitled to raise any and all defenses that would potentially be available to a private citizen or entity under state law. Camacho v. Tex. Workforce Comm'n, 445 F.3d 407, 410 (5th Cir. 2006). Therefore, if a private person under “like circumstances” would be shielded from liability pursuant to a state statute, lower courts must decline to exercise subject-matter jurisdiction in a case like this.

Because, here, the Mississippi and Alabama emergency statutes abrogate the tort liability of a private person who, (1) voluntarily, (2) without compensation, (3) allows his property or premises to be used as shelter during or in recovery from a natural disaster, the Government’s voluntary, cost-free provision of the EHUs to disaster victims, in connection with Hurricanes Katrina and Rita, was
also immunized conduct under the statute.  Despite plaintiffs' arguments, the Government’s provision of the government-owned EHUs, as implemented by FEMA, was voluntary because it was under no contractual or legal obligation, under any federal legislation, to provide the EHUs to disaster victims in response to the disasters. The Government did not receive compensation from the disaster victims in exchange for letting them use the EHUs. (The collection of taxes by the Government is not comparable to the traditional quid pro quo compensation contemplated by the statute.) In addition, the Government’s actions relating to the EHUs fell within the time frame contemplated by the statute as “during or in recovery from” a major disaster, since FEMA’s temporary emergency housing program ran from the hurricanes to May, 2009.

Because Mississippi and Alabama emergency laws would protect those private individuals who shelter natural disaster victims from tort liability, the federal government's voluntary provision of the trailers was likewise immunized, the court concluded.

As an alternative, the Appellants asked the Fifth Circuit to certify questions to the state supreme courts of Alabama and Mississippi regarding the meaning of the state emergency statutes, but the appeals court agreed with the district court that these questions did not warrant certification. Dismissals affirmed.

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The role of alternative dispute resolution mechanisms in alleged consumer product defect cases continues to be a hotly disputed issue.  Plaintiff lawyers prefer the class action device, with its ability to pressure blackmail settlements, while product makers continue to require in product literature that consumers go the quicker and cheaper route of ADR.

The Third Circuit held last week that a putative class of computer customers should arbitrate, not litigate, their product defect claims against Dell Inc., even though the arbitration forum originally named in the computer purchase "terms and conditions" was no longer available. See Raheel Ahmad Khan, et al. v. Dell Inc., No.10-3655 (3d Cir.).

This appeal involved a matter of first impression for this court– whether Section 5 of the Federal Arbitration Act (FAA) required the appointment of a substitute arbitrator when the arbitrator designated by the parties was unavailable.  The district court denied Dell's Motion to Compel Arbitration, based on the belief that the arbitration provision was rendered unenforceable because it provided for the parties to arbitrate exclusively before a forum that was unavailable when plaintiff commenced suit. The district court also refused to appoint a substitute arbitrator, finding that it could not compel the parties to submit to an arbitral forum to which they had not agreed.

Khan purchased a Dell computer through Dell's website; he alleged that his unit suffered from design defects, causing his computer to overheat and thereby destroy the computer's motherboard. Khan allegedly replaced the motherboard multiple times. Eventually, the  warranty expired. In 2009, Khan filed a putative consumer class action on behalf of himself and other similarly situated purchasers and lessees of the allegedly defectively designed computers.

But to complete the purchase, plaintiff had been required to click a box stating “I AGREE to Dell's Terms and Conditions of Sale.” Just beneath was a box requiring "BINDING ARBITRATION ADMINISTERED BY THE NATIONAL ARBITRATION FORUM (NAF)."  However, at the time the lawsuit was filed, the NAF had gotten out of the business of conducting consumer arbitrations pursuant to a Consent Judgment, which resolved litigation brought by the Attorney General of Minnesota.  Although Khan suggested that Dell must have chosen the NAF based on its alleged corporate-friendly disposition, the record did not show that Dell was aware of the practices challenged by the state AG at the time that it selected the NAF as the arbitral forum governing Khan's purchase, or that Dell selected the NAF for any improper reason.

The arbitration provision did not designate a replacement forum in the event that NAF was unavailable for any reason. But, the product Terms and Conditions did incorporate the Federal Arbitration Act.  The court of appeals noted that, because this was a question of arbitrability, it was governed by the FAA. Congress passed the FAA in response to widespread judicial hostility to arbitration agreements. The FAA reflects a liberal federal policy favoring arbitration. The federal courts have regularly noted that questions of arbitrability must be addressed with a healthy regard for this federal policy favoring arbitration.

The particular problem presented in this case – the unavailability of the NAF – was addressed in section 5 of the FAA, which provides a mechanism for substituting an arbitrator when the designated arbitrator is unavailable. In determining the applicability of Section 5 of the FAA when an arbitrator is unavailable, courts have focused on whether the designation of the arbitrator was “integral” to the arbitration provision or was merely an ancillary consideration. Only if the choice of forum is an integral part of the agreement to arbitrate, rather than an ancillary logistical concern, will the failure of the chosen forum preclude arbitration. In other words, a court will decline to appoint a substitute arbitrator, as provided in the FAA, only if the parties' choice of forum is so central to the arbitration agreement that the unavailability of that arbitrator brings the agreement essentially to an end. In this light, said the court, the parties must unambiguously express their intent not to arbitrate their disputes in the event that the designated forum became unavailable.

Plaintiff stressed that the NAF's rules were incorporated into the contract, and that these rules provide that all arbitrations must be conducted by the NAF or an entity having an agreement with it.  The court found this requirement ambiguous as to what should happen in the event that the NAF was unavailable. The NAF's rules provided that they shall be interpreted in a manner consistent with the FAA and that, if any portion of the NAF rules were found to be unenforceable, that portion shall be severed and the remainder of the rules shall continue to apply.  This suggested the possibility of substitutions.

The dissent argued that it was important why the NAF was not available to arbitrate. But, the terms and conditions clearly contained an agreement to resolve disputes through arbitration, rather than through litigation. And the reason the forum was not available was not dispositive.

 

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The Ninth Circuit last week reversed the certification of a nationwide class raising consumer fraud claims against an auto maker. See Mazza, et al. v. American Honda Motor Co., No. 09-55376 (9th Circuit). 

Honda appealed the district court’s decision to certify a nationwide class of all consumers who purchased or leased Acura RL's equipped with a Collision Mitigation Braking System (“CMBS”). The plaintiffs alleged that certain advertisements misrepresented the characteristics of the CMBS and supposedly omitted material information on its limitations. The complaint stated four claims under California Law, specifically the California Unfair Competition Law (UCL), Cal. Bus. & Prof. Code § 17200 et seq., False Advertising Law (FAL), Cal. Bus. & Prof. Code § 17500 et seq., the Consumer Legal Remedies Act (CLRA), Cal. Civil Code § 1750 et seq., and a claim for unjust enrichment.  Readers know those are the typical claims in a consumer fraud case in the popular forum of California.

The Ninth Circuit held that the district court erred because it erroneously concluded that California law could be applied to the entire nationwide class, and because it erroneously concluded that all consumers who purchased or leased the relevant Acura RL can be presumed to have relied on defendant’s advertisements, which allegedly were misleading and omitted material information.

In 2007, plaintiffs bought Acura RL's from authorized Acura dealerships, and the vehicles were equipped with the CMB System. In December 2007, they filed a class action complaint alleging
that Honda misrepresented and concealed material information in connection with the marketing and sale of Acura RL vehicles equipped with the CMBS. According to Plaintiffs, Honda did not warn consumers (1) that its CMB collision avoidance system’s three separate stages may "overlap,"  (2) that the system may not warn drivers in time to avoid an accident, and (3) that it allegedly shuts off in bad weather.

The district court certified a nationwide class of people in the United States who, between August 17, 2005 and the date of class certification, purchased or leased new or used Acura RL vehicles
equipped with the CMBS. The district court concluded that California law could be applied to all class members because Honda did not show how the differences in the laws of the various states were material, how other states might have an interest in applying their laws in this case, and how these interests were implicated in this litigation. It also held that class members were entitled to an
inference of reliance under California law.

Before certifying a class, the trial court must conduct a rigorous analysis to determine whether the party seeking certification has met the prerequisites of Rule 23.  The party seeking class certification has the burden of affirmatively demonstrating that the class meets the requirements
of Federal Rule of Civil Procedure 23. And, under Rule 23(b)(3), a plaintiff must demonstrate the
superiority of maintaining a class action and show that the questions of law or fact common to class members predominate over any questions affecting only individual members.  Here, Honda contended that common issues of law did not predominate because California’s consumer protection statutes may not be applied to a nationwide class with members in 44 jurisdictions.
It further contended that common issues of fact did not predominate because the court  impermissibly relied on presumptions that all class members were exposed to the allegedly
misleading advertising, that they relied on misleading information in making their purchasing decision, and that they were damaged as a result.

First, choice of law. Under California’s choice of law rules, the class action proponent bears the initial burden to show that California has significant contact to the claims of each class member. Also, California law may only be used on a class-wide basis if the interests of other states are not found to outweigh California’s interest in having its law applied.  Honda argued that the district court misapplied the three-step governmental interest test.  The Ninth Circuit agreed. The district court abused its discretion in certifying a class under California law that contained class members
who purchased or leased their car in different jurisdictions with materially different consumer protection laws.  For example, some state consumer fraud laws have no scienter requirement, whereas many other states’ consumer protection statutes do require scienter. See, e.g., Colo.
Rev. Stat. 6-1-105(1)(e), (g), (u) (knowingly); N.J. Stat. Ann. § 56:8-2 (knowledge and intent for omissions); Debbs v. Chrysler Corp., 810 A.2d 137, 155 (Pa. Super. 2002) (knowledge
or reckless disregard).  Some states require named class plaintiffs to demonstrate reliance, while some other states’ consumer protection statutes do not.  These differences are "not trivial or wholly immaterial."  

The court of appeals reminds us that consumer protection laws are a creature of the state in which they are fashioned. They may impose or not impose liability depending on policy choices made by state legislatures. Each state has an interest in setting the appropriate level of liability for companies conducting business within its territory.  Maximizing consumer and business welfare, and achieving the correct balance for society, does not inexorably favor greater consumer protection; instead, setting a baseline of corporate liability for consumer harm requires balancing these competing interests.  Getting the optimal balance between protecting consumers and attracting foreign businesses, with resulting increase in commerce and jobs, is not so much a policy decision committed to a federal appellate court, or to particular district courts where a plaintiff may sue, as it is a decision properly to be made by the legislatures and courts of each state. More expansive consumer protection measures may mean more or greater commercial liability, which in turn may result in higher prices for consumers or a decrease in product availability.  Here, the district court did not adequately recognize that each foreign state has an interest in applying its law to transactions within its borders and that, if California law were applied to the entire class, foreign states would be impaired in their ability to calibrate liability to foster commerce.

The court of appeals also found that the district court abused its discretion in finding that common issues of fact predominated, because the scale of the advertising campaign here did not support a presumption of reliance, even if one were legally available.  It was likely that many class members were never exposed to the allegedly misleading advertisements, insofar as advertising of the challenged system was very limited. And it was not dispositive that Honda’s advertisements were allegedly misleading because of the information they omitted, rather than the information they claimed.  For everyone in the class to have been exposed to the omissions, it was necessary for everyone in the class to have viewed the allegedly misleading advertising. Here the limited scope of that advertising makes it unreasonable to assume that all class members viewed it.
Honda’s product brochures and TV commercials fell short of the extensive and long-term fraudulent advertising campaign that might support a presumption in the eyes of some courts.  Even if Honda allegedly might have been more elaborate and diligent in disclosing the limitations of the CMB system, its advertising materials did not deny that limitations exist. A presumption of reliance does not arise when class members were exposed to quite disparate information from various representatives of the defendant.  California courts have not allowed a consumer who was never exposed to an alleged false or misleading advertising campaign to recover damages under California’s UCL.  

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We have tried to keep an eye out for lower court cases interpreting the Supreme Court decision in J. McIntyre Machinery Ltd. v. Nicastro, as the lower courts parse through plurality, concurring and dissenting views on the exercise of personal jurisdiction over foreign defendants -- with mixed results.   Now comes another decision weighing in on what standard should be applied to the proposed  exercise of personal jurisdiction over nonresident defendants. Smith v. Teledyne Continental Motors Inc., No. 9:10-cv-02152 (D.S.C., 1/3/12).
 

In 2010, a vacationer was jogging on the beach at Hilton Head, South Carolina, when he was struck and killed -- by an airplane.  The plane, operated by Smith, was a single-engine aircraft
Smith had made from a kit. As he was flying the plane up the Atlantic coast about ten miles offshore, the propeller fell off the plane and into the sea. Smith attempted to make the Hilton Head airport, but came up short, crash landing on the beach and fatally striking the 38-year-old stockbroker who left behind his wife and two small children, according to the opinion.

The widow sued the pilot, the manufacturer of the airplane’s engine, the manufacturer of the airframe, a company which had serviced the plane prior to the crash; and the manufacturer of the propeller. Smith, the pilot, also sued the manufacturers. The cases were then consolidated, and eventually Teledyne, the engine maker, and a citizen of Delaware and Alabama, challenged personal jurisdiction in South Carolina.

The district court held that jurisdiction was proper.  This case did not involve the general jurisdiction that arises from pervasive contacts with a forum, but specific jurisdiction based on Teledynes' alleged contacts and purposeful availment of the forum.  And when one looks at the facts described, the conclusion may not come as a great surprise: Over the past ten years,
Teledyne sold at least 400 engines directly to South Carolina purchasers at a cost of about $40,000 apiece for a total revenue of approximately $1,600,000. Further, its engines were installed in approximately one-third of general aviation aircraft based in South Carolina. It maintained a continuous relationship with the owners of these engines through its warranty programs. Further, it advertised in South Carolina through aviation magazines. It maintained a distributor there until 2004. It directly sold parts for its engines in the forum state through interactive websites. Significantly, Teledyne maintained ongoing relationships with at least eleven “fixed base operators” --  stores/service centers located at South Carolina airports.  Teledyne had a contract with each FBO which required them to display Teledyne’s logos and actively promote the sale of its products. Teledyne maintained a continuing interactive Internet relationship with these FBOs, through which it provides them with technical support in repairing Teledyne products. Teledyne warranty work must be performed by these FBOs. Teledyne both buys and sells products over the Internet and through retailers to South Carolina residents. It admitted it had derived over $1 million in revenue from its sales to South Carolina residents over the past 10 years.  

This certainly was NOT the most narrow list of contacts we have seen litigated.  What was more intriguing about the opinion was the test the court adopted. The court concluded that the recent decision of the Supreme Court in J. McIntyre Machinery, Ltd. v. Nicastro, 131 S. Ct. 2780 (2011), and existing Fourth Circuit precedents were dispositive of the issue at bar.  The court observed that the decision was "somewhat difficult to interpret because no single opinion was adopted by a majority of the Justices. Rather, there are three opinions which must be synthesized."  But rather than, as some courts have done, looked for the grounds upon which the concurring justices agreed with the plurality, this court saw as the “common denominator of the Court’s
reasoning,” a "position approved by at least five Justices who support the judgment” -- the “stream-of-commerce plus” rubric previously enunciated in an opinion by Justice O’Connor in Asahi Metal Industry Co. v. Superior Court, 480 U.S. 102, 112 (1987). This view has come to be known as the “stream-of-commerce plus” test. Although it did not win the support of a majority of the Court in Asahi, or since, in the view of this court, it has now done so. 

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.  

Here, the court saw more overlap with the dissent. When the concurring Justices expressed the view that the case could be resolved by existing precedents, this meant Justice O’Connor’s opinion in Asahi, according to this district court.   

The court read the Fourth Circuit precedents as having already adopted this view and, therefore, the long-arm cases in the Fourth Circuit were not affected by Nicastro.

In applying this test, the court felt that plaintiffs had enumerated many significant contacts by which Teledyne targeted or purposefully directed commercial activities at South Carolina, as noted above.  Regarding whether the exercise of jurisdiction based on those minimum contacts would offend traditional notions of fair play and substantial justice, the court decided that the additional burden on the defendant was relatively slight as compared to the cost of litigating the matter in its home state because Teledyne had a national presence and organization. The interests of the forum state were extremely strong, in that South Carolina, located on a major coastal air corridor, had a compelling interest in protecting its citizens and visitors and their property from damage from falling airplanes.  

Motion denied, case to proceed in South Carolina.

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The Ninth Circuit late last month issued an interesting little opinion on the venerable and useful notion of puffing. Vitt v. Apple Computer Inc., No. 10-55941 (9th Cir., 12/21/11).

The crux of plaintiff's contention, building on his dissatisfaction that his iBook G4 allegedly failed shortly after his one year warranty had expired, was that the iBook G4 does not last “at least
a couple of years,” which he alleged was the minimum useful life a reasonable consumer expects from a laptop.  Vitt alleged that this was because one of the solder joints on the logic board of the iBook G4 degraded slightly each time the computer was turned on and off, eventually causing the joint to break and the computer allegedly to stop working -- shortly after Apple’s one year express warranty has expired. Vitt further alleged that Apple affirmatively misrepresented the durability, portability, and quality of the iBook G4, and did not disclose the alleged defect.

The district court held that Apple’s affirmative statements were non-actionable puffery, and that Apple had no duty to disclose the alleged defect , citing Daugherty v. American Honda Motor Co., 144 Cal. App. 4th 824 (2006).

The court of appeals affirmed, for substantially the reasons given by the district court. To be actionable as an affirmative misrepresentation, a statement must make a “specific and  measurable claim, capable of being proved false or of being reasonably interpreted as a statement of objective fact. Coastal Abstract Serv. v. First Am. Title Ins. Co., 173 F.3d 725, 731 (9th Cir. 1999). California courts have also held that "mere puffing" cannot support liability under
California consumer protection laws. Vitt challenged Apple’s advertising because it allegedly stated that the iBook G4 was “mobile,” “durable,” “portable,” “rugged,”  “reliable,” “high performance,” “high value,” an “affordable choice,” and an “ideal student laptop.” These statements are generalized, non-actionable puffery because they contain “inherently vague and generalized terms” and were “not factual representations that a given standard has been met.”   

Even when viewed in the advertising context, as Vitt urged, these statements did not claim or imply that the iBook G4’s useful life will extend for at least two years.  For example, to the extent that “durable” is a statement of fact, it may imply in context that the iBook G4 is resistant to problems occurring because of its being bumped or dropped, but not that it will last for a duration beyond its express warranty.

Vitt also contended that Apple had an affirmative duty to disclose the alleged defect. But a  consumer’s only reasonable expectation was that the computer would function properly for the duration of the limited warranty. There is no duty to disclose that a product may fail beyond its warranty period absent an affirmative misrepresentation or a safety risk.  Adopting Vitt’s theory would effectively extend Apple’s term warranty based on subjective consumer expectations. The court of appeals agreed with the district court that Apple was under no duty to disclose the alleged "defect" in its iBook G4s.  Claims dismissed.

  

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A Missouri federal court last week denied the class certification motion of consumers suing defendants in the multi-district litigation over the use of bisphenol-A in baby bottles and sippy cups. In re: Bisphenol-A Polycarbonate Plastic Products Liability Litigation, No. 4:08-md-01967 (W.D. Mo.).

As we have posted before, the federal judge in the MDL involving BPA in baby bottles refused last Summer to certify three proposed multistate classes in this multidistrict litigation. In re: Bisphenol-A Polycarbonate Plastic Products Liability Litigation, No. 08-1967 (W. D. Mo. July 7, 2011).   That decision offered an interesting discussion of choice of law, and of the notion of commonality after Dukes v. Walmart, and included an important reminder that while individual issues relating to damages do not automatically bar certification, they also are not to be ignored. E.g., In re St. Jude Medical, Inc., 522 F.3d 836, 840-41 (8th Cir. 2008) (individual issues related to appropriate remedy considered in evaluating predominance); Owner-Operator Independent Drivers Ass’n, Inc. v. New Prime, Inc., 339 F.3d 1001, 1012 (8th Cir. 2003), cert. denied, 541 U.S. 973 (2004) (individual issues related to damages predominated over common issues); see also In re Wilborn, 609 F.3d 748, 755 (5th Cir. 2010).

The court gave plaintiffs an opportunity to show that a class of Missouri-only consumers should be certified, and plaintiffs then moved for certification of three classes of Missouri consumers. Plaintiffs alleged three causes of action: violation of the Missouri Merchandising Practices Act (MMPA), breach of the implied warranty of merchantability, and unjust enrichment.

The court focused first on standing. A court may not certify a class if it contains members who lack
standing. In re Zurn Pex Plumbing Products Liability Litigation, 644 F.3d 604, 616 (8th Cir. 2011). Plaintiffs’ proposed classes here could not be certified because they included individuals who had not suffered an injury-in-fact.  Individuals who knew about BPA’s existence and the surrounding controversy before purchasing defendants’ products had no injury. There was a potential for the proposed classes to include a large number of such uninjured consumers. Plaintiffs admitted that parents often carefully research baby care product purchases, and defendants submitted proof that information regarding BPA was in the media (including popular press such as "20/20") as early as 1999.

The opinion also offers an instructive discussion of reliance. Plaintiffs argued the issue of knowledge goes only to consumers’ reliance on defendants’ alleged nondisclosure, and plaintiffs always contend reliance is not an element of their consumer fraud claims. The court explained that the hypothetical posed by the question of reliance – whether the plaintiff would have purchased the product if she/he had known – presupposes the consumer did not know the relevant information. Thus, the question of knowledge logically precedes the question of reliance.

Even consumers who were unaware of BPA when they purchased defendants’ products may not have suffered an injury. Consumers who fully used defendants’ baby bottles and other products without physical harm before learning about BPA suffered no injury, and could not assert a claim under consumer protection statutes or for breach of warranty. Plaintiffs asserted that none of the proposed class members received what they intended to obtain, because plaintiffs were not provided material information before making their purchases. But plaintiffs were bargaining for baby products at the time of transaction, not for a certain type of information. Those who fully used the products before learning about BPA would have received 100% use (and benefit) from the products.

In the Rule 23 analysis proper, the court also noted that plaintiffs’ proof of what defendants failed to disclose would not be common for all class members, at least with respect to the scientific debate concerning BPA. Class-wide evidence cannot be used to show what defendants knew or should have known because their knowledge and the available information about BPA changed during the
class period. Plaintiffs' proposed trial plan stated they intended to show defendants' alleged awareness and nondisclosure of various scientific studies from 1997 to at least 2006.

The court's observation on materiality is also worth noting. A material fact for state consumer fraud liability includes a fact which a reasonable consumer would likely consider to be important in making a purchasing decision.  Even if this is an objective inquiry, that does not mean it can always be proven with class-wide evidence. A 2006 study allegedly showing BPA's effect on the endocrine systems of snails, even if material, would not be probative of defendants' liability in 2002. Similarly, a reasonable consumer may be less likely to consider a scientific study from 1997 significant if that consumer learned that federal agencies over the years – the FDA in particular – considered that study, and nevertheless still concluded BPA could be safely used to make baby products.

Finally, the court considered superiority and manageability, with a key issue of concern how to determine who was in the class (some courts do this analysis under the ascertainability rubric). Identifying himself or herself as a purchaser would not prove a person is in the class. A plaintiff in a typical case is not allowed to establish an element of a defendant’s liability merely by completing an affidavit swearing the element is satisfied, and this should be no different for a class action.  Defendants would be entitled to cross-examine each and every alleged class member regarding his or her memory and story.

For all these reasons, class certification denied.

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A federal court last week dismissed the claims in a case accusing Green Mountain Coffee Roasters of misrepresenting the performance quality of its single-cup brewing systems. See Green v. Green Mountain Coffee Roasters Inc., et al., 2011 WL 6372617 (12/20/12 D.N.J.).

Your humble blogger is in the minority, not being a coffee drinker. Nearly 60% of adults drink coffee daily. The average American drinks 3.1 cups of coffee each day. This contributes to an $18 billion U.S. coffee market. One of the tremendous innovations (speaking from experience, having given these as holiday gifts) in the market is the single cup brewing machine for the home, allowing coffee lovers to make less than a full pot, and to choose from among hundreds of flavors and brands of coffee-related beverages.

Defendants are in the specialty coffee and coffee maker businesses. They manufacture single-cup brewers, accessories and coffee, tea, cocoa and other beverages in "K–Cup portion packs.” Plaintiff Green maintained that his machine failed to brew the programmed amounts of K–Cup coffee within a few weeks of use. Plaintiff asserted that the machines had defective components, including defective pumps. As a result, the machines allegedly failed and brewed less than the specified amount. Furthemore, this defect allegedly caused consumers to use additional K–Cups to brew a single beverage. 

Plaintiff maintained that defendants' actions were in violation of the New Jersey Consumer Fraud Act (“CFA”), N.J. Stat. Ann. § 56:8–1, et seq., and constituted a breach of implied warranty. 

Defendants moved to dismiss.  The court noted that threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice under Ashcroft v. Iqbal, 556 U.S. 662 (2009), and Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007).  If the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint should be dismissed for failing to show that the pleader is entitled to relief. A plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do. 

The motion challenged plaintiffs' standing. To have standing, the plaintiff must have suffered an injury in fact—an invasion of a legally protected interest which is (a) concrete and particularized, and (b) actual or imminent, not conjectural or hypothetical. Second, there must be a causal connection between the injury and the conduct complained of—the injury has to be fairly traceable to the challenged action of the defendant, and not the result of the independent action of some third party not before the court. Third, it must be likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision.  The injury-in-fact element is often determinative.

The injury must affect the plaintiff in a personal and individual way.  Here, Green alleged that he purchased and used the Keurig Platinum Brewing System (model series B70).  Nevertheless, he sought to represent all individuals in New Jersey who “purchased or received”  a variety of Keurig Brewing Systems. Plaintiff did not have standing to pursue a claim that products he neither purchased nor used did not work as advertised.

Regarding that model series B70, plaintiff contended in his complaint that, because of defective components, the coffee machines at issue brew a lesser amount of coffee than the companies represented, compromising the quality of the beverage. Consumers are then forced to use additional K-Cups, which are a portion pack for the systems, according to the complaint. Defendants maintained that even if their alleged conduct was unlawful, plaintiff had not sufficiently pled ascertainable loss.  In a misrepresentation case, a plaintiff generally may show ascertainable loss by either out-of-pocket loss or a demonstration of loss in value.  In this case, Green did not allege that he made a claim for warranty repair or replacement of his machine.  The warranty provided as part of the contract of sale is part of the benefit of the bargain between the parties. Any defects that arise and are addressed by warranty, at no cost to the consumer, do not provide the predicate loss that the CFA expressly requires for a private claim.  Because plaintiff had not availed himself of defendants' warranty, he could not allege that the warranty does not address the defect in his machine.

Furthermore, the court found unpersuasive plaintiff's argument that the warranty did not address the defects in the brewers because other consumers allegedly reported that their replaced or repaired brewers were equally defective.  Allegations regarding the experience of absent members of the putative class, in general, cannot fulfill the requirement of pleading injury with adequate specificity.

Similarly, plaintiff did not sufficiently plead loss in value.   Plaintiff broadly asserted that he suffered a loss because each brewer failed to perform its advertised purpose and caused purchasers to suffer a loss of value of the product. But Green failed to allege how much he paid for his brewer and how much other comparable brewers manufactured by competitors cost at the time of purchase. Furthermore, Green had not suffered a diminution in value because the defective brewer could have been repaired or replaced with a new brewer which would have had its own one-year warranty.

Regarding the implied warranty claim, the general purpose of the brewers is to brew beverages. Even if defendants may have advertised that the machines would brew a specific amount of beverage, that alone did not transform the “general” purpose.  Green did not allege that his machine would not brew coffee or that it was inoperable.  The complaint was also devoid of any allegation that plaintiff can no longer use his brewer. Therefore, Green had not sufficiently alleged that his brewer was unfit for its ordinary purpose of brewing beverages at the time of purchase.

Defendants also contended that the class allegations should be dismissed. Plaintiff argued that the Court should deny the motion because it was premature. Nevertheless, a court may strike class action allegations in those cases where the complaint itself demonstrates that the requirements for maintaining a class action cannot be met.  Here, the court concluded that the plaintiff could not  meet the predominance requirement set forth in Fed.R.Civ.P. 23(b).

The complaint did not allege that all individuals in New Jersey who purchased the Keurig Brewing Systems had experienced the defect. Plaintiff acknowledged that there were members in the putative class who had not yet suffered the alleged pump failure. Consequently, the putative class included individuals who do not presently have a claim against defendants. Proving that defendants breached the implied warranty of merchantability would also require an individualized inquiry. Not every member of the putative class experienced a defect with the model series B70. Even if the purported defect had manifested in all of the brewers purchased within the class period, the court would have to make individual inquiries as to the cause and extent of the defect.  Motion granted. 

 

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The Massachusetts federal court overseeing multidistrict litigation against 11 beverage companies, including Coca-Cola Co. and Del Monte Corp., alleging that their fruit juices contained trace amounts of lead, dismissed the claims last week.  In re Fruit Juice Products Marketing and Sales Practices Litigation, No. 11-2231 (D. Mass., 12/21/11).

Plaintiffs alleged that the defendants misled them into believing that certain of their products were safe, whereas the products in fact contained lead and posed a health risk, especially to children.  The issue had caught the attention of the FDA, which concluded that while several of the products contained trace amounts of lead, in each case the level found would not pose an unacceptable risk to health.  (The FDA’s conclusion was based in part on a guidance report it issued in 2004. The agency concluded that many food products contain small amounts of lead because the substance is in the environment naturally and also released through many human activities.)

The majority of plaintiffs’ claims were for violations of the consumer protection laws of states in which defendants maintained their principal places of business. Plaintiffs also brought claims under the consumer protection laws of all states in which potential class members purchased the  products. Finally, the plaintiffs alleged breach of the implied warranties of merchantability and fitness for a particular purpose and for unjust enrichment.

Defendants moved to dismiss on several grounds, but the foundational argument that plaintiffs lacked standing was fatal to all of plaintiffs’ claims, and was in the eyes of the court so compelling that it was unnecessary for the court to reach the numerous satellite theories that defendants offered.

To establish Article III standing, a plaintiff must first demonstrate that he has suffered an injury in fact.  Whitmore v. Arkansas, 459 U.S. 149, 155 (1990). The injury must be concrete and the alleged harm actual or imminent, and not conjectural or hypothetical. Los Angeles v. Lyons, 461 U.S. 95, 101-02 (1983). If a plaintiff fails to allege sufficient facts to satisfy this requirement, the case must be dismissed.

In this case, plaintiffs did not allege a sufficient injury in fact. Plaintiffs offered two potential theories of injury in fact. First, they alleged that the lead in defendants’ products posed a health risk and that, by consuming these products, they placed themselves and their children at risk of future harm from lead poisoning. Second, plaintiffs alleged that they suffered economic injury when they purchased products that defendants advertised as safe, but that in fact contained allegedly dangerous amounts of lead. Both theories, according to the court, ran into the same problem -- plaintiffs
failed to allege any actual injury caused by their purchase and consumption of the products.

The claim of exposure to “potential adverse health effects” or “potential harm” was insufficient for Article III standing. A threatened future injury must be “certainly impending” to grant Article III
standing.  In product liability cases, courts have held that to establish standing based on a threat of future harm, plaintiffs must plead a credible, substantial threat to their health.  E.g., Herrington v. Johnson & Johnson Consumer Cos., Inc., 2010 WL 3448531, at *3 (N.D. Cal. Sept. 1, 2010); see also Public Citizen, Inc. v. Nat’l Highway Traffic Safety Admin., 489 F.3d 1279, 1293-96 (D.C. Cir. 2007); Sutton v. St. Jude Medical S.C., Inc.,419 F.3d 568, 570-75 (6th Cir. 2005).  But the complaint here contained no allegations that either plaintiffs or anyone else ever suffered any type of injury from consuming the products. The products were not recalled, and in fact, the FDA found that at least some of the specific products did NOT pose an unacceptable risk to human health.

Plaintiffs made no allegations as to the amount of lead actually in these products, did not claim that any particular amount in the products is dangerous, and did not allege that any specific amount had caused actual injuries to any plaintiff. The court also stressed that plaintiff did not allege that the levels of lead in the products violated any FDA standards. Under these circumstances, the allegations of risk of future harm to class members were insufficient to meet the “credible or substantial threat” standard. The claim of potential future injury was simply too hypothetical or conjectural to establish Article III  standing.

The court cited a series of cases involving lead in lipstick, which we have posted on, making clear that the type of speculative future injury here cannot form the basis of a lawsuit. See Koronthaly v. L’Oreal USA, Inc., 374 F. App’x 257(3d Cir. 2010), aff’g 2008 WL 2938045 (D.N.J. July 29, 2008); Frye v. L’Oreal USA, Inc., 583 F. Supp. 2d 954 (N.D. Ill. 2008).

Plaintiffs’ second theory of injury in fact was equally flawed. Plaintiffs alleged that defendants promised to provide products that were safe for consumption, but that plaintiffs received products that posed a health risk to them and their children. Consequently, the products were unsuitable for their intended purpose -- consumption -- and supposedly valueless. Because plaintiffs supposedly would not have purchased these products if they had known the products contained any lead, they suffered an economic injury -- the price of the product -- when they purchased the products.

But because plaintiffs were unable to show that any actual harm resulted from consumption of the fruit juice products, their allegation of “economic” injury lacked substance. The fact is that plaintiffs paid for fruit juice, and they received fruit juice, which they consumed without suffering harm. Again, the products were not recalled, did not cause any reported injuries, and did not violate any federal standards. The products thus had no diminished objective value due to the presence of the lead. These plaintiffs received the benefit of the bargain, as a matter of law, when they purchased these products and were able to consume them.

Other courts that have addressed similar “benefit of the bargain” standing arguments agree that plaintiffs who have not been injured by an allegedly defective product generally do not have standing to sue the product’s manufacturer. See, e.g., Rivera v. Wyeth-Ayerst Labs., 283
F.3d 315 (5th Cir. 2002).  Plaintiffs’ allegations only support the contention that the levels of lead in the products were unsatisfactory to them. This allegation was simply insufficient to support a claim for injury in fact. 

 

 

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Another federal appeals court will have an opportunity to assess the reach of the U.S. Supreme Court's decision in J. McIntyre Machinery Ltd. v. Nicastro. In Ainsworth v. Cargotec USA Inc., No. 2:10-cv-00236 (S.D. Miss., 12/15/11), the district court certified for interlocutory appeal its opinion finding personal jurisdiction over a foreign defendant in a forklift case.

Readers will recall that Nicastro resulted in a 6-3 decision with a plurality opinion by Justice Anthony Kennedy. Justices Breyer and Alito concurring in the judgment; and Justices Ginsburg, Sotomayor and Kagan dissenting. Justice Kennedy addressed the stream of commerce notion, stating that no “stream-of-commerce” doctrine can displace that general rule of purposeful availment, even for products liability cases. He acknowledged that the standards for determining state jurisdiction over an absent party have been a bit unclear because of decades-old questions left open in Asahi Metal Indus. Co. v. Superior Court of California, 480 U.S. 102 (1987).  This imprecision arising from Asahi, for the most part, resulted from its statement of the relation between jurisdiction and the notion of placing a product in the “stream of commerce.” That concept, like other metaphors, has its "deficiencies as well as its utilities." A defendant’s placement of goods into commerce “with the expectation that they will be purchased by consumers within the forum State” may sometimes indicate purposeful availment. But that does not swallow the general rule of personal jurisdiction. The principal inquiry in cases of this sort is still whether the defendant’s activities manifest an intention to submit to the power of a sovereign. Justice Breyer, joined by Justice Alito, agreed in the result, but concluded that because this case did not present the new and special issues arising from recent changes in commerce and communication, it was unnecessary to get into full analysis of the steam of commerce issue as it might be applied to 21st century marketing.

Since then, lower courts have continued to grapple with the meaning of the decision, with most recognizing that merely depositing goods in the stream of commerce, with knowledge that some will end up in the forum state, is not enough to satisfy the minimum contacts standard for personal jurisdiction.

Here, plaintiffs were the survivors of a Mississippi resident who was struck and killed by a forklift designed and manufactured by defendant Moffett Engineering, an Irish corporation, with its principal place of business is in Dundalk, County Louth, Ireland. (This is a "wee county" steeped in myth and legend, named for a Celtic pagan god.)  Moffett has never maintained a physical presence in Mississippi. It does not own, possess, or use any property in Mississippi. It has never had any officers, employees, or agents stationed in Mississippi, and it has never sent any of its employees to Mississippi for business purposes. It has never directly shipped or sold any of its products to customers there, and it has never directly solicited business from any company located in Mississippi. Moffett sold all of its products to defendant Cargotec, which had the exclusive right to market and sell Moffett’s products pursuant to a contract which specifically defines the U.S. as Cargotec’s sales territory. Cargotec sells or markets Moffett products in all fifty states. Moffett does not attempt to limit the territory in which Cargotec sells its products. Further, Moffett does not communicate with the end-purchasers of its products in any fashion, and it is not aware of their identities or locations. Cargotec sold 203 of those forklifts to customers in Mississippi, about 1.55% of Moffett’s United States sales.

The district court previously denied Moffett’s Motion to Dismiss for lack of personal jurisdiction.
Ainsworth v. Cargotec USA, Inc., 2011 U.S. Dist. LEXIS 49665, at *21 (S.D. Miss. May 9, 2011). After that decision, the Supreme Court issued its opinion in J. McIntyre Machinery, Ltd. v. Robert Nicastro, 131 S. Ct. 2780 (2011). Moffett filed a Motion for Reconsideration, arguing that decision controlled this dispute.

The district court denied the motion again, and concluded that Justice Breyer’s Nicastro opinion was only applicable to cases presenting the same factual scenario as that case.

But the court did agree the decision involves a controlling question of law as to which there is substantial ground for difference of opinion (noting at least one decision employing the stricter analysis from Justice Kennedy’s plurality opinion, Keranos, LLC v. Analog Devices, Inc., 2011 U.S. Dist. LEXIS 102618, at *29-*30 (E.D. Tex. Sept. 12, 2011)).  Review would materially advance the litigation, concluded the court, certifying it to the Fifth Circuit.  A case to keep our eye on.

 

 

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The FDA apparently will issue a final decision next Spring on an interest group's petition requesting a ban on the use of bisphenol A (BPA) in food packaging. This results from a settlement reached last week in Natural Resources Defense Council v. HHS, No. 11-cv-5801 (S.D.N.Y. 12/07/11).

FDA is agreeing to issue a final decision on or before March 31, 2012, settling a complaint by the NRDC that the agency unreasonably delayed a decision on its petition, which dates to 2008.  In reality, FDA continued to gather data on the issues, and has been looking at taking what it has called reasonable steps to reduce exposure to BPA in certain aspects of the food supply. For example, the American Chemistry Council has supported restricting the use of BPA in infant feeding bottles and spill-proof cups used by infants.

NRDC didn't want to wait for the science, taking the usual pro-plaintiff, anti-industry position that all gaps in knowledge should be filled in with worst-case scenarios. Studies employing standardized toxicity tests have in fact supported the safety of current low levels of human exposure to BPA. (FDA has been consulting with other agencies, including the National Institutes of Health (and National Toxicology Program), Environmental Protection Agency, Consumer Product Safety Commission, and the Centers for Disease Control and Prevention.)

And the interest group doesn't seem to care about the tremendous public health benefits that such products have provided. Any wide-spread ban of the product – or litigation accomplishing the same result -- may risk the public safety more than enhance it. Epoxy resins derived from bisphenol A are used to manufacture protective polymer coatings for the inner surface of metal food and beverage containers. This critical technology protects the contents of these containers from aggressive food products, thereby assuring a safe, wholesome, and nutritious food supply. Compared to other coating technologies, coatings derived from epoxy resins provide superior adhesion to the metal surface, greater durability, and higher resistance to the wide range of chemistries found in foods and beverages. These attributes are essential to protect the packed food from microbiological contamination, which is a significant food safety issue. 

Canning might be the single most important innovation in the preservation of food in history. More than 1500 food items are regularly packed in cans, making out-of-season foods globally accessible year-round. More than 90% of food and beverage cans use epoxy-based coatings because of their strength, adhesion, formability and resistance to chemical reactions in the food and drinks -- without affecting the taste or smell of the product. They protect the food from the container and from bacterial contamination. They give canned foods their long shelf-life.  Where is the cost-benefit analysis including these factors?

 

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A California federal  court has again dismissed a proposed class action brought against Sony Corp. of America regarding allegedly defective televisions. Marchante, et al. v. Sony Corp. of America Inc., et al., No. 3:10-cv-00795 (S.D. Calif.).

Plaintiffs alleged that overheating caused the chassis and internal parts of nine different Sony rear-projection televisions to melt or burn during normal use. Plaintiffs, on behalf of  a proposed class of purchasers, claimed that Sony violated several consumer protection statutes (such as, typically the California Consumer Legal Remedies Act) and breached express and implied warranties by selling them the defective televisions. Earlier this year, the court dismissed without prejudice all of the claims, and plaintiffs filed an amended pleading.  Defendants again moved to dismiss.

The court reviewed the Twombly/Iqbal standards, and ruled that the plaintiffs had not fixed the pleading problems. Plaintiffs again alleged that Sony engaged in unfair business acts or practices by selling, promoting, and recalling the television models at issue. The court had previously dismissed plaintiffs’ unfair business act claim because plaintiffs failed to allege a substantial consumer injury; in the new complaint plaintiffs again failed to allege that the televisions exhibited any problems during the one-year limited warranty period. Every alleged problem surfaced several years after purchase. Any alleged failure to disclose thus related to a defect that arose years after the express warranty expired. And any failure to disclose therefore could not constitute substantial injury.  Although plaintiffs did amend their complaint to include allegations that the televisions failed to operate properly from the outset, plaintiffs’ amendments did not cure the deficiencies of the prior complaint.  The fact remained that the defects did not become apparent to the plaintiff-consumers until after the warranty expired. Thus, the complaint still fell short of alleging that the defects caused the televisions to malfunction within the warranty period, as is required to allege a substantial consumer injury under California's consumer statutes. 

As a general rule, manufacturers cannot be liable under the CLRA for failures to disclose a
defect that manifests itself after the warranty period has expired.  A possible exception exists, however, if the manufacturer fails to disclose information and the omission is contrary to a representation actually made by the defendant, or the omission pertains to a fact the defendant was otherwise obligated to disclose. Here, all of plaintiffs alleged CLRA violations pertained to Sony’s alleged failures to disclose; the question therefore was whether Sony carried any obligation to disclose the alleged defect. The court noted that under the CLRA, a manufacturer’s duty to disclose information related to a defect that manifests itself after the expiration of an express warranty is limited to issues related to product safety.  Moreover, in order to have a duty to disclose, the manufacturer must be aware of the defect at the time that plaintiffs purchased, since a manufacturer has no duty to disclose facts of which it was unaware. In dismissing the prior complaint, the court held that plaintiffs failed to invoke the safety exception because the complaint was devoid of allegations that anyone or any property —other than the television itself— was damaged by the allegedly defective televisions.  

Even assuming plaintiffs’ allegations that the televisions pose a safety risk were sufficient to invoke the safety exception (fire hazard?), plaintiffs failed to allege that Sony was aware of this safety hazard at the time plaintiffs purchased the televisions.  First, plaintiffs alleged that Sony had known about it since 2008 and "possibly even earlier.”   Plaintiffs bought their televisions in 2004, 2005, and 2006. So under plaintiffs’ own allegations, Sony may not have been aware of the alleged defect at the time plaintiffs made their purchases, or even within the respective one-year post-purchase warranty periods.  Second, all of plaintiffs' allegations regarding Sony’s knowledge of the alleged defect pertained to Sony’s knowledge that the defect caused excess heat that resulted in the deterioration of the television display, not that the defect posed any safety hazard. 

 The court thus dismissed the CLRA claims without prejudice. 

The court previously dismissed plaintiffs’ claim for breach of the express (limited warranty) because the alleged defects did not manifest until after the one-year warranty period expired. The general rule is that an express warranty does not cover repairs made after the applicable warranty period—here, one year after purchase—has elapsed.  None of the plaintiffs here sought repair or replacement of their televisions within the warranty period. None of the four named plaintiffs alleged that Sony either refused to repair any covered defects or refused to replace any televisions suffering from covered defects.

Plaintiffs’ implied warranty claims again failed because they were untimely. Subject to a sixty-day minimum and one-year maximum, implied warranties are equal in duration to corresponding express warranties under California law, said the court.  The implied warranty here was deemed to have a one-year duration to match that of the express warranty. And because Plaintiffs purchased the televisions in 2004, 2005, and 2006, the implied warranties would have expired by 2007, at the latest. But the amended complaint did not contain allegations that the televisions failed to function as warranted or that plaintiffs sought warranty coverage during the one-year period following their respective purchases. Thus, these claims were dismissed with prejudice.

Plaintiffs continue to try to shoe horn claims into the consumer fraud matrix, thinking they will have an easier road to class certification.  That makes the court's scrutiny of the pleadings even more crucial.

 

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As we have noted for reader, lower courts continue to work to interpret and apply the Supreme Court's decision in J. McIntyre Machinery Ltd. v. Nicastro.  Earlier this week, a California appeals court found that the lower court should not have exercised personal jurisdiction over a Canadian unit of Dow Chemical Co. See Dow Chemical Canada ULC v. The Superior Court of Los Angeles County, No. B222609 Cal. Ct. App. 2d Dist.) (unpubl.).

The court noted that this case presented a question left open in Asahi Metal Industry Co., Ltd. v.
Superior Court, 480 U.S. 102 (1987), but now resolved by J. McIntyre Machinery, Ltd. v. Nicastro, 131 S.Ct. 2780 (2011):  whether merely placing products into the stream of commerce in a foreign country (or another state), aware that some may or will be swept into the forum state, is enough to subject a defendant to personal jurisdiction—or whether due process requires that the defendant have engaged in additional conduct, directed at the forum, before it can be
found to have purposefully availed itself of the privilege of conducting activities within
the forum state.  The court concluded that  defendant Dow Chemical Canada ULC was not subject to jurisdiction because it did not  purposefully avail itself of the privilege of conducting activities within the forum state.

Plaintiffs were allegedly injured in an accident involving a 1996 Sea-Doo watercraft. This product liability action was subsequently brought against Dow Chemical Canada ULC (Dow), among others, based on an alleged defect in the fuel tank.  Dow appeared specially and moved to
quash service of the summons on the ground that it lacked the requisite minimum contacts with California to justify the state’s assertion of personal jurisdiction. Its principal place of business was Calgary, Alberta, Canada; it had never advertised any products in California. The gas tanks and gas filler tank necks that were the subject of this litigation were sold exclusively in Canada pursuant to purchase order agreements entered into in Canada. Plaintiff contended, however, that the court had specific jurisdiction because Dow allegedly knew that its gas tanks were being installed in products that would be sold in the United States, including California.

The trial court rejected Dow’s motion; the court of appeals denied Dow’s petition for writ of
mandate; the California Supreme Court denied Dow’s timely petition for discretionary
review. But the United States Supreme Court granted Dow’s petition for certiorari on June
28, 2011, ordered that the judgment be vacated and remanded the matter for further consideration in light of J. McIntyre Machinery, Ltd. v. Nicastro.

On remand, the court said it was facing the question whether merely depositing goods in the stream of commerce, with knowledge that some will end up in a finished product manufactured
by another and sold in the forum state, is enough to satisfy the minimum contacts standard for personal jurisdiction.  The Due Process Clause of the Fourteenth Amendment limits the power of a state court to exert personal jurisdiction over a nonresident defendant.  The  constitutional touchstone of the determination whether an exercise of personal jurisdiction comports with due process remains whether the defendant purposefully established “minimum contacts” in the forum state.

In Asahi, the United States Supreme Court split on the impact of placing a product into the stream of commerce, with a fractured set of opinions, expressing separate standards for deciding the issue, none of which received the support of a majority of the Court.  Under Justice O’Connor’s view, placement of a product into a stream of commerce with awareness that it may be carried into a forum state would not, by itself, be adequate for the exercise of jurisdiction over a defendant. A defendant’s awareness that the stream of commerce may or will sweep the product into the forum state does not convert the mere act of placing the product into the stream into an act purposefully directed toward the forum state.  But Justice Brennan expressed the position that a chain of distribution carrying a product into the forum could be adequate to permit the exercise of jurisdiction over foreign defendants, because the stream of commerce refers not to unpredictable currents or eddies, but to the regular and anticipated flow of products from manufacture to distribution to retail sale.

According to the California court on remand here, in J. McIntyre Machinery v. Nicastro, the Supreme Court resolved the question in Asahi left unresolved by the competing opinions. The stream of commerce, like other metaphors, has its deficiencies as well as its utility. It refers to the movement of goods from manufacturers through distributors to consumers, yet beyond that descriptive purpose its meaning is far from exact. The principal inquiry in cases of this sort, said the plurality, is whether the defendant’s activities manifest an intention to submit to the power of a
sovereign. In other words, the defendant must purposefully avail itself of the privilege of conducting activities within the forum state, thus invoking the benefits and protections
of its laws. The concurrence in Nicastro noted no evidence of a “regular course” of sales into the state, so there was no "something more," such as special state-related design, advertising, advice, marketing, or anything else.

Here, at no time did Dow engage in any activities in California that revealed an intent to invoke or benefit from the protection of its laws. Nor was there any evidence that the design of Dow’s product was in any way California-specific. It was not sufficient for jurisdiction in this case that the
defendant might have predicted or known that its products would reach California.  Defendant never undertook to ship its components to California; it supplied its gas tanks and filler necks exclusively in Canada. It matters not whether it knew or could have predicted that another party would sell the finished Sea-Doos incorporating the gas tanks in California. Dow did not advertise or market products in California; it never sold products in, or directly to customers in, California; it never maintained an office or other facility of any kind in California; it had never been qualified to do business in California; and  it had no agent for service of process in California.

Due process requires that Dow would have engaged in more than that, in additional conduct directed at the forum, before it could be found to have purposefully availed itself of the privilege of conducting activities within California. 
 

 

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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).

 

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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. 

 

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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.)

 

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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.

 

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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.

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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.

 

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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.   

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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.

 

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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. 

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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).

 

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The Seventh Circuit ruled earlier this month that federal food labeling law expressly preempts state law claims seeking certain additional health-related disclosures on chewy bars. Turek v. General Mills Inc., No. 10-3267 (7th Cir. 10/17/11).

The bars have been around since at least the early 1980's, but have grown into a nearly $2 billion segment of the food industry.  Consumers love their portability, and relatively low calorie count.

Plaintiffs brought a diversity class action suit under the Illinois Consumer Fraud and Deceptive Business Practices Act, and the Illinois Uniform Deceptive Trade Practices Act, alleging that the label of certain "chewy bars" was misleading regarding fiber content.  Specifically, the complaint alleged that the principal fiber, by weight, in the bars was inulin extracted from chicory root. The complaint describes inulin so extracted as a processed, "non-natural” fiber which was not as beneficial to consumer health as other fiber.

Those state law claims ran smack into a provision of the Federal Food, Drug, and Cosmetic Act, 21 U.S.C. § 343-1(a)(5), added by the Nutrition Labeling and Education Act of 1990, which forbids states to impose “any requirement respecting any claim of the type described in section 343(r)(1)
[of the Food, Drug, and Cosmetic Act] . . . made in the label or labeling of food that is not identical to the requirement of section 343(r).”  A state thus can impose the identical requirement or requirements, and by doing so be enabled, because of the narrow scope of the preemption provision in the Nutrition Labeling and Education Act, to enforce a violation of the Act as a violation of state law. See also In re Pepsico, Inc. Bottled Water Marketing and Sales Practices Litigation, 588 F. Supp. 2d 527, 532 (S.D.N.Y. 2008); “Beverages: Bottled Water,” 60 Fed. Reg. 57076, 57120 (Final Rule, Nov. 13, 1995). This is important because the Food, Drug, and Cosmetic Act does not create a private right of action. Medtronic, Inc. v. Lohr, 518 U.S. 470, 487 (1996).

The question thus became what requirements the federal law imposes on the labeling of dietary fiber. Section 343(q)(1) of the Act contains a requirement that the “label or labeling” of food products intended for human consumption state “the amount of . . . dietary fiber . . . contained in each serving size or other unit of measure.” Other requirements for labeling claims relating to dietary fiber are set forth in implementing regulations.  

The labeling of the products challenged by the plaintiff was compliant with these regulations relating to health claims for dietary fiber. See, e.g., 21 C.F.R. § 101.76. All the FDA’s requirements relating to labeling dietary fiber are requirements to which any labeling disclosures required by a state must be identical.  But the disclaimers that the plaintiff wants added to the labeling of the defendants’ inulin-containing chewy bars were not identical to the labeling requirements imposed on such products by federal law, and so they were barred, held the court of appeals. The information required by federal law does not include disclosing that the fiber in the product includes inulin or that a product containing inulin allegedly produces fewer health benefits than a product that contains only product that contains only “natural” fiber, for example. 

Even if the disclaimers that the plaintiff wants added would be "consistent" with the requirements imposed, importantly, consistency is not the test. Identity is, said the court.

The Seventh Circuit thus affirmed dismissal of the case. But clarified, procedurally, that when a state law claim is expressly preempted under section 403A of the Federal Food, Drug, and Cosmetic Act,” a dismissal on the merits is the proper outcome, with prejudice like other merits judgments, not dismissal for want of federal jurisdiction, as the district court had ordered.

This is a victory for consumers when one considers why Congress did not want to allow states to impose disclosure requirements of their own on packaged food products, most of which are sold nationwide. Manufacturers might have to print 50 different labels, driving consumers who buy the food products crazy. A granola bar you buy in California ought to look just like the one you buy in Maine.

 

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Multiple reports indicate that an unnamed company filed a suit last week, under seal, to challenge aspects of the Consumer Product Safety Commission's new public database.

Readers may recall that the Consumer Product Safety Improvement Act of 2008 mandated the creation of a consumer product safety information database, and from the beginning, there was controversy about the absence of an adequate process for addressing false and inaccurate reports that will scare consumers, harm business, and generate no additional safety gains; the need to employ means to prevent the submission of fraudulent reports of harm while not discouraging the submission of valid reports; the importance of not putting the governmental imprimatur on voluntary data that has not been verified; and the absence of a sufficient time period allocated for manufacturers to evaluate and respond to any proposed report.

The suit was reportedly filed in federal court in Maryland, and relates to material inaccuracies with respect to a report of alleged injury that found its way into the database.  The suit apparently asks that the CPSC be enjoined from keeping the complaint about one of the company's products in the public database.

Almost anyone can file a “report of harm,” including consumers; government agencies; health care professionals; child service providers; and public safety entities. Consumers could include not just the purchaser of the product but their personal injury attorney, with their own agendas.

Manufacturers have only a limited opportunity to review and dispute information in incident reports before they are published on-line in the CPSC database. Manufacturers have limited control over what information can be removed or amended once posted. The two dissenting votes at the time the CPSC commissioners approved the database made an unsuccessful attempt to amend the final rule so as to give manufacturers more time to comment on or respond to the inaccuracy of postings before they are published to the database and to the public.

The database is accompanied by a weak disclaimer stipulating that CPSC has not verified the accuracy of any report. Observers continue to worry that the agency has not paid sufficient attention to legitimate issues of a manufacturer's goodwill and reputation, to the costs of unnecessary panic among product consumers, and the mischief that plaintiffs' lawyers might cause with unwarranted increase in litigation against manufacturers.

A recent U.S. Government Accountability Office report on the database found that of 1,800  published reports, manufacturers noted that 160, nearly 10%, had materially inaccurate information.

 

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The Sixth Circuit issues and interesting opinion last week, exploring plaintiff's burden to prove that exposure to defendant's product caused his injury in the context in which plaintiff was exposed to numerous other similar products. See Moeller v. Garlock Sealing Technologies LLC, No. 09-5670, (6th Cir., 9/28/11).

Plaintiff was a pipefitter who worked with asbestos-containing gaskets made by Garlock from about 1962 until about 1970. But from 1962 until about 1975, he also sustained significant exposure to asbestos insulation. He contracted mesothelioma and sued, alleging that his exposure to Garlock’s asbestos-containing gaskets was a substantial factor in causing his injuries.

At trial, plaintiff's expert testified that exposure to asbestos from Garlock gaskets, along with his other exposures, contributed to the mesothelioma. And one of the treating oncologists opined  that if plaintiff had worked for many years (as he did) scraping and grinding asbestos gaskets, and if plaintiff breathed those fibers, then that exposure would have caused his cancer. In rebuttal, Garlock presented evidence that plaintiff had sustained substantial exposure to asbestos insulation products for 13 years. It also presented evidence that whereas asbestos insulation was banned in the 1970s, leading asbestos safety authorities believed that gaskets, such as those sold by Garlock, posed “no health hazard,” and were sold lawfully in the United States. Garlock also suggested that the plaintiff had only installed Garlock gaskets (an activity that both parties agree did not create a risk of injury), and had not ever removed them (the activity that the plaintiff alleges caused the injuries).

The jury returned a verdict for plaintiff, and defendant appealed.

To prevail on a negligence claim, Kentucky law requires a plaintiff to prove that a defendant’s conduct was a substantial factor in bringing about the harm. Deutsch v. Shein, 597 S.W.2d 141, 144 (Ky. 1980). Causation requires a link between the specific defendant’s conduct and the plaintiff’s injuries. See Estes v. Gibson, 257 S.W.2d 604, 607 (Ky. 1953) . Substantial causation refers to the probable cause, as opposed to a possible cause. One measure of whether an action is a substantial factor is the number of other factors which contribute in producing the harm and the extent of the effect which they have in producing it.

The appeals court concluded that the plaintiff failed to prove that Garlock’s product was a substantial factor in bringing about the harm. The plaintiff presented various witnesses to support the claim that the mesothelioma was caused by his exposure to Garlock gaskets. But one expert never actually said that the exposure to Garlock gaskets was a substantial factor in causing the  cancer; the others testified that all types of asbestos can cause mesothelioma and that any asbestos exposure counts as a “contributing factor.”  That testimony does not establish that exposure to Garlock gaskets in and of itself was a substantial factor.

Moreover, the evidence presented was insufficient to allow a jury to infer that exposure to Garlock gaskets was a substantial cause of the cancer. Plaintiff here presented no evidence quantifying  exposure to asbestos from Garlock gaskets. There was testimony that he removed gaskets for several years, and that some of those gaskets were Garlock’s. But the plaintiff failed to establish how many Garlock gaskets he removed, or how frequently he removed—as opposed to installed—them. The record also shows that plaintiff regularly tore out asbestos insulation during the relevant years, and that his exposure to asbestos from insulation would have been thousands of times greater than his exposure from removing gaskets.

Thus, while his exposure to Garlock gaskets may have contributed to his mesothelioma, the record simply does not support an inference that it was a substantial cause of his mesothelioma. Given that the Plaintiff failed to quantify his exposure to asbestos from Garlock gaskets and that the Plaintiff concedes that he sustained massive exposure to asbestos from non-Garlock sources, there is simply insufficient evidence to infer that Garlock gaskets probably, as opposed to possibly, were a substantial cause of the injury.

The court summed it up: saying that exposure to Garlock gaskets was a substantial cause of plaintiff’s mesothelioma would be akin to saying that one who pours a bucket of water into the
ocean has substantially contributed to the ocean’s volume.

 

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Back when we taught Products Liability in law school, one of the topics that always got significant attention and discussion from the bright-eyed students was how to define "defect." The panoply of tests for defective or unreasonably dangerous products never failed to excite discussion, particularly the role of consumer expectations in product assessment.

That same topic is the focus of an interesting recent decision in the Seventh Circuit. See Show v. Ford Motor Co., Nos. 10-2428 and 10-2637 (7th Cir.,  9/19/11).

Plaintiffs were involved in a motor vehicle accident in a 1993 Ford Explorer;  they sued Ford, alleging design defect. In products liability cases in which the plaintiff alleges a design defect, Illinois (whose law supplied the substantive rules) permits the claim to be established in either
of two ways. First, the plaintiff may introduce evidence that the product failed to perform as safely as an ordinary consumer would  expect when used in an intended or reasonably foreseeable manner. This has come to be known as the consumer expectation test. Second, the plaintiff may introduce evidence that the product’s design proximately caused his injury, when the benefits of the challenged design do not outweigh the risk of danger inherent in such design. This test, which adds the balancing of risks and benefits to the alternative design and feasibility inquiries, has come to be known as the risk-utility or risk-benefit test.

Here, plaintiffs proceeded under the first prong, and offered no expert opinion. Ford moved for summary judgment in light of the absence of expert testimony. Plaintiffs conceded that testimony by an engineer or other design expert was essential when a claim rests on the risk-utility approach. But, they argued that jurors, as consumers, can find in their own experience all of the necessary opinions under the consumer expectation test. The district court sided with the defense, and plaintiffs appealed.

The court first discussed a very interesting preliminary question. The parties assumed, as did the lower court, that state law in this diversity case determined whether expert testimony was essential. The assumption rested on a belief that the quality of proof is part of the claim’s substantive elements, which in turn depend on state law under the Erie doctrine even when substantive doctrine is implemented through federal evidentiary rules.  However, there was a question whether Illinois treats the risk-utility and consumer expectations approaches as distinct substantive law doctrines, or merely as procedural aspects of the general question: is the product unreasonably dangerous. Perhaps the two tests are not theories of liability; they could be considered methods of proof by which a plaintiff may demonstrate that the element of unreasonable dangerousness is met.  If the consumer expectation test is not an independent theory of liability, perhaps federal rather than state law determines whether expert evidence is essential on it. Federal law often requires expert evidence about consumers' knowledge and behavior, because jurors are supposed to decide on the basis of the record rather than their own intuitions and assumptions. If federal courts require expert evidence, rather than relying solely on jurors' experience, in trademark and credit suits, for example, why not in product defect cases, asked the court?  But the court decided to bypass the question, in light of the parties' positions below. 

Turning to the consumer expectations issue, the court felt that plaintiffs’ argument that jurors should be able to rely on their own expectations as consumers reflected a belief that “expectations” are all that matters. Yet because the consumer expectations approach is just a means of getting at some of the issues that bear on the question whether a product is unreasonably dangerous, it is impossible to dispense with expert knowledge, concluded the panel.  The design defect is tied up in the issue of causation. Did the design decisions that went into the 1993 Ford Explorer even contribute to the rollover? Causation is a question about physics, and design options are the province of engineers. Jurors own cars, but people own lots of products without being able to explain (or even understand) the principles behind their construction and operation.  Unguided intuitions will not solve the equations. Without an expert’s assistance the decision would depend on speculation, which cannot establish causation—an issue on which plaintiffs bear both the burden of production and the risk of non-persuasion.

Because consumer expectations are just one factor in the inquiry whether a product is unreasonably dangerous, a jury unassisted by expert testimony would have to rely on speculation. The record here did not show whether 1993 Explorers were unduly (or unexpectedly) dangerous, because the record (absent an expert) lacked evidence about many issues, such as: (a) under what circumstances they roll over; (b) under what circumstances consumers expect them to do so whether it would be possible to reduce the rollover rate; and (d) whether a different and safer design would have averted this particular accident. All of these are subjects on which plaintiffs bear the burden of proof. There are other issues too, such as whether the precautions needed to curtail the rate of rollovers would be cost-justified.

The absence of expert evidence on these subjects was fatal to plaintiffs’ suit.

 

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We have warned readers of MassTortDefense of the alarming trend of plaintiff lawyers seeking to attack every aspect of a product's packaging and labeling as somehow a case of consumer fraud -- often ignoring common sense in the process.

The latest example comes from a case rightly rejected by the Second Circuit last week. See Verzani v. Costco Wholesale Corp., No. 10-04868, 2011 WL 4359936  (2d Cir., Sept. 20, 2011).

Plaintiffs brought a putative class action against Costco Wholesale Corp. over the size of its "shrimp trays." (We love em, especially for football parties.) Plaintiffs claimed that the wholesaler misled customers by labeling its shrimp trays as 16 ounce trays when the shrimp part of the tray itself only weighed about 13 1/2 ounces. The other few ounces were allegedly made up of  the cocktail sauce and lemon wedges. (We pause and ask, how can you eat shrimp without those two accompaniments?)

The case had a somewhat lengthy procedural history, with issues of preliminary injunctions, choice of law, motions to dismiss, and jurisdiction, in play; the class issue was never reached. In relevant part, the trial court dismissed the claims in 2009, concluding that the plaintiffs' contention that a “reasonable consumer” would not assume that the net weight of the product included the cocktail sauce and other (useful and edible) elements was not well founded. The district court later denied the plaintiffs' motion to amend, 2010 WL 3911499 (S.D.N.Y.), noting that a reasonable consumer would not believe that the net weight disclosed on the label for the shrimp tray refers to only the shrimp. The label lists the ingredients in descending order based on their relative weight --shrimp, lemon wedges, leaf lettuce -- followed by a number of ingredients that comprise the cocktail sauce, such as, tomato paste, distilled vinegar, and horseradish; it clearly states “Net WT 160z (1.00 lb).”

Verzani's interpretation of “net weight” as including 16 ounces of shrimp alone was objectively unreasonable; a simple visual inspection of the tray, with its clear plastic top,  would reveal that shrimp is not the only edible item inside. In fact, the product's name alone, “Shrimp Tray with Cocktail Sauce,” suggested that a consumer (at a minimum) is purchasing shrimp and cocktail sauce. A reasonable consumer reading the tray's label would not pick out “shrimp” to the exclusion of all the information on the label (including the product's name and the listed ingredients) when assessing the net weight of the product.

Plaintiffs appealed, but in a summary order, the panel found that court had been right to throw out the case and deny the motion to file an amended complaint.

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A federal court recently denied class certification in a case brought on behalf of consumers accusing Epson America Inc. of misrepresenting how its NX series of printers functioned with ink cartridges. Christopher O’Shea et al. v. Epson America Inc. et al., No. 09-cv-08063 C.D. Cal.). Readers may recall our post that the court earlier dismissed many of the plaintiffs' claims on the basis that a manufacturer is not required under consumer protection laws to denigrate its own product and broadcast that its product may not perform as well as its competition.

In May 2009, plaintiff Rogers purchased a “Stylus NX 200” inkjet printer manufactured by defendants. Her decision to purchase this printer was allegedly based, in part, on a statement on the printer box that read: “Replace only the color you need with individual ink cartridges.”  Plaintiff allegedly understood this statement to mean that the printer would only require a black cartridge to print black text. In actuality, plaintiff alleged, the Epson NX 200 printer requires all cartridges to function. She subsequently filed suit against Epson claiming that Epson failed to disclose and affirmatively misrepresented the features of the printer.

Plaintiff  moved for class certification.  The interesting part of the court's analysis relates to the predominance issue under Rule 23(b)(3). Even though individualized questions of reliance and materiality were diminished under some of the plaintiff's theories because the consumer fraud claims are governed by the “reasonable consumer” test, which requires plaintiff to show that members of the public are likely to be deceived, Williams v. Gerber Products Co., 523 F.3d 934, 938 (9th Cir. 2008), the notions of reliance and injury still impacted class certification. Specifically, the court was not convinced that members of the putative class had standing to pursue their claims in federal court. To have standing under Article III, a plaintiff must present an injury that is concrete, particularized, and actual or imminent; fairly traceable to the defendant’s challenged action; and redressable by a favorable ruling.

In the context of Rule 23(b)(3), questions of Article III standing amount to an inquiry as to whether individual issues of injury-in-fact and causation predominate over common issues. While case law suggested that absent class members need not establish standing under the requirements of California’s consumer laws, there is a distinct requirement of Article III standing in federal court.  Statutory interpretations cannot permit a federal class action to proceed where class members lack Article III standing.  The requirement that all members of the class have Article III standing makes sense. If that were not the rule, a class could include members who could not themselves bring suit to recover, thus permitting a windfall to those class members and allowing Rule 23 to enlarge substantive rights.  The court therefore held that absent class members must satisfy the requirements of Article III.

Satisfaction of Article III’s requirements in turn raised individualized issues that defeated certification under Rule 23(b)(3) in this case. Article III requires some showing of injury and causation for a plaintiff to recover. Even if the alleged failure to disseminate truthful information about the product  would be subject to common proof, whether each class member was entitled to recover was not susceptible to proof on a class-wide basis because, to establish standing under Article III, each class member was required to show that they suffered some injury as a result of using or buying the product. Plaintiff therefore must show that all persons in the United States who purchased an Epson NX series printer during the class period suffered an injury which was caused by Epson’s alleged misrepresentation, and which was likely to be redressed by a decision in plaintiff’s favor. The record contained evidence indicating that the injury purportedly suffered by some members of the putative class could not fairly be traced to Epson’s allegedly deceptive representation.  Those individuals who purchased printers from certain third-party on-line sources, such as Amazon.com, were not exposed to the allegedly deceptive representation before they purchased their printers. Not all consumers who purchased an NX200 printer bought it at a retail store. Nor could standing be established by plaintiff’s (unsupported) assertion that the misrepresentation was on every box of the subclass, since some individuals purchased class printers without ever having been exposed to the allegedly deceptive representation. The fact that these individuals may have subsequently seen the misrepresentation when the package arrived in the mail was beside the point. There cannot be a causal connection between the consumer’s injury (the money spent on the printer) and Epson’s alleged misconduct (the purportedly deceptive advertising) because these consumers purchased the printers without ever seeing the purported misrepresentation.

Based on the foregoing, the court found that individualized issues of injury and causation permeated the class claims.The proposed class failed to satisfy Rule 23(b)(3)’s requirement that common issues predominate.

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Here is an update on an interesting case we posted on before. A federal court last week denied a motion for reconsideration of its ruling that denied class certification to a consumer alleging that Arizona Beverages deceptively marketed its drinks as “all natural.”  See Coyle v. Hornell Brewing Co. et al., No.1:08-cv-02797 (D.N.J. 8/30/11). 

Plaintiff alleged that she was misled by labels on bottles of Arizona brand beverages touting “All Natural” ingredients, and thereby induced into buying bottles of Arizona beverages that contained High Fructose Corn Syrup (“HFCS”), which she claimed is not “natural”. Plaintiff sought to certify, under Fed. R. Civ. P. 23(b)(2), a class of consumers who purchased similarly labeled Arizona beverages that contained HFCS, seeking only declaratory and injunctive relief.

During the course of discovery in this case, plaintiff produced a retainer agreement she signed in anticipation of this lawsuit. But, the agreement was signed on August 9, 2007, more than seven months before plaintiff alleged that she was first misled by defendants’ “all natural” labeling in her product purchase on March 30, 2008. Indeed, plaintiff repeated the 3/08 purchase date in her deposition. She later changed her story.

The court originally observed that it need not find plaintiff to have intentionally lied to hold that she did not meet the adequacy element of Rule 23(a)(4). The issue was not simply whether plaintiff in fact lied, but whether her inconsistent testimony made her vulnerable to a unique factual or legal defense not faced by other class members, thereby rendering her interests potentially too antagonistic to the interests of the other class members. And that is exactly the case; the court found that plaintiff’s factual inconsistencies raised sufficiently grave credibility problems as to prevent her from serving as an adequate class representative.

Plaintiff filed a reconsideration motion. The court did reconsider its finding as to the adequacy of plaintiff’s counsel as a result of plaintiff’s repeated pleadings and certified discovery responses including the March 30, 2008 allegation. This "serious error" did not necessarily disqualify counsel.

But the court re-affirmed its decision as to the adequacy of plaintiff as class representative. Plaintiff argued that any defenses that she would face as a result of the credibility problems identified by the court could not become the focus of the entire litigation.  But the controlling rule does not hold that the only defenses that will disqualify a proposed named plaintiff on adequacy grounds are those which could become the focus of the entire litigation.  Indeed, to deny certification, a court need not conclude that credibility problems would ultimately defeat the class representative’s claim; rather, the court may deny class treatment if that unique defense is even arguably present. 

In any event, the court disagreed with plaintiff’s contention that the unique credibility-related defenses could not become the focus of the litigation in this matter. The court noted that plaintiff would have real trouble surviving summary judgment on the issue of "ascertainable loss" with a record  showing no dispute of fact that plaintiff’s only qualifying purchase of defendants’ product took place after plaintiff herself had concluded that the product was not “all natural.”  Plaintiff’s entire action would be vulnerable to a motion for summary judgment on the issue of ascertainable loss, which would prevent plaintiff (and the class she would seek to represent) from pursuing even injunctive relief.

Determining whether this plaintiff made her purchase of defendants’ product on the date she repeatedly claimed, after she had retained a lawyer to file the suit, would become a major focus and quite probably a show-stopper for this class. Reconsideration denied.

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A California federal court last week dismissed a putative class action accusing Apple Inc. of misleading consumers about the ability of its iPad to function outdoors without interruption. Jacob Baltazar et al. v. Apple Inc., No. 3:10-cv-03231 (N.D. Cal. 8/26/11).

We have posted before about the spate of consumer fraud class actions that look for any aspect of a functioning product that can be attacked as less than perfect, and turn it into a nationwide class action.  Here is a good case reminding readers that manufacturers do not warrant perfection, merely that the product will be reasonably fit for ordinary uses and reasonable expectations.

Plaintiffs alleged that Apple had represented that its iPad tablet computers function outdoors without interruption, when in fact the devices allegedly overheat and shut down when used in sunny conditions. Plaintiffs in this consumer class action asserted claims including breach of warranty and fraud.  Apple moved to dismiss plaintiffs’ second amended complaint for failure to state a claim upon which relief may be granted. The court agreed that the complaint failed to allege facts tending to show that Apple ever represented or claimed that the iPad would operate under such conditions, or that members of the putative class justifiably relied on such representations.

Each of the named plaintiffs alleged that he or she chose to purchase an iPad based at least in part on what they characterize as representations by Apple that the iPad could function outdoors as an e-reader and mobile Internet device. They relied, first, on a claim that Apple produced a television commercial showing depictions of the iPad being used outdoors, at least some of the time on sunny days, and posted on its website a video showing scenes of the iPad being used outdoors and in the sun. They also based their claims on a statement made on Apple’s website that reading the iPad is "just like reading a book.” Finally, they asserted that Apple represented expressly, both on the iPad’s packaging and on its website, that the iPad would function normally within a specified ambient temperature range.

While a complaint attacked by Rule 12(b)(6) motion to dismiss does not need overly detailed factual allegations, a plaintiff’s obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do. Bell Atlantic Corp. v. Twombly, 127 S. Ct. 1955 (2007).

Regarding the ads, while plaintiffs observed correctly that a warranty can be created by statements in advertisements, see e.g., Thomas v. Olin Mathieson Chem. Corp., 255 Cal. App. 2d 806, 811 (1967), they did not point to any cases in which a court found that advertising images alone are sufficient to created an express warranty. On the other hand, courts have rejected warranty claims based on advertising images alone. Moreover, even if the advertisement could be construed as an express warranty, the warranty would be that the iPad would work in the exact situations depicted, not in other situations. Plaintiffs described seven brief scenes in a thirty-
second commercial depicting the iPad in use in “outdoor locations,” some of which uses
allegedly occurred on a “sunny day.” But several of the images were on the screen for less
than a second, and none show the iPad being used in direct sunlight or for an extended period in
any environment. Even under the most liberal pleading standard, these brief clips of iPad use in some outdoor locations cannot be construed as an express warranty that the device will operate without interruption in direct sunlight or in outdoor conditions generally.

On the implied warranty claim,plaintiffs failed to identify with sufficient specificity which of the  functions are the ordinary purpose of the iPad and how the device was unfit for that purpose. The complaint alleged that the iPad was marketed as a mobile tablet computer that can be used “anywhere, whether it be while sitting in a park, at an outdoor café, or on one’s own front stoop.” However, the complaint alleged that the product was unfit for use, generally, presumably everywhere and under all conditions. It failed to allege the device did not meet “a minimum level of quality” for a tablet computer.

On the fraud-based claims, the court noted that to state a claim for fraud or intentional misrepresentation under California law, a plaintiff must allege: (1) misrepresentation (false representation, concealment, or nondisclosure); 2) knowledge of falsity (or scienter); (3) intent to defraud, i.e., to induce reliance; (4) justifiable reliance; and (5) resulting damage. Lazar v. Superior Ct., 12 Cal.4th 631, 638 (1996); Anderson v. Deloitte & Touche, 56 Cal.App.4th 1486, 1474 (1997).  Plaintiffs failed to allege adequately that Apple misrepresented the conditions under which the iPad would operate or that they justifiably could rely on those representations in believing that the iPad would operate as they expected. For example, none of the named plaintiffs claimed to have relied on Apple’s statement that the iPad can be used “just like a book,” which, the court noted, was mere puffery. 

However, the court gave the plaintiffs 30 days to submit a third amended complaint.

 

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Last week, the Consumer Healthcare Products Association (CHPA) submitted comments on the FDA’s draft guidance on nanotechnology, "Considering Whether an FDA-Regulated Product Involves the Application of Nanotechnology, "  which we posted on before.

CHPA is the not-for-profit association representing the makers of over-the-counter medicines and dietary supplements, and the consumers who rely on these healthcare products. CHPA is one of the oldest trade associations in the United States. Nanotechnology holds great promise for this industry.

CHPA agreed with the FDA that proposing a "definition" for nanotechnology is not a straight forward process; applying a strict, universal definition of nanotechnology to the fields of drug research, drug product development and drug manufacturing would not be, in CHPA's view, an appropriate science-based approach.

Defining a nanomaterial as a structure between 1 and 100 nm, and using this definition to establish new regulations on products containing nano-sized materials, would, they asserted,  erroneously group drug products together to form a new category based on size of ingredients.  Nanotechnology is not a separate drug category, but a technology used to, among other things, generate nanometer-sized ingredients and excipients. Inclusion of nanometer-sized active ingredients or excipients in a drug product does not by itself determine a product's safety and efficacy (i.e. size alone is not itself an indicator of toxicity). 

CHPA agreed that the agency should distinguish between engineered nanomaterials and those
naturally occurring at the nanoscale.  There exist common pharmaceutical ingredients with a long history of use that should not be considered as "engineered nanomaterials" or as agglomerates of nanomaterials but which may have particles whose size naturally falls within this range.

CHPA also noted that NIOSH accurately refers to nanotechnology as the manipulation of matter on a near-atomic scale to produce new structures, materials, and devices.  Nanomaterials are mainly engineered for their novel chemical, physical, and quantum mechanical properties; at the nanometer size, many materials exhibit such unique beneficial properties that may not exist when at the micron size. CHPA argued it is appropriate to include in the description the notion of particles that are deliberately manipulated and controlled at the nanoscale, which also exhibit changes in physical, chemical, or electromagnetic properties, the existence of unique phenomena to enable novel applications.

For example, milling, a beneficial process for the manufacturing of many individual pharmaceutical ingredients, may create particles with a portion of the particle size distribution under 1 micron; however, the chemical properties of the milled ingredient usually do not differ drastically from that of the bulk ingredient.

The agency should give further consideration, said CHPA,  to the possibility that not all materials should be considered equal; each material must be evaluated on a case-by-case basis. For example, soluble nanomaterials might not be treated the same as insoluble ones.  

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The Seventh Circuit last week affirmed the trial court's decision not to certify a class of consumers making product liability claims against the makers of Aqua Dots toys. In Re: Aqua Dots Products Liability Litig., No. 10-3847 (7th Cir. Aug. 17, 2011). A tip of the cap to Ted Frank at PointofLaw who wanted to make sure we didn't miss this one, because of the potentially very useful analysis of Rule 23(a)(4).

Defendants made, distributed, or sold, AquaDots, a toy consisting of small, brightly colored beads
that can be fused into designs when sprayed with water. A Chinese sub-contractor apparently substituted adhesives. While the substitute adhesive was chemically similar to the specified glue, when ingested, the sub metabolizes into gamma-hydroxybutyric acid (GHB), which can induce nausea, dizziness, drowsiness, agitation, depressed breathing, amnesia, unconsciousness, and even death, depending on the dose. Although the directions told users to
spray the beads with water and stick them together, it was possible, given the age of the intended audience, that some would be eaten; children who swallowed a large quantity of the beads could become sick.

After learning of the problem, the manufacturer recalled all Aqua Dots products. The recall notice instructed consumers to take Aqua Dots products away from children and to contact the sellers to exchange them. Consumers got an exchange, or upon request, a refund. The recall was widely publicized, and hundreds of thousands of products were returned.

The plaintiffs were purchasers of Aqua Dots products whose children were not harmed and who did not ask for a refund; they challenged the adequacy of the recall program. The plaintiffs asked for a full refund under federal law plus punitive damages under state law. The Panel on Multidistrict Litigation transferred twelve suits to the Northern District of Illinois for pretrial proceedings. After the district court denied plaintiffs’ motion to certify a class, see 270 F.R.D. 377 (N.D. Ill. 2010), the Seventh Circuit authorized an interlocutory appeal under Fed. R. Civ. P. 23(f).

The district court framed the central class question as whether a defendant- administered refund program may be found superior to a class action within the meaning of Rule 23(b)(3).  270 F.R.D. at 381.  The court concluded that consumers would be better off returning their products for refund or replacement than pursuing litigation, which the court thought would just require the class members to bear attorneys’ fees in order to obtain a remedy that is theirs for the asking already. The record showed that more than 600,000 consumers returned Aqua Dots kits, and that more than 500,000 of these 600,000 received refunds. The district court concluded that the substantial costs of the legal process could make a suit inferior to a recall as a means to set things right.

The Seventh Circuit noted that it "is hard to quarrel with the district court’s objective." The lower the transactions costs of dealing with an allegedly defective product, the better. The transactions costs
of a class action include not only lawyers’ fees but also giving notice under Rule 23(c). Here, notice might well cost more, per kit, than the kits’ retail price—and could be ineffectual at any price, since most purchases were anonymous. The trial court couldn't order that defendants send each buyer a letter; notice presumably would be by publication, yet the recall was already widely publicized. Why bear these costs a second time?

Moreover, the Consumer Products Safety Commission had not expressed dissatisfaction with the recall campaign or its results, and the record did not contain any evidence of injury to children after the recall was announced.

The problem was, however, that a recall is not a form of “adjudication” as described in Rule 23, and a “policy approach” to the superiority analysis could not ignore the Rule’s text.  Policy about class actions has been made by the Supreme Court through the mechanism of the Rules Enabling Act, and Rule 23 establishes a national policy for the district judges.

Even as it mis-read Rule 23(b), departing from the text of Rule 23(b)(3), the district court could have, said the appeals court, simply relied on the text of Rule 23(a)(4), which says that a court may certify a class action only if the representative parties will fairly and adequately protect the interests
of the class.  Plaintiffs here wanted relief that duplicated a remedy that most buyers already had received, and that remained available to all members of the putative class. Bottom line: "A representative who proposes that high transaction costs (notice and attorneys’ fees) be incurred at the class members’ expense to obtain a refund that already is on offer is not adequately protecting the class members’ interests."

So, the trial judge cited the wrong subsection of Rule 23. But defendants did not forfeit their arguments by focusing on superiority; they made the essential contentions -- there is something wrong with proceeding as a class under these circumstances.

The panel noted also serious problems of management with the proposed class, including the  variability of state law, and the fact that individual notice would be impossible, which would make it hard for class members to opt out.  The per-buyer costs of identifying the class members and giving notice could exceed the price of the toys (or any reasonable multiple of that price), leaving nothing to be distributed. "The principal effect of class certification, as the district court recognized,
would be to induce the defendants to pay the class’s lawyers enough to make them go away."

But, the most interesting aspect of the decision, again, is the analysis of Rule 23(a)(4) and the notion that the adequacy requirement forbids class representatives from bringing socially wasteful litigation for the benefit of the attorneys at the expense of the class they seek to represent. The decision can be seen as part of the trend (including Dukes) to put rigor into the Rule 23(a) analysis.

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The Judicial Panel on Multidistrict Litigation declined recently to consolidate three suits by plaintiffs who alleged Ferrero U.S.A. Inc. misrepresented Nutella hazelnut spread as a healthy and nutritious food. In re Nutella Marketing and Sales Practices Litigation, MDL No. 2248 (J.P.M.L.,  8/16/11).

We are always interested when the Panel declines to coordinate cases, but also have to admit that this is a favorite product in the MassTortDefense household.  The spread, in its earliest form, was created in the 1940s by Mr. Pietro Ferrero, a pastry maker and founder of the Ferrero company. At the time, there was very little chocolate because cocoa was in short supply due to World War II rationing. So Mr. Ferrero used hazelnuts, which were plentiful in the Piedmont region of Italy, to extend the chocolate supply. The region is mostly mountains and hills, on the north-western border of Italy with France and Switzerland.

A plaintiff in the District of New Jersey action sought consolidation, arguing that the cases made similar allegations challenging Ferrero's marketing and advertising practices. Interestingly, movants and respondents both recommended centralization because the actions contained "similar allegations" concerning Ferrero’s advertising, marketing and sale of Nutella spread and its alleged misrepresentations of Nutella as a healthy and nutritious food. All parties disagreed only as to the appropriate choice for transferee district.

However, the Panel noted that it has an institutional responsibility that goes beyond simply accommodating the particular wishes of the parties. See In re: Equinox Fitness Wage and Hour Empl’t Practices Litig., 764 F. Supp. 2d 1347, 1348 (J.P.M.L. 2011) (denying unopposed motion for centralization of two actions).

Here, the Panel was not persuaded that Section 1407 centralization was necessary for the convenience of the parties and witnesses or for the just and efficient conduct of this litigation. The actions may have shared some factual questions regarding the common defendant’s marketing
practices, but these questions did not appear complicated to the Panel. Indeed, the parties did not persuade the Panel that any common factual questions were sufficiently complex or numerous to justify Section 1407 transfer.  Instead, said the Panel, cooperation among the parties and deference among the courts should minimize the possibility of duplicative discovery and inconsistent pretrial rulings. See, e.g., In re: General Mills, Inc., Yoplus Yogurt Prods. Mktg. and Sales Practices Litig., 716 F. Supp. 2d 1371 (J.P.M.L. 2010).

 

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Ok, so it's not a major mass tort, but we couldn't resist mentioing this one. McGregor v. Scotts Co., No. 4:11-cv-00548 (E.D. Mo., 8/8/11).  The case goes to a basic element of products liability law, the definition of the product.

Plaintiff’s complaint alleged that he purchased a bag of potting soil sold by defendant, and upon opening the bag and putting his hand in to scoop out some soil, his hand was bitten by a copperhead snake. In Count I, Plaintiff sought damages on a theory of strict liability. Defendant argued that Count I should be dismissed for failure to state a claim because plaintiff failed to state facts supporting an alleged design or manufacturing defect in the potting soil.

Defendant sought to define the product at issue here as just the soil itself, and argued that there was nothing wrong with the soil. But the Court agreed with plaintiff that the product was the bag of soil sold by defendant. See generally Cantu, A Continuing Whimsical Search For The True Meaning Of The Term “Product” In Products Liability Litigation, 35 St. Mary's L.J. 341 (2004).

If indeed, there was a copperhead snake in the bag at the time manufacturing was complete, said the Court, the "product" could have been unreasonably dangerous when used as reasonably anticipated.

 

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A California federal court earlier this month rejected many of the claims in a putative class action against Epson America Inc.  Christopher O'Shea, et al. v. Epson America Inc., et al., 2011 WL 3299936 (C.D. Cal.). What may be of most interest to our readers is the important reminder that a manufacturer is not required under consumer protection laws to denigrate its own product and broadcast that its product may not perform as well as its competition.

Plaintiffs claimed that Epson affirmatively misrepresented and failed to disclose material information regarding the performance and/or value of Epson inkjet printers and ink cartridges. Named plaintiffs claimed to be frustrated with the amount of ink the Epson printer consumed.

In fact, Epson discloses that its printers are tested in accordance with ISO standards, and makes available to consumers detailed information about how ink yields are calculated, including the fact that testing is conducted based on continuous printing; potential consumers, further, are expressly cautioned that since no single yield standard can duplicate a customer's actual printer usage, Epson recommends that customers also consider print yield comparisons from reputable independent sources. In the same vein, Epson discloses on the packaging of its printers that actual cartridge yields may vary considerably for reasons including images printed, print settings, temperature and humidity.  But plaintiffs never let a wealth of information deter them from finding one factoid they allegedly didn't get.

So, in essence, plaintiffs sought to impose a duty on the seller to compare this feature of its printers to competitors' products, as the Complaint referred to yields which were allegedly well below the yields of other manufacturers' printers. 

The California courts have held that for an omission to be actionable for purposes of  the state consumer fraud laws, it must be either (1) contrary to a representation actually made by the defendant, or (2) a fact the defendant was obligated to disclose.  E.g., Daugherty v. Am. Honda Motor Co., Inc., 144 Cal.App.4th 824, 835–36, 51 Cal.Rptr.3d 118, 128 (2006). Here, because there was no allegation that the “omitted” information was contrary to an actual representation, to defeat summary judgment and prevail on an omission-based theory of liability, plaintiffs had to establish that Epson was affirmatively obligated to disclose the information.

Yet, plaintiffs failed to identify—and the Court was unable to find—any case in any jurisdiction in which a court imposed an affirmative legal obligation upon a manufacturer to disclose on its packaging that its products performed less efficiently than similar products from competing manufacturers. To the contrary, as Epson pointed out, courts have unequivocally rejected this proposition. As the federal court explained, in the absence of some special circumstance, any duty to disclose information about a competitor's products would be anathema to a competitive free-market economy.  Imagine a car manufacturer having to tell you in every ad about every other car that got better gas mileage or did better in a crash test. Imagine every food maker having to tell you in its ads of every competitive food or beverage that was lower in calories.

Plaintiffs did not allege that Epson's printers were defective, let alone dangerously defective. Their claim, rather, was that they were unhappy upon discovering that Epson's printers “wasted” more ink than other printers.  California's consumer protection laws, though broad and sometimes scary, do not extend so far as to require a company to denigrate its own products or promote those of its competitors just because consumers might be interested in the comparison. The duty that plaintiffs sought to impose upon Epson was properly served by independent consumer reports.

The court held that Epson was not legally obligated to disclose that actual print yields generated by its printers and ink cartridges are “grossly inefficient” vis à vis “reason-able consumer expectations and the yields of other manufacturers' printers.”  Because Epson was not obligated to disclose the purportedly “omitted” information, plaintiffs' omission-based claims consequently failed as a matter of law.

However, the court denied the motion as to express representations allegedly made concerning the claims on one proposed sub-class which alleged that the defendant deceived customers when it told them that its NX series of printers, which uses individual cartridges for different colors of ink, would allow customers to “replace only the color you need.”  There was an issue of fact regarding whether the consumer is familiar enough with printer technology and operations to know that small amounts of colored ink are used when printing black-and-white documents to keep the print head clear. The plaintiffs have moved for class certification, with the hearing set for later in August.
 

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Here's a case of a venerable rule (puffery) and an important new doctrine (Twiqbal) being applied in the context of a troubling trend -- the spate of consumer fraud class actions challenging everything a defendant says about its products.  A New Jersey federal court recently rejected a putative class action alleging that Panasonic Corp. falsely advertised its Viera plasma televisions made in 2008 and 2009. Shane Robert Hughes et al. v. Panasonic Consumer Electronics Co., No. 2:10-cv-00846 (D.N.J. July 21, 2011). A useful and detailed analysis of commonly found flaws in consumer fraud class action complaints.

Plaintiffs putatively represented a class defined as individuals and entities who own or purchased any 2008/2009 model Panasonic Viera Plasma Television. Plaintiffs alleged that the televisions suffered from increased “voltage adjustments” causing a rapid deterioration in picture quality. The  class members allegedly relied on Panasonic’s representations concerning the "industry leading" black levels and contrast ratios, and/or personally observed the televisions’ excellent picture quality on models displayed in retail stores. Plaintiffs sought damages and/or refunds from Panasonic for violations of the New Jersey Consumer Fraud Act (“NJCFA”), N.J. STAT. ANN. § 56:8-1 et seq.; other states’ consumer protection acts; and under various express and implied warranty claims.

Defendant moved to dismiss. The adequacy of pleadings is governed by Fed. R. Civ. P. 8(a)(2), which requires that a complaint allege “a short and plain statement of the claim showing that the pleader is entitled to relief,” but also requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do. Factual allegations must be enough to raise a right to relief above the speculative level. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007).

Although class members were from around the country, the court determined it need not decide whether it was appropriate to engage in a choice of law analysis at the pleadings stage because, as detailed below, each of the plaintiffs’ claims failed as a matter of law under any of the possibly applicable laws.

Claims under the NJCFA and most state consumer fraud acts require a plaintiff to allege (1) unlawful conduct by the defendants; (2) an ascertainable loss on the part of the plaintiff; and (3) a causal relationship between the defendants’ unlawful conduct and the plaintiff’s ascertainable loss.  Panasonic argued, among other things, that even if the allegations are true, plaintiffs’ CFA claim failed because plaintiffs had not pointed to any actionable unlawful conduct by Panasonic. According to Panasonic, plaintiffs did not set forth any specific advertisements, marketing materials, warranties, or product guides that plaintiffs viewed; where and from whom at Panasonic did plaintiffs received any such information; or how precisely, plaintiffs were injured by any such representations.

The Court found that Panasonic’s alleged misrepresentations about the Televisions’
“industry  leading” technology and features, which create superior image and color quality, were not “statements of fact,” but rather subjective expressions of opinion. Indeed, such statements of
product superiority are routinely made by companies in advertising to gain a competitive advantage
in the industry. The NJCFA distinguishes between actionable misrepresentations of fact and
"puffery.” Rodio v. Smith, 123 N.J. 345, 352 (1991) (the slogan “You’re in good hands with Allstate” was “nothing more than puffery” and as such was not “a deception, false promise, misrepresentation, or any other unlawful practice within the ambit of the Consumer Fraud Act”); see New Jersey Citizen Action v. Schering-Plough Corp., 367 N.J. Super. 8, 13-14 (N.J. Super. App. Div. 2003) (finding that defendant’s advertisements which employed phrases as “you . . . can lead a normal nearly symptom-free life again” were “not statements of fact, but are merely expressions in the nature of puffery and thus were not actionable” under the NJCFA).  The same is true in many states.

The remaining misrepresentations may have been statements of fact rather than mere puffery. However, plaintiffs did not assert sufficient allegations of fact to satisfy the requisite level of adequate pleading under Rule 9(b) or by Twombly/Iqbal.  For example, regarding the alleged misrepresentation about half-brightness, the Amended Complaint did not allege the date, place or time of this misrepresentation or otherwise inject some precision and some measure of substantiation into plaintiffs’ allegations of fraud. While plaintiffs could not be expected to plead facts solely within Panasonic’s knowledge or control, plaintiffs should be able to allege the specific advertisements, marketing materials, warranties or product guides that they each reviewed, which included this misrepresentation and when it was so advertised.

Plaintiffs also alleged various omissions, but fraudulent omissions require a showing of intent. Here, even accepting the allegations of omissions in the Amended Complaint as true, the court found that plaintiffs failed to allege sufficient facts to raise any plausible inference that Panasonic knowingly concealed the alleged defect with the intent that consumers and industry experts would rely upon the concealment. Indeed, throughout the Amended Complaint, it was alleged that Panasonic knew “or should have known” of the defect, but provides no additional facts explaining how or why Panasonic had knowledge of the defect to satisfy Twombly/Iqbal. Such allegations of intentionally failing to disclose the alleged defect were merely conclusory assertions.

Even assuming plaintiffs sufficiently alleged the “unlawful conduct” element under the consumer fraud acts, the court also concluded that the Amended Complaint did not satisfy the pleading requirements of Twombly/Iqbal or Rule 9(b) as to the “ascertainable loss” element.  A plaintiff must suffer a definite, certain and measurable loss, rather than one that is merely theoretical. The certainty implicit in the concept of an ascertainable loss is that it is quantifiable or measurable. The allegations did not sufficiently plead either an out-of pocket loss by plaintiffs or a showing of loss in value. For example. plaintiffs failed to allege how much they paid for their Televisions and how much other comparable Televisions manufactured by Panasonic’s competitors cost at the time.  Plaintiffs failed to allege how much of a premium they claim to have paid for their Panasonic Televisions.  Furthermore, in the Amended Complaint, plaintiffs affirmatively stated that most continue to use the Televisions, thus obscuring any possible measurable loss.  Typically, plaintiffs try not to allege details in this area for fear of undermining their class certification arguments.

Plaintiffs' warranty claim suffered from several defects. While the claim at times was presented as an alleged manufacturing problem, a review of the Amended Complaint revealed that plaintiffs alleged only that the Televisions suffered from an inherent design defect and/or improper programming. Plaintiffs one vague, conclusory allegation that the defect was caused, in part, due to “manufacturing errors” was insufficient to satisfy the requisite pleading standards under Twombly/Iqbal.  Moreover, the express warranty claims were impacted by what the court already concluded in connection with plaintiffs’ consumer fraud claims, that Panasonic’s statements about the Televisions’ “industry leading” technology and features, which create superior image and color quality, were mere expressions of puffery. As such, these marketing statements were not sufficient enough to create an express warranty. 

On the implied warranty claim, while plaintiffs alleged that the Televisions were defective, plaintiffs did not allege that the Televisions were inoperable or otherwise not in working condition. Indeed, the Amended Complaint did not contain any explicit allegation that plaintiffs could no longer use their Televisions - in other words, that they were no longer generally fit for their ordinary purpose.  Although the Televisions may not have fulfilled plaintiffs’ subjective expectations, plaintiffs did not adequately allege that the Televisions failed to provide a minimum level of quality, which is all that the law of implied warranty requires. See also In re Ford Motor Co. Ignition Switch Prods. Liab. Litig., 2001 WL 1266317, at *22 (D.N.J. Sept. 30, 1997) (merchantability “does not entail a promise by the merchant that the goods are exactly as the buyer expected, but rather that the goods satisfy a minimum level of quality”).

Thus, the court concluded, each of plaintiffs’ claims failed to state a claim under Rule 12(b)(6), to satisfy Rule 9(b) heightened pleading requirements, and/or pleading standards under
Twombly/Iqbal. The court granted Panasonic’s motion to dismiss the Amended Complaint without prejudice.

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A federal court late last month declined to certify a proposed class action in which plaintiffs challenged alleged claims about the weight-loss properties of One-A-Day WeightSmart vitamins. Gray v. Bayer Corp., No. 08-4716 (D.N.J. 7/21/11).  Our readers will be interested in the discussion of the predominance and superiority requirements for class actions.

Plaintiff alleged that the packaging of One-A-Day WeightSmart falsely claimed that the vitamin enhances a user’s metabolism. Plaintiff filed a complaint against Bayer alleging claims based on intentional and negligent misrepresentation, and the New Jersey Consumer Fraud Act (NJCFA), N.J.S.A. 56:8-1, et seq.;  plaintiff later moved  to certify a class of purchasers of One-A-Day WeightSmart pursuant to Rule 23(b)(3), which requires that a plaintiff establish that the questions of law or fact common to the class members predominate over any questions affecting only individual members and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy.

As plaintiff’s proposed nationwide class called for the application of state substantive law, the court first looked to determine which state’s law governed the claims. Plaintiff argued that New Jersey had the most significant relationship to the claims because all of the decisions with respect to marketing allegedly took place in New Jersey, and all of the alleged operative misrepresentations originated in New Jersey, at Bayer’s headquarters. Defendant noted that because consumers purchased One-A-Day WeightSmart throughout the United States and thereby received the alleged misrepresentations in various jurisdictions other than New Jersey, the consumer fraud laws of the states where the product was purchased should apply. The court agreed that .the place where the
putative class members received Bayer’s alleged representations and the place where the consumers acted in reliance upon those representations, were key factors pointing to the law of the individual states where the product was purchased. (Consumers purchased One-A-Day WeightSmart at retail locations nationwide, not from Bayer itself.)

Moreover, to apply the NJCFA to all the out-of-state consumers in this case would be to ignore the interests of potentially fifty other jurisdictions. Simply because New Jersey has struck a particular balance between consumer protection and the promotion of business within its borders does not suggest that its interest in deterrence should displace the differing policy goals of its fellow states. Those states have instead struck their own legislative balances, awarding compensation based on differing standards of, inter alia, intent, causation, reliance, and damages. The interests of interstate comity and the competing interests of the states counseled against the blanket application of one state’s law over the laws of other interested states.

Thus, the court had to next consider whether variations in state laws presented the types of insuperable obstacles which render class action litigation unmanageable. See In re Warfarin Sodium Antitrust Litig., 391 F.3d 516, 529 (3d Cir. 2004). Where the applicable law derives from the law of the 50 states, as opposed to a unitary federal cause of action, differences in state law will compound any disparities among class members from the different states. It is plaintiff’s burden to
credibly demonstrate, through an extensive analysis of state law variances, that class certification does not present insuperable obstacles. 

Here, plaintiff failed to carry this burden.The court acknowledged a “brewing issue” in the Third Circuit over whether the NJCFA could be applied in a national class action. But the better view was that the court would be required to apply distinct standards of, inter alia, intent, causation, reliance, and damages in order to adjudicate plaintiff’s claims under each state’s consumer fraud law. Litigating plaintiff’s claims based on law from potentially fifty-one different jurisdictions would likely require a multitude of mini-trials to determine Bayer’s liability to each statewide group of consumers. Such a procedure would be an inefficient use of  judicial resources and would defeat the purported economies of class treatment.

The court therefore concluded that plaintiff’s proposed nationwide class failed both the predominance and superiority requirements under Rule 23(b)(3). 

Bayer argued that the alternative proposed Florida class was not ascertainable because claims under the Florida consumer fraud act are subject to a four-year statute of limitations and thus the claims of some Florida class members would be barred -- an issue requiring an individual analysis. Plaintiff was, however, granted leave to file a revised motion for class certification with respect to a more ascertainable Florida class only.

 

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The Montana Supreme Court recently upheld the imposition of liability on a bat manufacturer for allegedly failing to warn about the dangers of aluminum bats. Patch v. Hillerich & Bradsby Co., d/b/a Louisville Slugger, No. DA 10-0051 (Mont. 7/21/11).  Bad facts made bad law here. 

Many people consider "The Natural" to be one of the greatest sports movies of all time, and those that think deep thoughts have asserted that the screenplay  (presumably not the 1952 book too?) was based in part on the story of Sir Percival from the Arthurian myths, with the broken bat "Wonderboy" taking the part of the knight's broken sword.  Had Roy Hobbs used an aluminum bat, that aspect of the story would have been lost. Since their introduction in the early 1970's, aluminum bats have become quite popular in youth and amateur adult baseball and softball markets. The new bats are often touted as having a wider sweet spot, more power, better feel, or higher performance. It is pretty much accepted that balls come off metal bats faster than they do from wood bats, but this aspect of performance has fueled an ongoing metal/wood issue in some circles.

While pitching in an American Legion baseball game on July 25, 2003, the eighteen year-old plaintiff was struck in the head by a batted ball that was hit using H&B’s model CB-13 aluminum bat. Tragically, plaintiff died from his injuries. In 2006, Brandon’s parents sued H&B, claiming H&B’s model CB-13 aluminum bat was in a defective condition because of the alleged enhanced risks associated with its use: It increased the velocity speed of a batted ball when it left the bat, thus decreasing infielders’ reaction times, which allegedly resulted in a greater number of high energy batted balls in the infield.

The matter was tried in October, 2009, and the design defect and failure to warn claims were submitted to the jury, which concluded that the model CB-13 aluminum bat was not designed defectively, but determined the bat was in a defective condition due to H&B’s failure to warn of the enhanced risks associated with its use. They awarded plaintiffs an $850,000 verdict on their failure to warn claim. Defendant appealed.

The key issue was whether a failure to warn claim can be brought by a bystander -- plaintiff was not the consumer nor the user. H&B asserted that only the individual batting (actual user) and the individual who purchased the bat (actual consumer) could assert a failure to warn claim.  The court disagreed, saying this interpretation of the terms user and consumer is somehow contrary to the definition of the terms as contained in the Restatement (Second) of Torts § 402A. This state court’s products liability jurisprudence had recognized that a failure to warn claim may be brought by some persons who are not actual purchasers or users of a product; previous plaintiffs included those who are passively enjoying the benefit of the product, as in the case of passengers in automobiles or airplanes, as well as those who are utilizing it for the purpose of doing work upon it.  "The realities of the game of baseball" supported, said the court, the decision to submit the failure to warn claim to the jury. The bat was deemed an indispensable part of the game. The risk of harm accompanying the bat’s use extends beyond the user, beyond a player who holds the bat in his or her hands. A warning of the bat’s risks to only the batter standing at the plate inadequately communicates the potential risk of harm posed by the bat’s increased exit speed, concluded the court. In this context, all of the players, including plaintiff, were deemed "users or consumers" placed at risk by the increased exit speed caused by H&B’s bat.

Defendant also argued that plaintiff could not establish causation - reading and heeding the warning. The court held that H&B’s argument erroneously assumed that placing a warning directly on the bat is the only method to provide a warning. While placing a warning directly on a product is certainly one method of warning, other methods of warning exist, including, but not limited to, issuing oral warnings and placing warnings in advertisements, posters, and media releases. Davis v. Wyeth Laboratories, Inc., 399 F.2d 121, 131 (9th Cir. 1968) (“[O]ther means of communication such as advertisements, posters, releases to be read and signed . . . or oral warnings . . . could easily have been undertaken . . . .”). Such warnings, if issued by H&B in this case, said the court, could have communicated to all players the potential risk of harm associated with H&B’s bat’s alleged increased exit speed.

What the court here called a "flexible" approach to causation really eviscerates one of the fundamental elements of the claim. The court allowed the jury to infer without any basis in fact that plaintiff would have heeded a warning had one been given-- apparently because he was deceased, and thus real proof of causation was hard to find. There is no basis to allow a jury simply to express sympathy for a tragic accident victim,as here there was not sufficient proof that the plaintiff would have adjusted his behavior after receiving the warning to avoid the injury. The decision puts this court in a tiny minority of states that recognize some kind of bystander failure to warn liability, which most courts agree is unworkable and contrary to the reality of modern commerce.

The concurrence correctly noted that plaintiff did not articulate specifically what a warning should have contained and what message should have been given. Statements to the effect that the bat would hit balls at unusually fast speeds or unusually far distances are the kind of messages accompanying usual product advertising and are not likely to change a player's/plaintiff's behavior. Moreover, they are precisely the qualities in a bat which baseball teams and players seek out. Plaintiff could not articulate specifically how a warning would have changed the result here, in other words, how the failure to warn caused this accident.

H&B also argued that because plaintiff had been hit by batted balls before, he knew he could be hit and, therefore, assumed the risk when he continued playing baseball. The court explained that assumption of the risk defense in this state is inapplicable as a matter of law without evidence the victim actually knew he or she would suffer serious injury or death, and, knowing that, the victim voluntarily exposed himself or herself to the danger. Lutz v. Natl. Crane Corp., 267 Mont. 368, 379-80, 884 P.2d 455, 461-62 (1994). What the victim actually knew is evaluated using a subjective standard in Montana. Here, said the court, there was no evidence that plaintiff actually knew he would be seriously injured or killed when pitching to a batter using one of H&B’s model CB-13 aluminum bats. He knew he could be hit with a screaming line drive, but not that it could injure him seriously?

Plaintiff's apparent theory, as articulated in closing argument, was that H&B should have
advertised that its bat “could kill.” And the inference which plaintiff asked the jury to draw in order to establish causation was that, following the publishing of a warning “that this bat could kill,” the parents would have prohibited Brandon from playing baseball.  That tells you how unworkable the theory is. This was a terrible accident on a baseball field, the kind of accident that has also occurred with wood bats. The bat was not defective. It was made in accordance with the rules approved for play by baseball's organizing and governing bodies. Bad facts again make bad law.
 

 

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The plaintiff who at one time had been the first-in-line bellwether plaintiff in the FEMA Trailer MDL has lost her appeal of the dismissal of her claims. In Re: Fema Trailer Formaldehyde Products Liability Litigation (Alana Alexander, plaintiff), No. 10-30451(5th Cir. June 24, 2011).

Plaintiffs sued the government, alleging exposure to potentially dangerous, high levels of formaldehyde in their Federal Emergency Management Agency (FEMA) provided emergency housing unit. Following Hurricanes Katrina and Rita, FEMA provided EHUs to the displaced victims of the storms. The hurricanes’ destruction created an urgent and immediate need for an unprecedented number of EHUs. In response, FEMA purchased more than 140,000 new EHUs from manufacturers and dealers. Alexander and her children were among the Louisiana residents who received an EHU. The Alexander family moved into their EHU in May 2006 and almost immediately noticed a “chemical smell” in the unit that caused the children's asthma to worsen. Other physical manifestations allegedly  included  irritation, burning, and tearing of the eyes; irritation and burning of nasal membranes; eczema; headaches; difficulty breathing; wheezing; shortness of breath; and new allergies and worsening allergies.

Alexander admitted that she knew the smell came from the EHU. Shortly after moving in, Alexander claimed, she asked an unidentified Government representative or contractor about  the smell. She claimed that he told her that that the smell was “nothing to worry about.”

In July, 2008, Alexander submitted an administrative claim with FEMA and in early 2009 filed a complaint in the district court, alleging under the Federal Tort Claims Act that the Government was careless, reckless, grossly negligent, and acted with deliberate indifference by failing to disclose the exposure to potentially dangerous and high levels of formaldehyde in the trailers.

Defendant moved to dismiss the complaint as untimely (in cases where the government has waived sovereign immunity, the statute of limitations issue is jurisdictional). Although the FTCA does not define when a claim accrues, it is well-settled that a tort action under the FTCA accrues when the plaintiff knows or has reason to know of the alleged injury that is the basis of the action. The trial court dismissed the case, and plaintiff appealed.

On appeal, Alexander argued that the accrual of her claim was delayed or tolled pursuant to either: (1) the discovery rule, (2) equitable estoppel, or (3) the continuing tort doctrine. The 5th Circuit found these arguments were without merit.

There was no dispute that Alexander was aware of the injuries by May 2006. When the family moved into the trailer in May 2006, almost immediately, the asthma worsened, and the kids
experienced a plethora of other health issues. The primary dispute was thus whether  Alexander knew or in the exercise of reasonable diligence should have discovered the cause of the  injuries such that her claim accrued at that time.

Plaintiff claimed she did not discover the Government’s role in the alleged injuries until July 2007, when FEMA issued its second round of flyers about formaldehyde emissions in the EHUs. This argument was "not convincing."  The court of appeals held that plaintiff had enough information regarding the injury and its cause by May 2006 that would lead a reasonable person in plaintiff's  position to further investigate the specific cause of that injury. All the facts were not in the control of the putative defendant, unavailable to the plaintiff or at least very difficult to obtain. Plaintiff could have established FEMA’s connection to the EHU, from which the “chemical smell” was emanating.

Second, plaintiff argued that because she reasonably relied on the claims of the representative that there was “nothing to worry about,” the limitations period should be equitably tolled. Because the limitations periods in statutes waiving sovereign immunity are jurisdictional, the district court properly held that equitable tolling did not apply to this case. 

Finally, Plaintiff could not cite any Fifth Circuit case law indicating that accrual should be delayed when the plaintiff knows about the injury and could have discovered, with a reasonable inquiry, the putative defendant’s, here the Government’s, potential liability. The court thus declined the invitation to apply the continuing tort doctrine to the facts presented in this case.

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At the end of the term, 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 opinions on this issue in two decades. Readers may recall we posted on these cases before, including on the grant of cert and the oral arguments.

Personal jurisdiction addresses the reach of the court’s power over a party, and without such jurisdiction, any ruling by the court is not binding on the party. Plaintiff lawyers focus on personal jurisdiction as part of the equation where they can sue; defendants as part of where they can be sued properly. As a general matter, a defendant can only be sued where it has sufficient minimum contacts with the state such that a suit there does not offend traditional notions of fair play and substantial justice.

The issue framed in Nicastro was: Whether, consistent with the Due Process Clause and pursuant to the stream-of-commerce theory, a state may exercise in personam jurisdiction over a foreign manufacturer when the manufacturer targets the U.S. market for the sale of its product and that product is purchased by a forum state consumer. The corresponding issue in Brown was: Whether a foreign corporation is subject to general personal jurisdiction, on causes of action not arising out of or related to any contacts between it and the forum state, merely because other entities distribute in the forum state products placed in the stream of commerce by the defendant.

Let’s start with Brown. Plaintiffs were North Carolina residents whose sons died in a bus accident outside Paris, France. They filed suit for wrongful death in North Carolina state court. Alleging that the accident was caused by a tire failure, they named as defendants Goodyear USA, an Ohio corporation, and petitioners, three Goodyear USA subsidiaries, organized and operating, respectively, in Luxembourg, Turkey, and France. The tires at issue were manufactured primarily for European and Asian markets and differ in size and construction from tires ordinarily sold in the United States. The foreign subs affiliates were not registered to do business in North Carolina; had no place of business, employees, or bank accounts in the State; did not design, manufacture, or advertise their products in the state; and did not solicit business in the State or sell or ship tires to North Carolina customers. But, a small percentage of their tires were redistributed in North Carolina by other Goodyear USA affiliates.

The state court denied defendants’ motion to dismiss the claims against them for want of personal jurisdiction. A unanimous Supreme Court reversed.

The Court first reviewed the general principles: The Fourteenth Amendment’s Due Process Clause sets the outer boundaries of a state tribunal’s authority to proceed against a defendant. International Shoe (you remember that one from law school) provides that state courts may only exercise personal jurisdiction over an out-of-state defendant who has certain minimum contacts with a state such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice. The Court has recognized that jurisdiction could be asserted where the corporation’s in-state activity is “continuous and systematic” and gave rise to the episode-in-suit. The commission of “single or occasional acts” in a state may also be sufficient to render a corporation answerable in that state with respect to those acts, though not with respect to matters unrelated to those forum connections. These became known as “specific jurisdiction.” This notion is distinguished from cases in which the continuous corporate operations within a state are so substantial and of such a nature as to justify suit against it on causes of action even arising from dealings entirely distinct from those activities, “general jurisdiction.” Helicopteros Nacionales de Colombia, S. A. v. Hall, 466 U. S. 408.

Here, defendants lacked the kind of continuous and systematic general business contacts necessary to allow North Carolina to entertain a suit against them unrelated to anything that connects them to the state. The so-called stream-of-commerce cases on which the North Carolina court relied relate to exercises of specific jurisdiction in products liability actions, in which a nonresident defendant, acting outside the forum, places in the stream of commerce a product that ultimately causes harm inside the forum. Many state long-arm statutes authorize courts to exercise specific jurisdiction over manufacturers when the events in suit, or some of them, occurred within the forum state. The North Carolina court’s stream of commerce analysis ignored the essential difference between specific and general jurisdiction. Flow of a manufacturer’s products into the forum may or may not bolster an affiliation germane to specific jurisdiction, but here North Carolina was not a forum in which it would be permissible to subject petitioners to general jurisdiction.

[Finally, plaintiffs failed to preserve the possible argument that the courts should disregard petitioners’ discrete status as subsidiaries and treatment of all Goodyear entities as a “unitary business,” so that jurisdiction over the parent would draw in the subsidiaries as well.]

More contentious and complex were the issues in Nicastro, which resulted in a 6-3 decision with a plurality opinion by Justice Anthony Kennedy. Justices Breyer and Alito concurring in the judgment; and Justices Ginsburg, Sotomayor and Kagan dissenting.

Plaintiff injured his hand while using a metal-shearing machine that petitioner/defendant J. McIntyre Machinery, Ltd. manufactured in England, where the company is incorporated and operates. Nicastro filed a products liability suit in a state court in New Jersey, where the accident occurred. Defendant argued there was no personal jurisdiction. Nicastro’s jurisdictional claim was based on three primary facts:

1) a U. S. distributor agreed to sell J. McIntyre’s machines in this country;

2) J. McIntyre officials attended trade shows in several states, although not in New Jersey; and

3) exceedingly few J. McIntyre machines (the record suggested only one), ever ended up in New Jersey.

The NJ state court held that jurisdiction could be exercised as long as the manufacturer knew or reasonably should have known that its products were distributed through a nationwide distribution system that might lead to sales in any of the states-- even though at no time had it advertised in, sent goods to, or in any relevant sense targeted this specific state. This is a version of the so-called “stream-of-commerce” doctrine of jurisdiction, discussed by a plurality of the court in Asahi Metal Industry Co. v. Superior Court of Cal., Solano Cty., 480 U. S. 102.

The Supreme Court reversed. The exercise of jurisdiction here would violate due process when the defendant never engaged in any activities in New Jersey that revealed an intent to invoke or benefit from the protection of the state’s laws. The plurality’s due process analysis is intriguing, and very traditional. A court may subject a defendant to judgment only when the defendant has sufficient contacts with the sovereign such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice. But, “free-form” fundamental fairness notions divorced from traditional practice cannot transform a judgment rendered without authority into law. That some might argue subjecting the defendant to suit is “fair” is not enough. As a general rule, the sovereign’s exercise of power still requires 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. In cases like this one, it is the defendant’s purposeful availment that would make jurisdiction consistent with “fair play and substantial justice” notions.

Justice Kennedy then went on to address the stream of commerce notion, stating that no “stream-of-commerce” doctrine can displace that general rule of purposeful availment, even for products liability cases. He acknowledged that the standards for determining state jurisdiction over an absent party have been a bit unclear because of decades-old questions left open in Asahi. This imprecision arising from Asahi, for the most part, resulted from its statement of the relation between jurisdiction and the notion of placing a product in the “stream of commerce.” That concept, like other metaphors, has its "deficiencies as well as its utilities."  A defendant’s placement of goods into commerce “with the expectation that they will be purchased by consumers within the forum State” may sometimes indicate purposeful availment. But that does not swallow the general rule of personal jurisdiction. The principal inquiry in cases of this sort is still whether the defendant’s activities manifest an intention to submit to the power of a sovereign. And the conclusion in this case that the authority to subject a defendant to judgment depends on purposeful availment is consistent with Justice O’Connor’s Asahi opinion, not that of Justice Brennan.

Nicastro did not establish below that J. McIntyre engaged in conduct purposefully directed at New Jersey. The company had no office in New Jersey; it neither paid taxes nor owned property there; and it neither advertised in, nor sent any employees to, the State. Indeed, the trial court found that petitioner did not have a single contact with the State apart from the fact that the machine in question ended up there. That’s not enough.

Justice Breyer, joined by Justice Alito, agreed that the New Jersey Supreme Court’s judgment must be reversed, but concluded that because this case did not present the new and special issues arising from recent changes in commerce and communication, it was unnecessary to get into full analysis of the steam of commerce issue as it might be applied to 21st century marketing. Rather, the outcome of the case could be determined by the Court’s existing precedents, which have held that a single isolated sale, even if accompanied by the kind of sales effort indicated in the record here, is not sufficient. Here, the relevant facts showed no “regular flow” or “regular course” of sales in New Jersey, nor any special state-related design, advertising, advice, or marketing.

So what dies it all mean? It is significant for foreign companies that the Court corrected the mistake of some lower courts which have blended the concepts of specific and general jurisdiction. And a majority of the Court feels that the mere fact that your product ends up in a state and injures someone there is not, by itself, sufficient to confer jurisdiction on that state’s courts. Both the plurality and the concurrence seem to agree that a rule like that adopted by the NJ court would erroneously permit every state to assert jurisdiction in a products liability suit against any domestic manufacturer who sells its products (made anywhere in the United States) to a national distributor, no matter how large or small the manufacturer, no matter how distant the forum, and no matter how few the number of items that end up in the particular forum at issue. But there is no majority agreement so far on whether there can ever be a proper exercise of jurisdiction when a case presents “contemporary commercial circumstances” regarding the sale of a product – presumably things like use of Internet marketing. And if a foreign defendant directs his conduct at the entire United States, the plurality suggests that conceivably the defendant may in principle be subject to the jurisdiction of the courts of the United States but not of any particular state, but it is not clear if the rest of the Court agrees. The plurality thought this might be rare in that foreign corporations will often target or concentrate on particular states, and it might depend on the product/industry.

 

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The House Appropriations Committee voted last week (tally 27–21) to send a funding bill to the House floor that would cut off funds from being used for the Consumer Product Safety Commission's new consumer database.

Readers may recall that the Consumer Product Safety Improvement Act of 2008 mandated the creation of a consumer product safety information database, and from the beginning, there was controversy about the absence of a process for addressing false and inaccurate reports that will scare consumers, harm business, and generate no additional safety gains; the need to employ means to prevent the submission of fraudulent reports of harm while not discouraging the submission of valid reports; the importance of  not putting the governmental imprimatur on voluntary data that has not been verified; and the absence of a sufficient time period allocated for manufacturers to evaluate and respond to any proposed report.

As we have posted, the U.S. Consumer Product Safety Commission gave final approval late last year to the new consumer product safety database, overriding very real concerns about who should be permitted to submit incident reports and how they will be verified as accurate. CPSC commissioners split along party lines in the 3-2 vote, which came after a final discussion of whether the regulation would simply give certain interest groups a new forum to attack product makers and plaintiff lawyers a new tool, giving rise to lawsuits based on a rumor repeated through the echo chamber of the Internet.

Manufacturers have limited control over what information can be removed or amended once posted. The two dissenting votes made an unsuccessful attempt to amend the final rule so as to give manufacturers more time to comment on or respond to the accuracy of postings before they are published to the database and to the public.

The database is accompanied by a weak disclaimer stipulating that CPSC has not verified the accuracy of any report. Observes worry that the agency has not paid sufficient attention to legitimate issues of a manufacturer's goodwill and reputation, to the costs of unnecessary panic among product consumers, and the mischief that plaintiffs' lawyers might cause with unwarranted increase in litigation against manufacturers.

The bill just passed out of committee would cut CPSC's overall budget by about $3.5 million—approximately the same amount needed for the database—from FY 2011 levels, and provides that  no funds may be used to carry out any of the database activities.  It appears the bill will be taken up on the House floor in July. 

While consumer groups have opposed the funding cut-off, the majority on the committee agreed with the concern about the risks of unverifiable and inaccurate consumer comments that may be submitted. In the meantime, a 2011 continuing resolution requires the GAO to conduct an analysis of the database.

 

 

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A federal court in New York last week denied plaintiffs' motion for class certification in a case alleging that the run-flat tires on defendant BMW's MINI Cooper S were defective. See Oscar v. BMW of North America LLC, No. 1:09-cv-00011-RJH (S.D.N.Y. 6/7/11).

Oscar purchased a new 2006 MINI Cooper S from BMW-MINI of Manhattan, an authorized MINI dealership, but prior to purchasing the MINI did not do any sort of research. Nor did he take the car for a test drive. The car came with run-flat tires (RFTs), an innovation that allows drivers to drive to the nearest service station even after the tire was flat. As of December 2, 2009, a period of about three years, Oscar had had five flat tires.  Plaintiff alleges that  his troubles stemmed from the fact that his car was equipped with RFTs rather than with standard radial tires. He considered the number of flat tires he experienced to be evidence of a widespread defect.

Plaintiff proposed a nationwide class (or a New York class) of all consumers who purchased or leased new 2005, 2006, 2007, 2008, and 2009 MINI vehicles equipped with Run-Flat Extended Mobility Technology tires manufactured by Goodyear and sold or leased in the United States whose Tires have gone flat and been replaced.

On the first prerequisite of Rule 23(a), the court offered an interesting discussion arising from the fact that most of plaintiff's evidence of numerosity did not correlate directly to his class definition: data that may have included other vehicles, or non-RFT tires, or makers other than Goodyear. But the opinion noted that courts have relied upon "back-of-the-envelope calculations in finding numerosity satisfied."  Conservative assumptions leading to a likelihood of numerosity have at times sufficed. This case fell "right on the border between appropriate inference and inappropriate speculation."  Accordingly, numerosity was satisfied for the proposed national class but not the New York class.

Turning to the Rule 23(b)(3) requirements, the court confronted the choice of law issues inherent in a national class. Although plaintiff conceded that the law of the fifty states plus the District of Columbia would apply to the members of the nationwide class, he argued that the differences between the states’ laws on implied warranty claims were negligible because the implied warranty is a Uniform Commercial Code claim. But numerous courts have recognized that there are significant variances among the interpretation of the elements of an implied warranty of merchantability claim among the states. See Walsh v. Ford Motor Co., 807 F.2d 1000, 1016 (D.C. Cir. 1986); In re Ford Motor Co. Ignition Switch Litig., 194 F.R.D. 484, 489 (D.N.J. 2000).  In particular, several states still require privity; so, plaintiff advanced a theory of privity-by-agency. But this theory has not been accepted in all states. Readers know that choice of law issues impact, among other things, the manageability of the class and the superiority of the use of the class device.

The court also found that plaintiff failed to demonstrate that common questions of fact predominate. Plaintiff was unable to articulate and allegedly common defect, merely hypothesizing that the failure rate could stem from the RFTs’ "stiffness" and stating that further discovery would be necessary to ascertain the precise nature of the defect. Plaintiff did not provide the court with any evidence that Goodyear RFTs are likely to fail because of a particular common defect. The failure to specify an alleged common defect provided a further basis for concluding that plaintiff had not demonstrated predominance. See Am. Honda Motor Co. v. Allen, 630 F.3d 813, 819 (7th Cir. 2010) (holding predominance was not satisfied where forty-one plaintiffs owners alleged that their motorcycles wobbled, but failed to provide competent evidence that a common defect underlay their claims).

Even if Oscar had put forth evidence of a common defect, breach of warranty suits like this one often involve complicated issues of individual causation that predominate over common questions regarding the existence of a defect. See, e.g., In re Bridgestone/Firestone, Inc., 288 F.3d 1012, 1018-19 (7th Cir. 2002) (noting that class treatment of tire defect litigation was unmanageable in part because individual factors could affect the alleged tire failure); Sanneman v. Chrysler Corp., 191 F.R.D. 441, 451-52 (E.D. Pa. 2000) (declining to certify a class of vehicle owners whose paint had delaminated allegedly because of faulty painting process in part because the paint could delaminate for reasons other than the alleged defect); In re Ignition Switch Litig., 194 F.R.D. at 490-91 (declining to certify a class of vehicle owners whose passenger compartments caught on fire allegedly because of a faulty ignition switch because issues of individual causation would predominate); Feinstein v. Firestone Tire and Rubber Co., 535 F. Supp. 2d 595, 603 (S.D.N.Y. 1982) (declining to certify a class of tire purchasers because of “myriad [individual] questions,” including “other possible causes of the problem encountered”); see also Wolin v. Jaguar Land Rover N. Am., LLC, 617 F.3d 1168, 1172-74 (9th Cir. 2010).

Here, individualized issues of causation would swamp the common inquiry into an as yet to be identified tire design defect.  Even if the plaintiffs were to show that the Goodyear RFTs suffered from a common defect, they would still need to demonstrate that this defect caused each class member’s RFT to puncture. But tires can puncture for any number of reasons, and not all of these reasons will relate to the alleged defect. RFTs can go flat for reasons that would also cause a standard radial tire to go flat -- for example, if the driver ran over a nail, tire shredding device, or large pothole, or if a vandal slashed the tire. In order to demonstrate liability, plaintiff would have to demonstrate in each individual class member's case that the tire punctured for reasons related to the defect, rather than for a reason that would cause any tire to fail.

Similarly, under the state consumer fraud law claim, where the link between the defendant’s alleged deception (about the tires) and the injury suffered by plaintiffs is too attenuated and requires too much individualized analysis, courts will not certify a class. See, e.g., Pelman v. McDonald’s Corp., 272 F.R.D. 82 (S.D.N.Y. 2010) (declining to certify a class allegedly misled by McDonald’s claims that its food was healthy).  Again, determining whether each tire failed as a result of the allegedly concealed defect or as a result of unrelated issues, e.g., potholes or reckless driving habits, would devolve into numerous mini-trials.

Certification denied.

 

 

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A California appeals court last week affirmed the dismissal of a putative class action in which plaintiffs accused Fiji Water Co. LLC of improperly promoting its bottled water. Ayana Hill v. Roll International Corp. et al., No. A128698 (Cal. Ct. Appeal, 1st Appellate District).

Plaintiff  Hill alleged she bought bottles of Fiji water, on the label of which was a green drop; she claimed that the drop somehow represented Fiji bottled water was environmentally superior to other waters and endorsed by an environmental organization. Hill filed a proposed class action on behalf of herself and other consumers of Fiji bottled water, asserting violations of California‟s Unfair Competition Law (UCL) (Bus. & Prof. Code, § 17200 et seq.), False Advertising Law (FAL) (§ 17500 et seq.), and Consumers Legal Remedies Act (CLRA) (Civ. Code, § 1750 et seq.), plus common law fraud and unjust enrichment.

Readers know that the term “green” is commonly used to describe the environmentally friendly aspects of products, and that concerned about over-use of such terms, the Federal Trade Commission (FTC) has issued standards known as “Green Guides” to describe the appropriate use of such labeling. The Federal Trade Commission last Fall proposed revisions to the guidance that it gives marketers to help them avoid making misleading environmental claims. The proposed changes were designed to update the Guides and make them easier for companies to understand and use.  The changes to the Green Guides included new guidance on marketers’ use of product certifications and seals of approval, “renewable energy” claims, “renewable materials” claims, and “carbon offset” claims.

Because the guides are not legislative rules under Section 18 of the FTC Act, they are not themselves enforceable regulations, nor do they have the force and effect of law. They consist of general principles, followed by nonexclusive specific examples, and are intended to provide a safe harbor for marketers who want certainty about how to make environmental claims. However, a few states, such as California, have incorporated the FTC guides into their consumer fraud (here CLRA) definition of environmental marketing claims.  

Hill's personal allegations were that, starting in 2008, she bought Fiji water about twice a week from Walgreens stores in San Francisco, relying on  these alleged representations that the product was “environmentally friendly and superior.” She would not have bought Fiji water had she supposedly known the truth that the Green Drop was the creation of defendants, not a neutral party or environmental group. Defendants accomplish this supposed elaborate "deception” through conspicuous placement of the Green Drop on the front of the product to allegedly look similar to environmental seals of approval.  Further, plaintiff complained  that in their packaging and marketing, defendants have “called their product FijiGreen” and, in stores and other public places, stated that "Every Drop is Green.” 

The trial court dismissed the claims, and plaintiff appealed.  In that posture, the court assumed that Hill actually was, as she claims, misled in the context to believe that the green drop symbol on Fiji water was a seal implicitly indicating approval by a third party organization, and thus believed that the Fiji product was environmentally superior to competitors' bottled water.

The problem was that Hill's beliefs, asserted and even assumed, do not satisfy the reasonable consumer standard, as expressed in the FTC guides (16 C.F.R. § 260.7(a) (2011) [material implied claims conveyed “to reasonable consumers”]) and as used in California's consumer laws. The court of appeals emphasized that the standard is not a least sophisticated consumer, nor the unwary consumer , but the ordinary consumer within the larger population.  Importantly, the court noted that "it follows, in these days of inevitable and readily available Internet criticism and suspicion of virtually any corporate enterprise, that a reasonable consumer also does not include one who is overly suspicious."  How true that is.

So, does the green drop on Fiji water bottles convey to a reasonable consumer in the circumstances that the product is endorsed for environmental superiority by a third party organization? No, said the court. The drop itself bears no name or recognized logo of any group, much less a third party organization, no trademark symbol, and no other indication that it is anything but a symbol of Fiji water.  The water has just a green drop, the drop being the most logical icon for this particular product—water.  And for context, a green drop on the back of every bottle appears right next to the website name, “fijigreen.com,” further confirming to a reasonable consumer that the green drop symbol is by Fiji water, not an independent third party organization—and, of course, inviting consumers to visit the website, where Fiji Water's explains its  environmental efforts.

Plaintiff asked the court of appeals to reverse the the trial court's denial of leave to amend, claiming that any defects in the complaint could be cured by amendment. But Hill's saying so "does not make it so," and it was her burden to show how she might amend to cure the deficiencies. She did not. Dismissal without leave affirmed.

 

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Earlier this year, the Commission Staff of the European Union issued a Staff Working Document seeking public comment on the topic "Towards a Coherent European Approach to Collective Redress."

In an individual capacity, your humble blogger joined some other lawyers in providing comments recently.

As readers of MassTortDefense may know, collective redress -- aggregate litigation -- is not a novel concept in the European Union. Existing EU legislation and international agreements require Member States to provide for collective injunctive relief in certain areas. All Member States have procedures in place which grant the possibility of certain injunctive relief to enjoin some allegedly illegal practices. In the area of consumer law, as a result of the Directive on Injunctions, consumer protection authorities and consumer organizations have standing to seek an injunction regarding practices that allegedly breach national and EU consumer protection rules in all Member States. In the area of environmental law, the Aarhus Convention requires Member States to ensure access to justice against infringements of environmental standards. All Member States have implemented this by introducing some form of collective injunctive relief, whereby non-governmental organizations are given standing to challenge certain environmental administrative decisions.

In our comments, we warned that experience with overly robust collective redress procedures in some jurisdictions (such as the class action procedures as implemented in some courts in the United States) reveals significant risks inherent in such actions. These risks include the ability of collective actions to result in lengthy and costly litigation; their ability to trample the right of the entity accused of unlawful practices to a fair adjudication of the allegations; and their ability to actually encourage abusive, spurious, and non-meritorious complaints because of the economic incentives they provide. [Readers in the U.S. are well aware of the "Field of Dreams" effect-  "if you build it they will come."]  In particular, the EU needs to guard against “lawyer-created” litigation that is fueled by the prospect of large fee awards rather than a significant injury.

Any proposal for a holistic European approach towards collective redress actions thus must be analyzed in the context of not only the potential utility of collective actions but also the substantial risks they create. Collective redress, if ever widely adopted, should be limited to where the same breach of EU law harms a large group of citizens and businesses, and individual lawsuits and other legal remedies are demonstrated not to be an effective means to end ongoing unlawful practices or to obtain compensation for the harm caused by these practices.

Any European approach to collective redress must, as paramount concerns, preserve the parties’ rights to a fair trial or adjudication of the factual and legal issues, and not create any untoward economic incentive for the bringing of abusive claims.  While various procedural and substantive safeguards might be adopted to help avoid abusive collective actions, including those inspired by some aspects of the existing national judicial redress systems in the EU Member States, those may not be sufficient to the task. That is, the unavailability of punitive damages or the unavailability of contingency fees for claimant attorneys, while extremely important, may not alone sufficiently decrease the risk of abusive litigation and unfairness to an extent compatible with the European legal tradition and fundamental justice.

What may also be required are clear limitations with regard to standing to bring a collective redress action, should the decision be made to move the proposal forward. The risk of abuses and unfairness can relate in some measure to the role of the sophisticated and entrepreneurial plaintiff’s class action bar. In many jurisdictions, they serve not as “gatekeepers” to screen out frivolous claims and pursue meritorious actions, but as the “promoters” of claims. Quite often, they create claims out of whole cloth, seek out the plaintiffs to nominally prosecute the class action, while they fund the litigation, and manage the cases. If the decision is made to move forward with European collective redress actions -- despite the substantial risks they present-- one important way to preserve the balance between preventing abusive and unfair litigation, and ensuring the effective access to justice for EU citizens and businesses, is to create a system that does not rely on the private bar in the first instance. Thus, any new EU collective redress system should be handled by public bodies exclusively. Individuals and private organizations representing those who are allegedly harmed by illegal conduct on a mass scale would have the ability to petition the public body to screen the allegations, bring the action, and obtain proper compensation for the damages they suffered following successful litigation.

Public bodies may be in the best position to overcome cross-border issues and coordinate the relevant actions. The alleged injuries that have arisen in an increasingly inter-connected European market are a primary reason an EU-wide collective redress system has become a focus of discussion. The use of public bodies would allow for consistent rules for choosing the appropriate venue in which to bring the collective redress actions.  The use of designated public entities is also one method of controlling the potentially crippling costs of discovery associated with class actions in some countries.  Should the decision be made to move forward with more systematic, broad collective redress, despite its many risks, this proposal may offer a way to address some of the specific concerns that cross-border collective redress actions present, while also adhering to the EU’s core legal principles.

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In recent years, corporate defendants facing consumer class actions in California and several other states have been unable to enforce arbitration agreements prohibiting class actions. Under the California Supreme Court’s ruling in Discover Bank v. Superior Court, 36 Cal. 4th 148, 162-63 (2005), class action waivers were unenforceable if the waivers were in “a consumer contract of adhesion,” in disputes that “predictably involve small amounts of damages,” when the “party with superior bargaining power" allegedly has harmed large numbers of consumers. 

Last week, the U.S. Supreme Court, in a 5-4 decision in AT&T Mobility LLC v. Concepcion, No. 09-893, held that the Federal Arbitration Act (“FAA”) preempted the Discover Bank rule. Significantly, the Supreme Court also held that “[r]equiring the availability of classwide arbitration interferes with fundamental attributes of arbitration and thus creates a scheme inconsistent with the FAA.” Slip Op. at 9. This decision will significantly enhance corporate defendants’ ability to enforce arbitration provisions in California and the many other states with similar limitations on class action waivers.

Some colleagues at the firm have put together a short and sweet analysis of the case, observing that this decision may have a substantial impact in consumer product markets, enabling businesses to enforce contractual individual arbitration agreements and thereby very significantly narrow the occasions for certain consumer class actions. Many companies had changed their standard contracts to take the Discover Bank rule into account, and they may now want to consider modifying those standard agreements back to include class action waivers. Although the California rule was the only state law at issue in the case, Concepcion likely will impact other similar state law rules that have rendered class action waivers unenforceable and that similarly created impermissible “‘obstacle[s] to the accomplishment and execution of the full purposes and objectives of Congress,” in enacting the FAA. Id. at 18 (quoting Hines v. Davidowitz, 312 U.S. 52, 67 (1941)).

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We have posted before about the ongoing Thorogood v. Sears Roebuck & Co. litigation, when the 7th Circuit rejected the proposed class action; when the court held that a "copycat" class action suit could not go forward in federal court in California;  and when the court reaffirmed its decision in an unusual opinion on the petition for rehearing.

The district court had certified a multi-state class of Kenmore-brand clothes dryer purchasers. On appeal, the Seventh Circuit called the case “a notably weak candidate for class treatment.” Not only did common issues of law or fact not predominate over the issues particular to each purchaser of a stainless steel Kenmore dryer, as Rule 23(b)(3) requires, there were, the court said, “no common issues of law or fact.” 547 F.3d at 746-47.

The same plaintiffs' lawyer then brought Murray v. Sears, Roebuck & Co., No. 4:09-cv-5744-CW (N.D. Cal.). Murray was a member of Thorogood’s class, and he brought essentially the identical claim in California. Sears Roebuck sought an injunction halting the new class action in front of Judge Leinenweber, who had presided over and eventually dismissed Thorogood’s original class suit, but he ruled that Sears could obtain adequate relief against being harassed by repetitive litigation by pleading collateral estoppel in Murray’s suit in California. Sears appealed, asking the court to to reverse the district court's denial of Sears’s motion to enjoin the virtually identical class action suit.

Ordinarily the ability to plead res judicata or collateral estoppel gives a litigant adequate protection against being harassed by repetitive litigation by the loser in a previous suit against him. But this case was unusual, said Judge Posner for the panel, both because it involved class action litigation and because of the specific tactics employed by class counsel. Class members are interested in relief for the class but the lawyers are primarily interested in their fees, and the class members’ stakes in the litigation are ordinarily too small to motivate them to supervise the lawyers in an effort to align the lawyers’ incentives with their own. The defendant wants to minimize outflow of expenditures and the class counsel wants to increase inflow of attorneys’ fees. "Both can achieve their goals if they collude to sacrifice the interests of the class.” Leslie, “The Significance of Silence: Collective Action Problems and Class Action Settlements,” 59 Fla. L. Rev. 71, 79-81 (2007). And when the central issue in a case is given class treatment and so will be resolved once and for all, a trial becomes a roll of the dice. Depending on the size of the class, a single throw may determine the outcome of an immense number of separate claims (hundreds of thousands, in the dryer litigation)—there is no averaging of decisions over a number of triers of fact having different abilities, priors, and biases. The risk of error becomes asymmetric when the number of claims aggregated in the class action is so great that an adverse verdict would push the defendant into bankruptcy; in such a case the defendant will be under great pressure to settle even if the merits
of the case are slight.

In the most recent iteration, the district court -- nothing the "tortured path" the case has taken through the judicial system -- has followed the direction of the 7th Circuit. Needless to say,  the parties disagreed as to the terms of the injunction that should be issued.  The primary areas of dispute were whether the injunction should be broad enough to encompass class action claims against co-defendant Electrolux and whether former members of the class should be allowed to pursue class-wide discovery against Sears as a non-party.   Sears argued that its advertising would still be at issue, and that Electrolux was obligated to indemnify Sears for any damages related to the marketing of the dryers.  That is, the only basis for Murray’s claims against Electrolux was the same advertising and marketing by Sears at issue in this case. As such, allowing Murray and his lawyers to continue to burden Sears with class-wide discovery concerning that issue would defeat the purpose of the injunction and circumvent the ruling in Thorogood.

The court concluded that any injunction should not allow class-wide discovery from Sears related to its advertising or representations regarding the composition of the dryer drums. Based on the representations of Murray’s counsel to the California court, it was clear that if his class action suit against Electrolux were allowed to continue, his attorneys plan to seek the same discovery from Sears as they would have if Sears itself were the defendant. No matter what it is called — third–party discovery, non–party discovery — by any name the Seventh Circuit has held that this amounts to irreparable harm.

Regarding whether the focus of the injunction should be on the issues that were litigated and decided in the previous Thorogood rulings, or on the identity of the parties, the court decided that the injunction precedents were couched in terms of the issues decided in the prior case, not the specific parties involved. There was no indication in any of the Seventh Circuit’s rulings that this conclusion depends on the party sued over these representations. Moreover, an injunction is not invalid merely because it may benefit non-parties. See Easyriders Freedom F.I.G.H.T. v. Hannigan, 92 F.3d 1486, 1501–02 (9th Cir. 1996).

Thus, the Court found that Sears would invariably be drawn into the defense of any class-action lawsuit regarding its marketing of the dryers as containing stainless steel drums, regardless of what party is named as a defendant. This would defeat the purpose of the Seventh Circuit’s ruling in Thorogood and prevent Sears from receiving the full measure of relief ordered by the Seventh Circuit. Murray and the other members of the class were free to pursue on a class basis claims against Electrolux not related to Sears’ marketing of the dryers, but they may not use a suit against Electrolux as a back-door method of evading the Seventh Circuit’s ruling in Thorogood.

 

 

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A New Jersey federal recently dismissed a putative class action accusing The Coca-Cola Co. of misleading consumers about the health value of the carbonated beverage Diet Coke Plus.  Mason et al. v. The Coca-Cola Co., No. 09-cv-00220 (D.N.J. 3/31/11).

This is another in the series of cases we have warned readers about: plaintiffs are not injured, are not at risk of injury, have gotten the benefit of their bargain, but claim they were somehow duped by marketing. Here, plaintiffs alleged that they “were persuaded to purchase the product because the term ‘Plus’ and the language ‘Diet Coke with Vitamins and Minerals’ suggested to consumers that the product was healthy and contained nutritional value,” when it allegedly did not.

Defendants moved to dismiss under the Twombly/Iqbal doctrine.  Of course, claims alleging fraud or mistake must also meet the heightened pleading requirements of Fed. R. Civ. P. 9(b), which requires such claims to be pled with “particularity.”

To state a claim under the New Jersey Consumer Fraud Act., a plaintiff must allege: “(1) unlawful conduct by the defendants; (2) an ascertainable loss on the part of the plaintiff; and (3) a causal relationship between the defendants’ unlawful conduct and the plaintiff’s ascertainable loss.” Frederico v. Home Depot, 507 F.3d 188, 202 (3d Cir. 2007). Plaintiffs claimed that defendant committed affirmative acts of fraud and deception, and that they were persuaded to purchase the product because the term ‘Plus’ and the language ‘Diet Coke with Vitamins and Minerals’ somehow suggested to consumers that the product was healthy and contained extra nutritional value.

However, the FDA's warning letter about the product attached by plaintiffs to their own complaint shows that it is not false that Diet Coke Plus contains vitamins and minerals.  Plaintiffs failed to allege with particularity what further expectations beyond these ingredients they had for the product or how it fell short of those expectations. Plaintiffs simply made a broad assumption that defendant somehow intended for Diet Coke Plus’s vitamin and mineral content to deceive plaintiffs into thinking that the beverage was really “healthy.”  Without more specificity as to how defendant made false or deceptive statements to plaintiffs regarding the healthiness or nutritional value of the soda, the court found that plaintiffs failed to plead the “affirmative act” element with sufficient particularity to state a viable NJCFA claim.

Plaintiffs also failed to plead an ascertainable loss. When plaintiffs purchased Diet Coke Plus, they received a beverage that contained the exact ingredients listed on its label. Plaintiffs could not explain how they experienced any out-of-pocket loss because of their purchases, or that the soda they bought was worth an amount of money less than the soda they consumed. Mere subjective  dissatisfaction with a product is not a quantifiable loss that can be remedied under the NJCFA.  The same defects doomed the common law misrepresentation claims.

Although the FDA had issued the warning letter (on a somewhat arcane and technical issue), the court noted that not every regulatory violation amounts to an act of consumer fraud. The court also noted that it is simply not plausible that consumers would be aware of FDA regulations regarding “nutrient content” and restrictions on the enhancement of snack foods. The complaint actually did not allege that consumers bought the product because they knew of and attributed something meaningful to the regulatory term “Plus” and therefore relied on it. Rather, plaintiffs alleged merely that they subjectively thought they were buying a “healthy” product that happened to also apparently run afoul of a technical FDA regulation.

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I am attending the DRI Product Liability Conference in New Orleans this week (as I know a number of readers are). Your humble blogger serves as Chair of the Mass Torts and Class Action sub-committee.

At the keynote address, Cheryl Falvey, Esq., General Counsel of the Consumer Product Safety Commission, spoke about an issue we have posted on before, the new incident report database.
With the usual disclaimer that she was not speaking for the CPSC officially, she shared a number of personal insights.

The new database went on line last month, and the first consumer reports were posted last week. It can be viewed through the Commission site with a link to SaferProducts.gov. There is a search function for products or manufacturers names, and it lists any recalls and reports, which can be filtered by date.

She indicated that, like Congress and the bar, the Commission is extremely divided on the new database. She stressed that, per the statutory requirement, there is a disclaimer on the site that: CPSC does not guarantee the accuracy, completeness, or adequacy of the contents of the Publicly Available Consumer Product Safety Information Database on SaferProducts.gov, particularly with respect to information submitted by people outside of CPSC. She admitted, however, that some lawyers may well seek to use the database to argue manufacturers were on notice of something regarding the product.

She noted that anonymous reports to the CPSC are not automatically published, but of course as to the public, every report on the website appears anonymous.

The CPSC believes it is mandated to publish reports of risks of harm as well as actual harm.

The Commission, she says, investigates only about 10% of the reports received; they do not have the budget and resources to investigate every report, let alone investigate reports before they are published. The CPSC is thus "not adjudicating" the product complaints, just posting them.
 

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The judge overseeing one part of the litigation involving Chinese drywall -- the Florida class action -- has issued an important ruling on the negligence claims. Bennett v. Centerline Homes Inc. et al., No. 2009-ca-014458 (Palm Beach County, Fla.)

Defendants moved to dismiss the negligence claims, arguing they had no duty to protect the plaintiffs from the unknown and unforeseeable harm of the drywall.  The court found that there was no duty to inspect or test the drywall for a latent defect, and thus to warn the plaintiffs.  Florida law does not impose a duty to inspect a product for a latent defect, or to warn others about a latent defect, unless the product is inherently dangerous (which drywall is not).

Home builders, installers or suppliers of allegedly defective Chinese drywall could only be held negligent if it is established that the companies were aware that the drywall was defective, through actual or implied notice.  But the issue whether a defendant had notice of a defect must be
determined on an individual, case-by-case basis.  Thus, the court declined to grant the motion on an omnibus basis. 

As we have noted before, according to the allegations of the litigation, a shortage of drywall made in the U.S. caused many builders to use imported Chinese drywall during Florida's construction boom between 2004 and 2006. Much of the drywall was used in construction after Hurricane Katrina.  Lawsuits filed over the drywall issues allege that excessive sulfur levels in the Chinese-made products are causing health effects and problems with air conditioning systems, appliances, internal wiring and other electrical systems. The U.S. Judicial Panel on Multidistrict Litigation consolidated the lawsuits in the U.S. District Court for the Eastern District of Louisiana.  Other defendants, including building supply distributors, general contractors and installers, face  litigation in state courts, like this one.

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A California appeals court earlier this month affirmed a trial court's dismissal of a product liability failure to warn claim, based on the sophisticated user doctrine. Walkowiak v. MP Associates, No. B220494, (Cal. Ct. App., 2d App. Dist., 3/9/11)(not published).

Plaintiff Christopher Walkowiak began working for a special effects company in the movie industry in 1994. His boss had a Class 1 Pyrotechnic Operator license, and Walkowiak received on-the-job training in special effects. He obtained a Class 3 Pyrotechnic Operator license in 1995 and a Class 2 license in 1998. In order to obtain these licenses, Walkowiak had to obtain references from pyrotechnicians and pass a written examination. The written examination was general in nature and did not cover every specific types of explosive device used in productions.

Defendant MP Associates (MP) manufactures pyrotechnic devices. Defendant Roger George Rentals (RGR) rents and sells special effects supplies, including pyrotechnic devices manufactured by MP. Its primary clientele is the entertainment industry. One of the products they sold was a simulated stinger missile (SSM). The SSM consists of a cardboard tube with a red plastic cap on one end and a white plastic cap on the other end. The tube contains pyrotechnic materials near the end with the red plastic cap. Prior to ignition, the white plastic cap is to be removed. Upon ignition, a pellet of pyrotechnic material is propelled out of the end of the tube by gunpowder. It produces bright white light and smoke, and it travels about 200 feet. It simulates the appearance of a missile. Pretty clever, and can fool the camera.

The SSM had a sticker on the side of the cardboard tube which read, “Dangerous. Handle With Care. Keep Fire Away.” This was a standard warning that MP placed on all of the pyrotechnic devices it sold. The SSM also had a piece of tape over the white plastic cap which read, “Remove Before Ignition. This Side Up.” Once the tape was removed, there was nothing on the SSM to indicate which end was to face up. Packaging materials which came with the SSM included a list of “Dos and Don’ts” which applied to pyrotechnic devices in general. The list included the warning not to “use any explosive material unless completely familiar with safe procedures for their use, or under the direction of competent, experienced persons.” However, the packaging materials did not include any specific instructions for use of the SSM.  The manufacturer sold SSMs only to purchasers with a Class 1 or Class 2 Pyrotechnic Operator license. And the company would personally discuss use of the SSM with the purchaser. Since 1998, MP had reportedly sold over 20,000 SSMs. Until the accident in this case, there had been no misfires or injuries resulting from the use of an SSM.

On January 18, 2007, Walkowiak was working on the movie set for “Charlie Wilson’s War.”  His supervisor instructed Walkowiak to test fire an SSM that had been leftover from a previous production, using the same shoulder launcher that had been used in “Over There.” The shoulder launcher consisted of a steel tube bolted to a rifle stock. The steel tube was closed at the end bolted to the rifle stock. The SSM was loaded into the open end of the steel tube. It was fired by means of a battery-operated power switch which was connected to the SSM by wires. Walkowiak’s Class 2 license allowed him to use the SSM fired from a shoulder launcher under the supervision of a Class 1 license holder.

But Walkowiak had not worked on “Over There.” He had never fired an SSM before or seen an SSM loaded into a shoulder launcher. He had not seen any instructions for using the SSM. What he did know was that the SSM was a controlled pyrotechnic device that was potentially dangerous. He knew that he should get questions regarding its use answered before using it. Walkowiak called one of the defendants and asked how to operate the shoulder launcher. Defendant told him how to wire and prepare the launcher. He did not tell Walkowiak how to load the SSM into the launcher, however. Before loading the SSM into the shoulder launcher, Walkowiak saw tape with printing on one end of the SSM. He did not recall seeing the words “Remove Before Ignition” or “This Side Up” on the tape. However, he understood these words to mean that the cap and tape should be removed before discharging the SSM, and “This Side Up” referred to the discharge end of the SSM.

Walkowiak removed the cap and the tape from the SSM. Walkowiak made the decision as to how to load the SSM into the shoulder launcher. Walkowiak loaded the SSM into the shoulder launcher and connected the wires. He believed he was loading the device safely and correctly. He knelt down and pointed the shoulder launcher toward a wall. After a countdown, Walkowiak fired the device. There was an explosion and a bright flash of light. The SSM exploded in the steel tube. The steel tube broke off the rifle stock and hit Walkowiak in the face, causing severe injury. It was determined that he had loaded the SSM in backwards.

Plaintiff sued the various parties in the chain of distribution of the SSM.  The trial court dismissed the claim.  The trial court explained that merely because an accident has occurred, there is no presumption of a defect or negligence.  In this case, Walkowiak had not shown that the device had any physical, manufacturing or design defect. There was no evidence of even a single incident where the device was used properly but caused this kind of injury.  Therefore, the trial court noted, the only potential basis for imposing liability on defendants was the breach of a duty to warn of a danger. The court added, however, that product liability cannot be based on failure to warn of a danger that is known or obvious to a user, under California law. Failure to warn of a danger that is generally known and recognized does not, by itself, render a product dangerous.

Plaintiff appealed. The court of appeals discussed the doctrine of sophisticated user. In explaining the development of the sophisticated user defense, the state Supreme Court had begun with the general principle that manufacturers have a duty to warn consumers about the hazards inherent in their products. This enables consumers to avoid the hazards through careful use of the products or refraining from using the products altogether.  However, the sophisticated user defense exempts manufacturers from their typical obligation to provide product users with warnings about the products’ potential hazards. It provides that sophisticated users need not be warned about dangers of which they are already aware or should be aware. Because these sophisticated users are charged with knowing the particular product’s dangers, the failure to warn about those dangers is not the legal cause of any harm that product may cause. The rationale supporting the defense is that the failure to provide warnings about risks already known to a sophisticated purchaser usually is not a proximate cause of harm resulting from those risks suffered by the buyer’s employees or downstream purchasers. This is because the user’s knowledge of the dangers is the equivalent of prior notice.

In California, a manufacturer is not liable to a sophisticated user of its product for failure to warn of a risk, harm, or danger, if the sophisticated user knew or should have known of that risk, harm, or danger. An objective test applies, because it would be nearly impossible for a manufacturer to predict or determine whether a given user or member of the sophisticated group actually has knowledge of the dangers because of the infinite number of user idiosyncrasies. Hence, even if a user was truly unaware of a product’s hazards, that fact is irrelevant if the danger was objectively obvious to the expert user.  And, the defense applies to both negligence and strict liability causes of action.

Here, Walkowiak’s own deposition testimony supported the finding that he was a sophisticated user of pyrotechnics. He had a Class 2 Pyrotechnic Operator license and years of experience in special effects. He knew that the SSM was a controlled pyrotechnic device and potentially dangerous. He understood the nature of the warnings provided on and with the SSM. He knew to ask for instructions on how to operate the device, and in fact asked for some information. In other words, said the court, Walkowiak knew or should have known of the risk involved in use of the SSM.

That Walkowiak did not have experience using the SSM and could only use it under supervision did not establish that he was unaware of the risks associated with its use. His testimony established that he was aware of the risks: he knew the SSM was dangerous, and he understood the nature of the warnings on the device, “Remove Before Ignition” and “This Side Up.” He simply did not know how to use the SSM with the shoulder launcher. Plaintiff could cite no authority, however, that would require a manufacturer not only to apprise a user of the risks associated with use of its product but also to provide instruction on how to use the product in a device it did not manufacture. 

(The court remanded the design defect claim, under the risk benefit test, as the trial court had jumped the gun on its conclusion that an alternate design would make the SSM unsuitable for other uses.)

 

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The 5th Circuit last week affirmed a grant of summary judgment to defendants in a case of a plaintiff allegedly injured when he used a gasoline-soaked rag to start a diesel engine while wearing a polyester and cotton uniform. Spears v. Cintas Sales Corp., No. 09-30750 (5th Cir., 2/28/11).

At the time of his accident, Spears was employed as the shop foreman for Apeck Construction, Inc., and was the head mechanic in charge of servicing and repairing equipment used by Apeck in its business. While performing his duties, Spears wore a Cintas uniform that Apeck had purchased for him. The uniform was 65% polyester and 35% cotton.The agreement between Apeck and Cintas specified that the garments were not flame-retardant, and the employer promised to tell its employees that their garments are not designed for use in areas of flammability risk or where contact with hazardous materials is possible.

Spears was injured while attempting to start a dump truck powered by a diesel engine.  Spears used a gasoline-soaked rag, a procedure he had used “thousands of times” to attempt to start an engine.The dump truck backfired, and Spears’s uniform caught on fire. As the uniform burned, it melted and fused to his body.

Spears filed suit in state court under the Louisiana Product Liability Act, alleging that the Cintas
uniform was an unreasonably dangerous product. Cintas moved for summary judgment, arguing that Spears could not present sufficient evidence to prove two elements of his claim: (1) that his damages were proximately caused by a characteristic of the Cintas uniform that rendered it unreasonably dangerous; and (2) that the damage arose from a reasonably anticipated use of the uniform. The district court found that Spears’s use of the uniform was not a reasonably anticipated use and granted summary judgment in favor of Cintas. Plaintiff appealed.

Under the LPLA, a manufacturer of a product shall be liable to a claimant for damage proximately caused by a characteristic of the product that renders the product unreasonably dangerous when such damage arose from a reasonably anticipated use of the product. If a plaintiff’s damages did not arise from a reasonably anticipated use of the product, then the unreasonably dangerous question need not even be reached. Reasonably anticipated use means a use or handling of a product that the product’s manufacturer should reasonably expect of an ordinary person in the same or similar circumstances. The court said  this is an objective inquiry that requires a court to ascertain what uses of its product the manufacturer should have reasonably expected at the time of manufacture.

A plaintiff’s use of a product is not reasonably anticipated in a situation where a manufacturer provides an express warning cautioning against a use of the product for which the product was neither designed nor intended, and where the plaintiff acts in direct contravention of that warning. Even if the warning did not reach the users, if the danger from a particular use of a product is obvious, then it is not a “reasonably anticipated use” under the LPLA. If the plaintiff acts in contravention of an express warning, the plaintiff’s use may still be reasonably anticipated if the plaintiff presents evidence that despite the warnings, the manufacturer should have been aware that users were using the product in contravention of the warnings.

Cintas did not dispute that the warning did not reach Spears. Instead, Cintas argued that Spears’s use was not a reasonably anticipated use because the danger of exposing the uniform to flammability risks was obvious to Spears. The record demonstrated that Spears knew that his uniform was not flame retardant. Furthermore, Spears’s testimony established that Spears knew that his poly-cotton uniform would melt.  Because the danger of exposing the uniform to flammability risks was obvious to Spears, his use of the uniform is not a “reasonably anticipated use” under the LPLA.

Plaintiff spent considerable effort arguing about the foreseeability of the danger involved in starting the engine with a gasoline-soaked rag. But the 5th Circuit said that was the wrong issue; it may be relevant in assessing a plaintiff’s comparative negligence, but it was not relevant to whether Spears’s use of the uniform was a reasonably anticipated use. The correct obvious-danger analysis in this case related to what Spears argues that Cintas should have warned against—that the uniform would melt when exposed to flame -- whatever the source. Furthermore, the court pointed out, Spears’s argument that he did not know the engine would backfire was contradicted by his other argument that Cintas should have reasonably anticipated that he would be exposed to flammability risks while wearing his uniform. If Spears, an expert mechanic, supposedly did not know that there was a risk that the engine would backfire when he attempted to start it, Cintas could not reasonably anticipate that its uniform would be exposed to the backfire of a diesel engine.

 

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The Indiana Supreme Court recently answered a certified question from the federal court asking whether, in a crash-worthiness case alleging enhanced injuries under the Indiana Products Liability Act, the finder of fact shall apportion fault to the person suffering physical harm when that alleged fault relates to the cause of the underlying accident. Green v. Ford Motor Co., No. 94S00-1007-CQ-348 (Ind. 2/8/11).  The court answered in the affirmative, laying out a two-step procedure for the consideration of a plaintiff's fault in enhanced-injury cases.

The case was a damages action by Nicholas Green against Ford Motor Company under the Indiana Product Liability Act, asserting that Green's 1999 Ford Explorer vehicle was defective and unreasonably dangerous, and that Ford was negligent in its design of the vehicle's restraint system. Back in 2006, while Green was driving the vehicle, it left the road, struck a guardrail, rolled down an embankment, and came to rest upside down in a ditch. Green sustained severe injuries. He sued, claiming that his injuries were substantially enhanced because of the alleged defects in the vehicle's restraint system. In the federal case, Green moved in limine to exclude any evidence of his alleged contributory negligence on the grounds that any conduct by him in causing the vehicle to leave the road and strike the guardrail was not relevant to whether Ford's negligent design of the restraint system caused him to suffer greater injuries he would not have otherwise suffered.

So in this "crash-worthiness" claim for the "enhanced injuries" suffered, Green sought to exclude evidence at trial regarding his own alleged initial negligence resulting in the vehicle leaving the road and striking the guardrail. Ford asserted that Green's product liability lawsuit is subject to Indiana's statutory comparative fault principles, which require the jury to consider the fault of Green in causing or contributing to the physical harm he suffered.

The "Crash-worthiness Doctrine" has been identified in numerous cases, e.g., Larsen v. General Motors Corp., 391 F.2d 495, 502 (8th Cir. 1968).  The notion is that, in light of the statistical inevitability of collisions, a vehicle manufacturer must use reasonable care in designing a vehicle to avoid subjecting the user to an unreasonable risk of injury in the event of a collision. The reasoning is that the manufacturer should be liable for that portion of the damage or injury caused by the defective design over and above the damage or injury that would have occurred as a result of the impact or collision absent the allegedly defective design.  Thus a normal risk of driving must be accepted by the user, but the policy is not to penalize the user by subjecting him to an unreasonable risk of further injury due to negligence in design.

The court noted that in both the state Product Liability Act and the Comparative Fault Act, the legislature employed expansive language to describe the breadth of causative conduct that may be considered in determining and allocating fault. Both enactments require consideration of the fault of all persons who caused or contributed to cause the harm. The Comparative Fault Act further specifies that, in comparative fault actions, the "legal requirements of causal relation apply." The state legislature has thus directed that a broad range of potentially causative conduct initially may be considered by the fact-finder, but that the jury may allocate comparative fault only to those actors whose fault was a proximate cause of the claimed injury.

Therefore, in a crash-worthiness case alleging enhanced injuries under the Indiana Product Liability Act, it is the function of the fact-finder to consider and evaluate the conduct of all relevant actors who are alleged to have caused or contributed to cause the harm for which the plaintiff seeks damages. An assertion that a plaintiff is limiting his claim to "enhanced injuries" caused by only the "second collision" does not preclude the fact-finder from considering evidence of all relevant conduct of the plaintiff reasonably alleged to have contributed to cause the ultimate injuries. From that evidence, the jury must then determine whether such conduct satisfies the requirement of proximate cause.  The fact-finder may allocate as comparative fault only such fault that it finds to have been a proximate cause of the claimed injuries. And if the fault of more than one actor is found to have been a proximate cause of the claimed injuries, the fact-finder, in its allocation of comparative fault, may consider the relative degree of proximate causation attributable to each of the responsible actors.

While a jury in a crash-worthiness case may receive evidence of the plaintiff's conduct alleged to have contributed to cause the claimed injuries, the issue of whether such conduct constitutes proximate cause of the injuries for which damages are sought is typically a matter for the jury to determine in its evaluation of comparative fault.  
 

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The Mississippi Supreme Court has vacated a $4.5 million verdict in favor of plaintiffs in a case against defendant Hyundai over a serious car accident. Hyundai Motor America v. Applewhite, No. 2008-CA-01101-SCT (Miss., 2/10/11).

Casino co- workers Dorothy Applewhite, Cecilia Cooper, and Anthony Stewart were traveling in Applewhite's 1993 Hyundai Excel after work.  It is unclear who was driving, but the two women were in the front seats, and Stewart was in the rear seat. A co-worker traveling ahead of them testified that he noticed the car weaving, drifting onto the shoulder, and finally swerving into the northbound lane, where it collided with another vehicle. The Excel separated into two pieces. All three passengers in the Excel died at the scene of the accident. 

Family members of the three decedents sued Hyundai. At trial, the plaintiffs undertook to prove that the Excel was not crashworthy due to alleged defects in both its design and manufacture, including the welds in the vehicle. Plaintiffs offered the testimony of several expert witnesses, including Andrew Webb, an accident reconstructionist.  Webb testified that he had used a computer program to reconstruct the accident and concluded that, had the Excel remained intact, the occupants would have experienced a change in velocity of thirty-five miles per hour. Another expert then testified that at thirty-five miles per hour, it was more likely than not that the occupants would have survived the crash.

The jury awarded the plaintiffs $4.5 million, or $1.5 million for each of three decedents, finding that the automobile at issue was defective in both its design and manufacture.

On appeal, Hyundai argued that it was entitled to a new trial because it was ambushed by changes
to Webb’s opinion. As noted, one of Webb’s main contentions was that, had the Excel remained
intact, the vehicle would have experienced a change in velocity (delta-v) of no more than thirty-five miles per hour. Hyundai deposed Webb before trial, at which time Webb gave a detailed
explanation of his calculations. Months after the deposition, Webb signed an errata sheet concerning his deposition testimony, changing four key variables that he had used to make his calculations. Most notably, Webb changed the angle of the Excel from 22 degrees to 44 degrees and increased the closing speed of the Excel from 68 miles per hour to 78 miles per hour. Despite these dramatic changes, Webb did not alter his ultimate conclusion that the car would have sustained a delta-v of only thirty-five miles per hour had it remained intact.

At trial, Webb testified about the errata sheet, claiming that he had to change several variables because he realized after he had been deposed that he had made some mistakes in his initial analysis. It is undisputed that Webb’s errata sheet was not done to correct errors made by the court reporter or to clarify his testimony. On the sheet itself, Webb listed the reason for the changes simply as “range not asked.”

Hyundai moved to strike Webb’s testimony at trial, alleging that it had never received the errata sheet during discovery and that these changes were a surprise. In response, the plaintiffs argued that the changes were not material because they did not alter Webb’s ultimate conclusion. The plaintiffs also produced a letter trying to demonstrate that they had forwarded Webb’s errata sheet to the defendant. The trial court heard extensive arguments on the issue and denied the defendant’s motion.

The Supreme Court did not agree.  The discovery rules impose a duty on the parties to amend a prior response when the party knows that the response, though correct when made, is no longer
true and the circumstances are such that a failure to amend the response is in substance a
knowing concealment. The failure seasonably to supplement or amend a response is a discovery violation that may warrant sanctions, including exclusion of evidence. Whether the plaintiffs did or did not send the errata sheet was unnecessary and irrelevant to a proper analysis. Even if Hyundai did receive the errata sheet, simply giving the defendant this document did not relieve the plaintiffs of their duties under the rules. The purpose of an errata sheet is to correct scrivener’s errors or provide minor clarification; it is not a means of making material, substantive changes to a witness’s testimony. See e.g., Garcia v. Pueblo Country Club, 399 F.3d 1233, 1242 n.5 (10th Cir. 2002) (“A deposition is not a take home examination.”) If a witness changes his testimony in a manner that conflicts with prior discovery responses, the sponsoring party has a duty under the rules (Rule 26(f) in this state) seasonably and formally to amend or supplement the response -- not try to sneak it through in an errata sheet. This the responsibility of the party sponsoring the witness, not the responsibility of the witness.

The plaintiffs argued that Webb’s changes were not material because they did not alter his opinion that, had the car not separated, the occupants would have experienced a delta-v of only thirty-five miles per hour. The Court did not agree. The changes in Webb’s calculations were material changes because they were essential components of the basis for his opinion. When Hyundai attempted to cross-examine Webb about his calculations, Webb referred to his errata sheet at least seven times to demonstrate that he had corrected his mistakes. It is clear from Webb’s own trial testimony that the figures on the errata sheet were important to his calculations. Moreover, when Hyundai’s experts performed crash testing, they relied on and used the figures given by Webb in his deposition in an attempt to test his opinions and refute his testimony. When Webb changed his calculations, the entire crash test using Webb’s initial calculations lost much of its relevance.  

The Court found that the trial judge abused his discretion by not enforcing the rules, noting "we do
not condone trial by ambush." Hyundai was entitled to full and complete disclosure of the plaintiffs’ expert testimony, and neither these plaintiffs nor any other party litigant may rely on a witness’s notations on a deposition errata sheet as a substitute for formal and timely supplementation. 

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The House Energy and Commerce Committee's Subcommittee on Commerce, Manufacturing, and Trade, chaired by Rep. Mary Bono Mack (R-CA), held a hearing last week to examine the unintended consequences of the Consumer Product Safety Improvement Act of 2008 on American job creators, including small businesses. The purpose of this oversight hearing was to develop an understanding of the problems created by CPSIA, including the practical impediments to implementation; the impact of CPSIA on children’s safety; the impact on American jobs and businesses of all sizes; and practical ways to amend the law without endangering children’s health.

Two panels of witnesses testified before the Subcommittee. On the first were Honorable Inez Tenenbaum, Chairman, Consumer Product Safety Commission; and Honorable Anne Northup, Commissioner, Consumer Product Safety Commission.   The second panel included a mix of child safety advocates and representatives of small business industries.

The Chair noted that as a former small business owner, she recognized how unnecessary regulations – even well intentioned ones – can destroy lives.  Rick Woldenberg, the operator of Learning Resources, Inc., a small business making educational products and educational toys, testified on the many difficulties associated with the new, burdensome regulatory requirements. His company, Learning Resources, Inc., has recalled a grand total of 130 pieces in a single recall since its founding in June 1984, showing management of safety risks that was highly effective long before the government intervened in the safety processes.

CPSC Commissioner Northup testified on the exorbitant costs to small businesses, stating that in  March 2009, Commission staff reported that the economic costs associated with the CPSIA would be in the billions of dollars. Small businesses without the market clout to demand that suppliers provide compliant materials have been hit the hardest. Many report that the new compliance and testing costs have caused them to cut jobs, reduce product lines, leave the children’s market completely, or close.

CPSC Commissioner Anne Northup also focused on a key aspect of the new reporting database, observing that the Commission's database rule all but guarantees that the database will be flooded with inaccurate reports of harm, and thus it will be less useful for commission staff in determining hazard patterns than are the current, internal databases. She suggested that the Congress delay the launch of the database until new CPSC regulations can ensure that reports of harm contain sufficient information to permit verification, and the agency has an effective procedure in place to resolve a claim of material inaccuracy before a report is posted on the database.

She noted that the the Majority on the CPSC has expanded the list of database submitters to such an extent that virtually anyone can submit reports of harm—thereby rendering meaningless the statutory language listing permitted submitters. A database full of inaccurate reports from individuals who have second or third-hand information is not remotely helpful to consumers to determine which consumer product they should purchase.  Soliciting information from sources seeking to promote an agenda unrelated to simply sharing first-hand information invites dishonest, agenda-driven use of the database.  Trial lawyers, unscrupulous competitors, advocacy groups and other nongovernmental organizations and trade associations serve their own agendas and lack an incentive to prioritize accuracy in their reports of harm.  In particular, she testified, plaintiff trial lawyers with self-serving motives will use the Commission’s database to look for potential trends and patterns of hazards. Under the current database rule, this same group could also submit to the database false and unverifiable reports to fuel a lawsuit.


 

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The Texas Civil Justice League has released a new report, "A Texas Success Story: Asbestos and Silica Lawsuit Reform."

Established in 1986, the Texas Civil Justice League is a non-partisan, statewide business coalition committed to legal reform and public policy research. The League makes legislative recommendations in vital issue areas, such as administration of the courts, general business liability, mass torts, and products liability.

The purpose of this special report is to document the current state of asbestos and silica litigation in Texas state courts. Part one provides a brief history of asbestos and silica litigation in the United States and an overview of the legislative efforts in Texas to address abuses in asbestos and silica litigation.  The report then offers a description of asbestos and silica litigation in Texas’s two multidistrict litigation courts handling asbestos and silica cases, and the impact of reform legislation (S.B. 15) on the state MDLs.

The report then turns to recent issues in asbestos litigation, specifically to the science-based evidentiary standards required by the Texas Supreme Court’s decision in Borg-Warner Corp. v. Flores.

Next are the issues relating to asbestos claimant compensation, starting with the role of bankruptcy trusts in compensating asbestos claimants; the bankruptcy trust payment system can provide substantial compensation to asbestos victims, but is a “black box” system that remains hidden from public scrutiny.

Lots of good info, worth a read.

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The Texas Civil Justice League has released a new report, "A Texas Success Story: Asbestos and Silica Lawsuit Reform."

Established in 1986, the Texas Civil Justice League is a non-partisan, statewide business coalition committed to legal reform and public policy research. The League makes legislative recommendations in vital issue areas, such as administration of the courts, general business liability, mass torts, and products liability.

The purpose of this special report is to document the current state of asbestos and silica litigation in Texas state courts. Part one provides a brief history of asbestos and silica litigation in the United States and an overview of the legislative efforts in Texas to address abuses in asbestos and silica litigation.  The report then offers a description of asbestos and silica litigation in Texas’s two multidistrict litigation courts handling asbestos and silica cases, and the impact of reform legislation (S.B. 15) on the state MDLs.

The report then turns to recent issues in asbestos litigation, specifically to the science-based evidentiary standards required by the Texas Supreme Court’s decision in Borg-Warner Corp. v. Flores.

Next are the issues relating to asbestos claimant compensation, starting with the role of bankruptcy trusts in compensating asbestos claimants; the bankruptcy trust payment system can provide substantial compensation to asbestos victims, but is a “black box” system that remains hidden from public scrutiny.

Lots of good info, worth a read.

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A Superbowl win. An upset of the previously undefeated No. 1 college basketball team.  Wisconsin is on a roll.  But of greatest interest to our readers is, late last month, Wisconsin's Governor Scott Walker (R) signed into law new tort reform legislation in that state.  The bill is regarded as the most extensive set of changes to Wisconsin's civil litigation system in decades.  Tort reform as a vehicle to improve Wisconsin's business climate was a campaign theme for the governor in the last election, and the reform bill was one of the first agenda items for the new legislature in January.  Republican majorities had been elected in both the state Senate and the Assembly last fall.

The Act contains several provisions that will affect plaintiffs and defendants in product liability  litigation.

• Punitive damages received by the plaintiff may not exceed twice the amount of any compensatory damages recovered by the plaintiff or $200,000, whichever is greater.
• The law establishes a higher legal standard for recovering punitive damages, as the plaintiff must prove that the defendant either acted with intent to cause injury to a particular person or persons or that the defendant knew that the action of the defendant that resulted in injury to one or more persons was practically certain to result in injury to one or more persons. 
• The act adopts a Daubert-like standard for experts. The expert testimony must be based
  upon sufficient facts or data, the testimony must be the product of reliable principles and methods, and the witness must have applied the principles and methods reliably to the facts of the case.
• With respect to strict liability claims, the bill borrows the definition of defect from the  Restatement (Third) of Torts.  A product is defective in design if the foreseeable risks of
  harm posed by the product could have been reduced or avoided by the adoption of a reasonable alternative design by the manufacturer and the omission of the alternative
  design renders the product not reasonably safe.   
• In an action for damages caused by a manufactured product based on a claim of strict liability, evidence of remedial measures taken subsequent to the sale of the product is not admissible for the purpose of showing a manufacturing defect in the product, a defect in the design of the product, or a need for a warning or instruction, but may be used to show a reasonable alternative design that existed at the time  the product was sold.
• The law creates a rebuttable presumption that the product is not defective if it complied with relevant standards under federal or state law.
• The act also modifies the market share or “risk contribution’’ theory that Wisconsin adopted in the lead paint litigation. The new law reaffirms the general rule that manufacturers, distributors, and sellers of a product may be held liable for damages only if the injured party proves that the specific product that caused the injury was manufactured, distributed, sold or promoted by the defendant.  The only exception is when a claimant can prove all of the following:
  1. That no other lawful process exists for the claimant to seek any redress from any other person for the injury or harm.
  2. That the claimant has suffered an injury or harm that can be caused only by a manufactured product chemically and physically identical to the specific product that
  allegedly caused the claimant’s injury or harm.
  3. That the manufacturer, distributor, seller, or promoter of a product manufactured, distributed, sold, or promoted a complete integrated product, in the form used by the claimant or to which the claimant was exposed, and that meets all of the following criteria:
          a. Is chemically and physically identical to the specific product that allegedly caused the claimant’s injury or harm.
          b. Was manufactured, distributed, sold, or promoted in the geographic market where the injury or harm is alleged to have occurred during the time period in which the specific product that allegedly caused the claimant’s injury or harm was manufactured, distributed, sold, or promoted.
        c. Was distributed or sold without labeling or any distinctive characteristic that identified the manufacturer, distributor, seller, or promoter.
        d.  The action names, as defendants, those manufacturers of a product who collectively manufactured at least 80 percent of all products sold in this state during the relevant
  production period.  

 

• The law permits defendants to claim damages for frivolous claims,  that is, for actions undertaken solely for the purpose of harassing or maliciously injuring another.
• Regarding comparative fault in an action by any person to recover damages for injuries caused by a defective product based on a claim of strict liability, if the injured party’s percentage of total causal responsibility for the injury is greater than the percentage resulting from the defective condition of the product, the injured party may not, based on the defect in the product, recover damages from the manufacturer, distributor, seller, or any other person responsible for placing the product in the stream of commerce.

A good model for other states considering tort reform.

More than any ad campaign, a civil justice system that is equitable and reliably predictable signals to employers that a state is truly open for business. Particularly in light of recent liability-expanding state court decisions, the new reform package enacted by Wisconsin will help convince employers that it’s a new day in the Badger State, according to the American Tort Reform Association. 

 

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California's Supreme Court ruled late last month that consumers who purchase a product allegedly as a result of misleading advertising can sue the manufacturer even in the absence of traditional injury, despite enactment of a recent ballot proposition that was designed to stiffen injury requirements and limit standing under the state's unfair competition and false advertising laws. Kwikset Corp. v. Superior Court, No. S171845, 2011 WL 240278 (Cal. Jan. 27, 2011).

Readers have seen our posts about the danger of plaintiffs' misuse of state consumer fraud acts and unfair and deceptive practices acts.  Partially in response to such abuse, a few years back the voters of California passed Proposition 64, which substantially revised the state's unfair competition and false advertising laws by beefing up standing and injury requirements for suits by private individuals.  The initiative declared: “It is the intent of the California voters in enacting this act to prohibit private attorneys from filing lawsuits for unfair competition where they have no client who has been injured in fact under the standing requirements of the United States Constitution.”  Specifically, Proposition 64 also restricted standing to consumers who can allege they have suffered “injury in fact” and have “lost money or property” as a result of the defendant's improper business practice.  The plain import of this is that a plaintiff now must demonstrate some form of economic injury -- the issue is what form. 
 
Plaintiff James Benson brought suit against Kwikset Corp. challenging the company's “Made in U.S.A.” labeling of lock sets that allegedly contain foreign-made parts or involved foreign manufacture.  Specifically, plaintiff alleged that Kwikset falsely marketed as “Made in USA” locksets that contained screws or pins made in Taiwan or that were assembled in Mexico. Plaintiff prevailed in the trial court, on injunctive relief, but lost on the restitution claim. While cross-appeals were pending, Proposition 64 took effect. The lower courts gave plaintiff an opportunity to plead standing based on injury under the new Prop standing requirements of injury in fact and loss of money or property. The amended complaint then alleged that plaintiff relied on Kwikset’s representations in deciding to purchase the locks, and that he supposedly would not have purchased the locksets if they were not labeled “Made in the USA.”  On appeal, the court of appeals vacated the decision in light of the standing issues in the wake of the new law. The court found that the plaintiffs (new plaintiffs had been added) had alleged “injury in fact,” but they had not alleged “loss of money or property” because they got perfectly functioning locksets in return for their money, and they were not overpriced or defective. Plaintiffs therefore received the benefit of the bargain. 

The state Supreme Court agreed to hear the appeal, specifically to address the new standing requirements and what constitutes “loss of money or property” under California’s unfair competition law (Business and Professions Code section 17200 et seq. (the UCL)) and the false advertising law (Business and Professions Code section 17500 et seq.).

The state high court held that plaintiffs who allege they are deceived by a product’s label and thus purchase a product that they would not have purchased otherwise have “lost money or property” as required by Proposition 64 and have standing.  The court somehow concluded that such an individual does not receive the “benefit of the bargain” even if the product is not overpriced or defective, and works just fine. The Supreme Court concluded that “labels matter.” For each consumer who relies on the truth and accuracy of a label and is deceived by misrepresentations into making a purchase, the economic harm is the same: the consumer has purchased a product that he or she paid more for than he or she otherwise might have been willing to pay if the product had been labeled accurately, said the court. This economic harm -the "loss of real dollars from a consumer's pocket" -is the same whether or not a court might objectively view the products as functionally equivalent.  If a party has alleged or proven a personal, individualized loss of money or property in any non-trivial amount, he or she has also alleged or proven injury in fact.

The majority worried that to deny such consumers standing would bring an end to private consumer enforcement regarding label misrepresentations.  Instead, this unfortunate decision may well encourage frivolous and contrived class action litigation by plaintiffs who have not suffered any type of quantifiable economic loss -- exactly what the voters voted to curtail.

The dissent correctly noted that the majority's ruling directly contravened the both the intent of Prop 64 and the express language of the amendment.  Indeed Proposition 64 was an effort to curb suits just like this one (which was mentions in the campaign), in which plaintiff got the benefit of their bargain. In direct contravention of the electorate's intent, the majority disregarded the express language of the amendment and arguably made it easier for a plaintiff to achieve standing under the UCL.  Lost money cannot refer to every time a consumer pays for something, because then every consumer would always have standing to challenge every transaction, and how could Proposition 64 be seen as a new restriction on standing?  Loss of money is not the same as any economic injury. Lost money or property is a subset, one form of, economic injury.  Not all economic injuries include lost money as the statute uses the term;  the majority effectively rendered one of the two statutory requirements redundant and a nullity. 

By delving into the subjective motivation of the plaintiff ("labels matter"), the court ignored the focus of the statute not on subjective intent of the buyer, but objective proof of actual loss of property versus no such loss.

In focusing on the fact that the plaintiffs paid for the items, the majority ignored the fact that plaintiffs received the locksets in return, which were not alleged to be overpriced or otherwise defective. Aside from paying the purchase price of the locksets, plaintiffs have not alleged they actually “lost” any money or property.  The majority simply concluded there was a loss of real dollars, but there was no such allegation of such a loss here, where plaintiffs simply paid the purchase price for the mislabeled but otherwise fully functional locksets. Plaintiffs did not allege that the locksets were worth less or were of lesser quality or were defective, and the majority's holding apparently does not require that plaintiffs allege any price differential.

 

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The Consumer Product Safety Commission released a report of an investigation it had requested be performed by the CDC's National Center for Environmental Health regarding deaths allegedly associated with exposure to imported drywall.  The report concludes that the drywall was not a contributing factor in the deaths of the people who had previously lived in or visited homes reported to contain problem drywall.

The investigation included reviews of the pertinent medical records,  interviews of witnesses, and available information from state public health authorities.   The CDC review confirms the results of previous reviews conducted by CPSC itself.  The cause of death in each case was clearly a primary, and often secondary, pre-existing chronic health condition.  Subjects typically had multiple long-term, severe, pre-existing conditions.  

We have posted about the drywall issues here and here. 

 

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Readers have been following our posts on new state efforts on chemical regulation, such  as California's Green Chemistry initiative. Now comes word that environmental officials from 10 state and local governments have formed an umbrella organization - the Interstate Chemicals Clearinghouse (IC2) - with the stated goals of promoting a clean environment, healthy communities, and a vital economy through the development and use of safer chemicals and products.

The states joining IC2 include California, Connecticut, Massachusetts, Michigan, Minnesota, New Jersey, New York, Oregon, and Washington.

The goals of the IC2 are to:

• Avoid duplication and enhance efficiency and effectiveness of state, local, and tribal initiatives on chemicals through collaboration and coordination
• Build agency capacity to identify and promote safer chemicals and products
• Ensure that state, local, and tribal agencies, businesses, and the public have ready access to high quality and authoritative chemicals data, information, and assessment methods

Launched under the auspices of the Northeast Waste Management Officials' Association (NEWMOA), the new Clearinghouse says it will support state, local, and tribal health and environmental agencies with development and implementation of programs to promote use of safer chemicals and products; support the development of alternative assessment methods and identification of safer alternatives; share data and information on chemical use, hazard, exposure, and alternatives; share strategies and outcomes on chemicals prioritization initiatives; and build the capacity of agencies by sharing materials, strategies, and trainings.  IC2 has a number of projects planned in these areas.

The Northeast Waste Management Officials Association's announcement of the IC2 comes just as many chemical manufacturers are expecting that the federal government (including through an update to TSCA) will take the lead in regulating chemical products, not state regulatory agencies and legislatures.

Industry groups, including the American Chemistry Council, continue to believe that a patchwork of state and local programs has the potential to create more confusion for consumers and manufacturers, and may ultimately simply hamper investment, and threaten future job creation.  As we have noted, some of the bills introduced in the last Congress would have set an impossibly high hurdle for all chemicals in commerce, and were guaranteed to produce significant technical, bureaucratic and commercial barriers. Of particular concern to readers of MassTortDefense would be efforts to eliminate the current risk-based review system under TSCA and force EPA to use the so-called precautionary principle.

It seems more supportable that any overhaul of TSCA should include the notion that scientific reviews must use data and methods based on the best available science and risk-based assessment; must include cost-benefit considerations for the private-sector and consumers; must protect proprietary business information, and should logically prioritize reviews for existing chemicals.

 

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A federal court granted summary judgment to defendant Snapple in a lawsuit accusing
Snapple Beverage Corp. of misleading consumers by labeling drinks as "all natural" even though they are sweetened with high fructose corn syrup. Weiner et al. v. Snapple Beverage Corp., No. 1:07-cv-08742 (S.D.N.Y.).

We have commented on the growing and alarming trend of plaintiffs' lawyers concocting consumer fraud class action claims against products, even when consumers were not injured and got basically what they paid for, because of some alleged ambiguity in the label or old-fashioned puffing.

Snapple Beverage Corporation was founded in New York’s Greenwich Village in 1972. Snapple began selling and marketing its teas and juice drinks in the late 1980s. In marketing its beverages, Snapple focused on, among other things, flavor, innovation, and humor. Snapple became known for its quirky personality and funny advertising, as well as its colorful product labels and beverage names. For instance, Snapple’s television advertisements featured, among other things, Snapple bottles dressed in wigs and hats, singing in a Backstreet-esque “boy-band,” running with the bulls (hamsters with cardboard horns) in Spain, and performing synchronized swimming.

When Snapple entered the beverages market in the late 1980s, it avoided putting preservatives, which were then commonly found in some similar beverages, in its teas and juice drinks. Snapple was able to do so by using a “hot-fill” process, which uses high-temperature heat pasteurization to preserve products immediately before bottling. Snapple also used 16-ounce glass bottles instead of aluminum cans or plastic. Hence the term on their label "All Natural."

From their inception, Snapple’s beverages were sweetened with high fructose corn syrup. HFCS is made from corn ( a natural product last time we checked), and its primary constituents are glucose and fructose, the sugars that comprise table sugar and honey (which also sound pretty natural). It is undisputed that Snapple disclosed the inclusion of HFCS in the ingredient list that appears on the label of every bottle of Snapple that was labeled “All Natural.”

Readers may recall from our previous post, that here plaintiffs sued seeking to represent a nationwide class of consumers who made purchases between 2001 and 2009 in New York of Snapple beverages labeled “all natural” and which contained high fructose corn syrup.  The plaintiffs alleged they paid a premium for the company's drinks as a result of the all natural claim.

Judge Cote denied the plaintiffs' motion for class certification last year, finding that plaintiffs had not proposed a suitable methodology for establishing the critical elements of causation and injury on a class-wide basis. Without a reliable methodology, plaintiffs had not shown that they could prove at trial, using common evidence, that putative class members in fact paid a premium for the beverage. Because individualized inquiries as to causation, injury, and damages for each of the millions of putative class members would predominate over any issues of law or fact common to the class, plaintiffs’ claim could not be certified under Rule 23(b)(3).

Snapple then moved for summary judgment on the two named plaintiffs' individual claims
under New York's consumer protection laws, as well as claims of unjust enrichment and breach of express warranty.

Jurisdiction was predicated on CAFA, so a preliminary issue was whether the court retained jurisdiction after the denial of class certification. The statute does not speak directly to
the issue of whether class certification is a prerequisite to federal jurisdiction, and the Second Circuit has not addressed the issue. The circuits that have considered the issue, however, have uniformly concluded that federal jurisdiction under CAFA does not depend on class certification. See Cunningham Charter Corp. v. Learjet, Inc., 592 F.3d 805, 806 (7th Cir. 2010); United Steel, Paper & Forestry, Rubber, Mfg., Energy, Allied Indus. & Serv. Workers Int’l Union, AFL-CIO, CLC
v. Shell Oil Co., 602 F.3d 1087, 1092 (9th Cir. 2010); Vega v. T-Mobile USA, Inc., 564 F.3d 1256, 1268 n.12 (11th Cir. 2009).

The court granted the motion, finding that the named plaintiffs had failed to show that they were injured as a result of Snapple's labeling.  According to Snapple, because the plaintiffs had not offered evidence showing either the price they paid for Snapple or the prices charged by competitors for comparable beverages, they could not demonstrate that they paid a premium for the “All Natural” Snapple product and thus could not show harm stemming from the allegedly misleading label.  Neither of the plaintiffs had any record of his purchases of Snapple. Their most recent purchases were made in 2005 and 2007, or 3 to 5 years before their deposition testimony was taken. Not surprisingly, they had only vague recollections of the locations, dates, and prices of their purchases of Snapple. Besides being unable to establish the actual price they paid for the Snapple products at issue here, the plaintiffs have offered no other evidence from which to
calculate the premium they paid for Snapple. The court agreed that plaintiffs failed to prove that they paid more for Snapple's products than they would have for comparable beverages.

As for the breach of expressed warranty claim, an injured party is entitled to the benefit of its bargain, measured as the difference between the value of the product as warranted by the manufacturer and its true value at the time of the transaction. Because the plaintiffs
had not demonstrated that they purchased Snapple's drinks in reliance on the “all natural”
label, they could not show any such difference in value. 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 

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

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

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

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

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

 

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

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

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

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

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

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

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

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

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

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

 

 

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Insecticide manufacturers held on to summary judgment as the Eight Circuit affirmed the lower court's causation ruling under Daubert.  Junk v. Terminix International Co., No. 08-3811 (8th Cir., 12/9/10).

The plaintiffs'  home had been infested with spiders during the mother's pregnancy, and she contacted Terminix about the problem.  Defendant thereafter sprayed a pesticide inside and outside the Junks' home, approximately 20 times, the last occurring two years after her son's birth. Junk alleged that the child's multiple medical conditions were caused by exposure to ingredients in Dursban, an insecticide manufactured by Dow, distributed by Terminix.

The defendants moved to exclude the causation testimony of plaintiffs' two medical experts, and for summary judgment.  The trial court first excluded the testimony of Dr. Richard Fenske, who had been retained to determine whether the son had been exposed to an unsafe level of the insecticide during his mother's pregnancy and after his birth. Dr. Fenske testified that when making toxic exposure and dosage estimates he usually relied on a "deterministic modeling" method in which he creates an exposure model that accounts for numerous variables. In this case, however, he did not have sufficient data to perform such an analysis. Instead, he compared what he knew about the circumstances of the child's exposure with those in published studies. This comparative analysis led him to conclude that plaintiff had been exposed to an unsafe level. Observing that Dr. Fenske had not followed his own usual methodology and concluding that he had relied on a number of ungrounded assumptions in his comparative approach, the district court excluded his opinion on the ground that his methodology was not sufficiently reliable.

Dr. Cynthia Bearer's testimony was also excluded. She was a neonatologist and board certified pediatrician whom Junk retained to give her opinion on general and specific causation.  Because Dr. Bearer's opinion on specific causation relied on Dr. Fenske's conclusions, after the court excluded Dr. Fenske's testimony, it found Dr. Bearer's opinion on specific causation also lacked a scientific factual basis and declined to admit it.

Plaintiffs appealed.

The court of appeals agreed that Dr. Fenske's comparative analysis depended on various unsupported assumptions. He did not account for differences between conditions in the Junk household and those described in the articles he consulted. In one instance, his only basis for comparison was the fact that the Junk household and those in a particular study were all treated with the Dursban ingredient chlorpyrifos. In another, he relied on a study where the only common variable between the Junks' experience and the homes studied was the total amount of chlorpyrifos applied. Dr. Fenske thus disregarded other important variables such as where and how chlorpyrifos was applied in the household and whether the homes in a comparison study were the same size as the Junks' home.

While Dr. Fenske was not required to produce a mathematically precise table equating levels of exposure with levels of harm, he was required to have a "scientifically valid" method to estimate that plaintiff's exposure exceeded a safe level. The expert's failure to follow his own general practice and his reliance on unfounded assumptions in his comparative method created "too great an analytical gap" between his opinion and the data on which it relied.

Because Dr. Bearer's differential diagnosis depended on Dr. Fenske's opinion on exposure, the district court did not abuse its discretion in excluding it. A differential diagnosis begins with an expert's "ruling in" plausible causes of an injury. See Kudabeck v. Kroger Co., 338 F.3d 856, 860–61 (8th Cir. 2003). Then the expert "rules out" less likely causes until the most likely cause remains. Without a scientific basis for including unsafe chlorpyrifos exposure in her differential, her opinion amounted to speculation.

To succeed in her claims, Junk needed to present expert testimony showing that the chlorpyfiros could have caused the son's injuries and that it did in fact cause those injuries. Junk's  experts did not survive the district court's Daubert analysis. After the court properly excluded Dr. Bearer's
testimony, Junk could not prove specific causation as required under Iowa law. As there was no longer a genuine issue of material fact as to that necessary element, Dow and Terminix were entitled to judgment.

 

 
 

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Last month we posted about a class action decision from the Seventh Circuit, in which the court of appeals approved an injunction against copycat litigation once class certification was denied.  Thorogood v. Sears, Roebuck & Co., No. 10-2407 (7th Cir., 11/02/10).

Ordinarily the ability to plead res judicata or collateral estoppel gives a litigant adequate protection against being harassed by repetitive litigation by the loser in a previous suit against him. But this case was unusual, said Judge Posner, both because it involved class action litigation and because of the specific tactics employed by class counsel. Class members are interested in relief for the class but the lawyers are primarily interested in their fees, and the class members’ stakes in the litigation are ordinarily too small to motivate them to supervise the lawyers in an effort to align the lawyers’ incentives with their own. The defendant wants to minimize outflow of expenditures
and the class counsel wants to increase inflow of attorneys’ fees. "Both can achieve their goals if they collude to sacrifice the interests of the class.” Leslie, “The Significance of Silence: Collective Action Problems and Class Action Settlements,” 59 Fla. L. Rev. 71, 79-81 (2007). And when the
central issue in a case is given class treatment and so will be resolved once and for all, a trial becomes a roll of the dice. Depending on the size of the class, a single throw may determine the outcome of an immense number of separate claims (hundreds of thousands, in this home dryer
litigation)—there is no averaging of decisions over a number of triers of fact having different abilities, priors, and biases. The risk of error becomes asymmetric when the number of claims aggregated in the class action is so great that an adverse verdict would push the defendant into bankruptcy; in such a case the defendant will be under great pressure to settle even if the merits
of the case are slight.

The plaintiff appellee filed a petition for panel rehearing, and rehearing en banc. All the judges  voted to deny the petitions, and typically that is the end of the appeal.  But the court wrote an opinion about the denial, "in view of the accusations leveled in the petition by the plaintiff’s lawyer."

On the merits, said the court, the petition ignored the principal reasons for enjoining the copycat class actions, and said virtually nothing about the All Writs Act, which was the very grounds for the prior decision.  The petition also ignored the point that class certification was improper given the nature of the plaintiff's claim, which did not present common issues that would support a class action.  It ignored the panel's criticism of the district court reasoning, and mischaracterized the scope of the injunction, as individual claims were not enjoined.

The petition's main concern was with the language used in the opinion describing plaintiff counsel as pugnacious, pertinacious to a fault, and a "nuisance." To which the panel responded that the petition ignored the facts and analysis that supported those characterizations, and the right of a court to  and the duty of a court to note unacceptable tactics.

The petition claims the panel did not treat the counsel with respect, to which the court noted that the lawyer had compared Judge Posner to Simon Cowell.

What the panel had said is that the structure of class actions gives plaintiff lawyers an incentive to negotiate settlements that enrich themselves but give scant rewards to class members. With numerous citations, the panel noted that the criticisms in the prior opinion of the tactics employed by some class action lawyers are not criticisms made by judges alone, let alone judges of the panel or judges of the Seventh Circuit.

So far from retracting any criticisms or modifying any language, the court reaffirmed its key criticisms.

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A variety of business groups have weighed in as amici, asking the Supreme Court to recognize how contingency fee arrangements by California counties and cities pursuing lead paint litigation violated the due process rights of the defendants. Atlantic Richfield Co. v. County of Santa Clara, No. 10-546 (U.S., amicus curiae brief submitted 11/24/10).

Readers may recall our previous posts about how the California supreme court had taken a major step backward by modifying a 1985 decision that had limited the power of government agencies to retain private plaintiffs attorneys on a contingency fee basis to prosecute nuisance litigation. County of Santa Clara v. The Superior Court of Santa Clara County, No. S163681 (Cal. 7/26/10).

A group of public entities composed of various California counties and cities were prosecuting a public-nuisance action against numerous businesses that manufactured lead paint. Defendants moved to bar the public entities from compensating their privately retained counsel by means of contingent fees. The lower court, relying upon People ex rel. Clancy v. Superior Court, 39 Cal.3d 740 (1985), ordered that the public entities were barred from compensating their private counsel by means of any contingent-fee agreement, reasoning that under Clancy, all attorneys prosecuting public-nuisance actions must be “absolutely neutral.”

The state supreme court acknowledged that Clancy arguably supported defendants' position favoring a bright-line rule barring any attorney with a financial interest in the outcome of a case from representing the interests of the public in a public nuisance abatement action. The court proceeded to engage in a reexamination of the rule in Clancy, however, finding it should be "narrowed," in recognition of both (1) the wide array of public-nuisance actions (and the corresponding diversity in the types of interests implicated by various prosecutions), and (2) the different means by which prosecutorial duties may be delegated to private attorneys supposedly without compromising either the integrity of the prosecution or the public's faith in the judicial process.

The state court had previously concluded that for purposes of evaluating the propriety of a contingent-fee agreement between a public entity and a private attorney, the neutrality rules applicable to criminal prosecutors were equally applicable to government attorneys prosecuting certain civil cases. The court had noted that a prosecutor's duty of neutrality stems from two fundamental aspects of his or her employment. As a representative of the government, a prosecutor must act with the impartiality required of those who govern. Second, because a prosecutor has as a resource the vast power of the government, he or she must refrain from abusing that power by failing to act evenhandedly.

But then, the court concluded that to the extent Clancy suggested that public-nuisance prosecutions always invoke the same constitutional and institutional interests present in a criminal case, that analysis was "unnecessarily broad" and failed to take into account the wide spectrum of cases a state may bring. The court described a range of cases; criminal cases require complete neutrality. In some ordinary civil cases, neutrality is not a concern when the government acts as an ordinary party to a controversy, simply enforcing its own contract and property rights against individuals and entities that allegedly have infringed upon those interests. The nuisance cases fall between these two extremes on the spectrum of neutrality required of a government attorney. The case was not an “ordinary” civil case in that the public entities' attorneys were appearing as representatives of the public and not as counsel for the government acting as an ordinary party in a civil controversy. The case was being prosecuted on behalf of the public, and, accordingly, the concerns identified in Clancy as being inherent in a public prosecution were, indeed, implicated.

But, despite that, state supreme court found that the interests affected in this case were not similar in character to those invoked by a criminal prosecution or the nuisance action in Clancy. The case would not have resulted in an injunction that prevents the defendants from continuing their current business operations. The challenged conduct (the production and distribution of lead paint) has been illegal in the state since 1978. Accordingly, whatever the outcome of the litigation, no ongoing business activity would be enjoined. Nor would the case prevent defendants from exercising any First Amendment right. Although liability may be based in part on prior commercial speech, the remedy would not involve enjoining current or future speech, said the court.

While a heightened standard of neutrality was required for attorneys prosecuting public-nuisance cases on behalf of the government, that heightened standard of neutrality is not always compromised by the hiring of contingent-fee counsel to assist government attorneys in the prosecution of a public-nuisance abatement action. Use of private counsel on a contingent-fee basis is permissible in such cases if neutral, conflict-free government attorneys retain the power to control and supervise the litigation.

In so finding, the court downplayed the reality that the public attorneys' decision-making conceivably could be influenced by their professional reliance upon the private attorneys' expertise and a concomitant sense of obligation to those attorneys to ensure that they receive payment for their many hours of work on the case.To pass muster, neutral government attorneys must retain and exercise the requisite control and supervision over both the conduct of private attorneys and the overall prosecution of the case. Such control of the litigation by neutral attorneys supposedly will provide a safeguard against the possibility that private attorneys unilaterally will engage in inappropriate prosecutorial strategy and tactics geared to maximize their monetary reward. .

The list of specific indicia of control identified by the state supreme court seem quite strained, however, and to elevate form over substance, and written agreements over human nature. The authority to settle the case involves a paramount discretionary decision and is an important factor in ensuring that defendants' constitutional right to a fair trial is not compromised by overzealous actions of an attorney with a pecuniary stake in the outcome.  In reality, even if the control of private counsel by government attorneys is viable in theory, it fails in application because private counsel in such cases are hired based upon their expertise and experience, and therefore always will assume a primary and controlling role in guiding the course of the litigation, rendering illusory the notion of government “control”.

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

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The U.S. Consumer Product Safety Commission last week gave final approval to the controversial
new consumer product safety database, overriding very real concerns about who should be permitted to submit incident reports and how they will be verified as accurate. Readers may know that Section 212 of the Consumer Product Safety Improvement Act of 2008 (‘‘CPSIA’’) amended the Consumer Product Safety Act (‘‘CPSA’’) to require the Commission to establish and maintain a publicly available, searchable database on the safety of consumer products, and other products or substances regulated by the Commission.

CPSC commissioners split along party lines in the 3-2 vote, which came after  a final discussion of whether the regulation would simply give certain interest groups a new forum to attack product makers and plaintiff lawyers a new tool, giving rise to lawsuits based on a rumor repeated through the echo chamber of the Internet.

The rule will give consumers access to reports of alleged product-related safety incidents via a new publicly accessible database.  Consumers, government agencies, and various public health and safety interest groups will be able to post largely self-verified reports related to the safety of any product regulated by the CPSC.

Manufacturers will have limited control over what information can be removed or amended once posted.  The two dissenting votes made an unsuccessful attempt to amend the final rule so as to give manufacturers more time to comment on or respond to the accuracy of postings before they are published to the database and to the public. 

The database will be accompanied by a weak disclaimer stipulating that CPSC has not verified the accuracy of any report.  But the Democratic commissioners rejected any system by which the CPSC could investigate obviously questionable claims and find out the origin of such reports before allowing the public to see and use them.   We posted about these very issues last Spring, and argued that the CPSC had not fully addressed them.  It still seems that insufficient attention has been paid by the majority commissioners to legitimate issues of a manufacturer's goodwill and reputation, to the costs of unnecessary panic among product consumers, and the mischief that plaintiffs' lawyers might cause with unwarranted increase in litigation against manufacturers.

Accordingly, a product seller may only make a comment in response to the report of harm, which may be published; claim the report of harm contains confidential business information, triggering a CPSC review of the claim; and/or claim the report of harm contains materially inaccurate information (e.g., that it is not the manufacturer or private labeler of the product), triggering a CPSC review of the claim. Materially inaccurate information is narrowly defined to include information that is false or misleading and relates to a matter which is so substantial and important as to affect a reasonable consumer’s decision making about the product. 

CPSC is expected to have the database go live at www.saferproducts.gov in March, 2011. In the meantime, the Commission plans to start outreach on business portal registration and features; conduct workshops with manufacturers and private labelers; offer training webinars; and finalize the new incident report form.

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We haven't weighed in yet on the latest crazy development in the food world, that attack by some of the San Francisco Board of Supervisors on "Happy Meals."  And no, this is not sour grapes for the Giants having beaten the Phillies. The Board of Supervisors recently voted to ban meals packaged with toys unless the meal contains fruits and vegetables, is less than 600 calories and is very low in fat and sodium, and, presumably, doesn't taste good and won't make your kid happy. 

So much is wrong with that, it's hard to know where to start. 

It undercuts the rights of consumers to choose. If more people wanted these kinds of meals, more fast food restaurants would sell them. (You can get carrots and milk with a Happy Meal by the way.) That's the way a free economy is supposed to work. San Francisco (or at least a majority of the Board) is simply taking choice away from consumers, the right to eat or drink what he or she chooses.  Apparently, these Board members are part of that new government mindset in which individuals are incapable of making decisions for themselves.  Only the government can make those choices.
 

But, it's about obesity in children, argues the Board.  We say parents, not politicians, should decide what their children eat. So the impact on kids is actually another reason this bill is a bad idea, an unwise and unprecedented governmental intrusion into parental responsibilities and family choices.  It is a parents' right and responsibility — not the government's — to make their own decisions and to choose what’s right for their children.

On this basis, San Francisco Mayor Gavin Newsom wisely vetoed the ban on Happy Meals, but the Board of Supervisors voted 8-3 just this week to override Newsom’s veto.

Put aside the policy debate, one of the most troubling aspects is the quote from a sponsor that this bill was part of "an agenda of food justice.”  Seen in this light, the bill is part of a broader legal campaign that will include litigation against food companies.  Indeed, as we have posted on before, the so-called Center for Science in the Public Interest has threatened to  file a lawsuit against McDonald’s, attacking the company's marketing of Happy Meals. In our view, the CSPI needs to worry more about junk science than junk food.

 

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We alerted readers recently that the Supreme Court had granted review in two product liability cases that raise cutting edge personal jurisdiction issues that may not only impact foreign manufacturers but and may also alter due process/personal jurisdiction jurisprudence generally. See J. McIntyre Machinery Ltd. v. Nicastro, U.S., No. 09-1343 (certiorari petition granted 9/28/10); Goodyear Luxembourg Tires SA v. Brown, U.S., No. 10-76 (certiorari petition granted 9/28/10).

Personal jurisdiction, of course, addresses the reach of the court’s power over a party, and without such jurisdiction, any ruling by the court is not binding on the party. Plaintiff lawyers focus on personal jurisdiction as part of the equation where they can sue; defendants as part of where they can be sued properly. As a very general matter, a defendant can only be sued where it has sufficient minimum contacts with the state such that a suit there does not offend traditional notions of fair play and substantial justice.

The issue framed in Nicastro is: Whether, consistent with the Due Process Clause and pursuant to the stream-of-commerce theory, a state may exercise in personam jurisdiction over a foreign manufacturer when the manufacturer targets the general, overall U.S. market for the sale of its product and that product is purchased by a forum state consumer. The corresponding issue in Brown is: Whether a foreign corporation is subject to general personal jurisdiction, on causes of action not arising out of or related to any contacts between it and the forum state, merely because other entities distribute in the forum state products placed in the stream of commerce by the defendant.

"Stream of commerce" personal jurisdiction, debated frequently in the lower courts, if recognized by the Supreme Court, might allow any state to assume jurisdiction over any product manufacturer whose product found its way into the state, no matter how many independent, separate distributors the product had passed through in separate legal transactions. The original stream of commerce idea had included the element of a manufacturer's expectation that its products will be purchased in the specific forum state. Many foreign and out-of-state manufacturers reasonably should know that their products are distributed through a system that might result in sales in any given state. Should that be enough? Readers may recall that the Supreme Court took a look at "stream of commerce" jurisdiction over 20 years ago, and split with no majority decision. But a plurality rejected the "stream of commerce" concept in Asahi Metal Industry Co. v. Superior Court of California, 480 U.S. 102 (1987).

The foreign companies appealing the two state court rulings in two product liability cases recently filed merits briefs. See J.  McIntyre Machinery Ltd. v. Nicastro, No. 09-1343 (U.S. brief submitted 11/12/10); Goodyear Luxembourg Tires SA v. Brown,  No. 10-76 (U.S. brief submitted 11/12/10). There's a link to the Goodyear brief from the ABA Supreme Court Preview, and the McIntyre brief. Also, amici curiae filed briefs, including PLAC, Dow Chemical Canada ULC, the former ATLA now know as American Association for Justice, the Chamber of Commerce of the United States of America, and  the Organization for International Investment and Association of International Automobile Manufacturers Inc. 

In the NJ case, the defendant asks how a “new reality” of “a contemporary international economy” permits a state to exercise in personam jurisdiction over a foreign manufacturer pursuant to the stream of commerce theory solely because the manufacturer targets the US market for the sale of its product and the product is purchased by a forum state consumer?  The petitioner argues that the analysis in Justice O’Connor’s concurring opinion in Asahi is the better view; first, it embodies the requirement of active engagement, of personal agency, that the Supreme Court has made the centerpiece of its formulations of personal jurisdiction limits under the Constitution. Second, it avoids the subjectivity that inheres in the test of mere awareness advanced by
Justice Brennan on the other side of the Asahi split. A concrete formulation is especially valuable in giving out-of-state actors the fair notice that the Court  has  deemed essential in allowing persons to conform their behavior to avoid, if they choose, the possibility of being haled into the courts of a state.  A defendant must intentionally act and direct that action at, and sufficiently in, the very state that seeks to exercise power over that person. Only through purposeful availment a producer will have a fair opportunity to conform its conduct so as to avoid state power if the producer chooses. To predicate jurisdiction on anything less leads to a rule where every seller of chattels would in effect appoint the chattel his agent for service of process and his amenability to suit would travel with the chattel.

 
The Goodyear brief notes that, unlike specific jurisdiction—which inherently must adapt to the permutations raised by varying claims—general jurisdiction, which does not vary from claim to claim, is more susceptible to precise rules. Indeed, one of its primary functions is to provide a certain and predictable place where a person can be reached by those having claims against him. No Supreme Court decisions have held that a manufacturer’s mere participation in the stream of
commerce could create general jurisdiction wherever the manufacturer’s products were distributed. To the contrary, most courts have repeatedly indicated that injecting a product, even in substantial volume, into a forum’s stream of commerce, without more, does not support general jurisdiction. General jurisdiction based on the stream of commerce theory violates traditional notions of fair play and substantial justice because essentially universal jurisdiction would exist in every state’s courts over every significant seller of goods, foreign or domestic. Because general jurisdiction must be justified solely by reference to the relationship between the state and the defendant, that relationship must be so significant — sufficiently substantial and of such a nature — as to give the state a basis for global judicial authority over all of the defendant’s conduct, wherever it occurs.
 

The Supreme Court has set argument in the two cases for Jan. 11, 2011. They will be argued separately.

 

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The Seventh Circuit has held that a "copycat" class action suit cannot go forward in federal court in California after a similar class action had already been denied certification in federal court in Illinois.  Thorogood v. Sears, Roebuck & Co., No. 10-2407 (7th Cir., 11/02/10).

The first class action in the package of related cases was filed in state court in Illinois but removed to federal court under the Class Action Fairness Act.  Thorogood, a Tennessean, bought a Kenmore-brand clothes dryer from Sears (Kenmore is a Sears brand name). The words “stainless steel” were imprinted on the dryer, and point-of-sale advertising explained that this meant that the drum in which the clothes are dried was made of stainless steel. Thorogood claimed to have thought that this meant that the drum was made entirely of stainless steel, whereas part of the front of the drum—a part the user would see only if he craned his head inside the drum—is made of a ceramic-coated steel. 

The district court certified a multi-state class of Kenmore-brand clothes dryer purchasers. On appeal, the Seventh Circuit called the case “a notably weak candidate for class treatment.” Not only did common issues of law or fact not predominate over the issues particular to each purchaser of a stainless steel Kenmore dryer, as Rule 23(b)(3) requires, there were, the court said, “no common issues of law or fact.” 547 F.3d at 746-47.  It was well-nigh inconceivable, said the court,  that the other members of the class had the same understanding of Sears’s advertising as Thorogood claimed to have. Sears hadn’t advertised the dryers as preventing rust stains on clothes; and it’s not as if such stains are a common concern of owners of dryers—there was no suggestion of that either.

Stainless steel appliances are popular even among consumers, undoubtedly the vast majority, who do not expect a dryer to cause rust stains. Stainless steel does not rust, and that is certainly a plus, clothing stains to one side. But ceramic doesn’t rust either.  Advertisements for clothes dryers mention a host of features that might matter to consumers, such as price, size, electrical usage, appearance, speed, and controls, but not the prevention of clothing stains attributable to rust. The litigation of the class members’ claims would thus have devolved into a series of individual hearings in which each class member who wanted to pursue relief against Sears would testify to what he understood to be the meaning of a label or an  advertisement that identified a clothes dryer as containing a stainless steel drum. Few if any of them would have shared Thorogood’s alleged concerns, which, were a confabulation, said the court.

After the court of appeals thus ordered the first class decertified, thus shrinking the suit to Thorogood’s individual claim, Sears made Thorogood an offer of judgment under Rule 68 of $20,000 inclusive of attorneys’ fees. The district judge, believing that Thorogood should receive no attorneys’ fees, dismissed the suit. The Seventh Circuit affirmed the district court’s denial of attorneys’ fees and dismissal of the suit. 595 F.3d 759 (7th Cir. 2010).

The same plaintiffs' lawyer then brought Murray v. Sears, Roebuck & Co., No. 4:09-cv-
5744-CW (N.D. Cal.). Murray was a member of Thorogood’s class, and he brought essentially the identical claim in California.  Sears Roebuck sought an injunction halting the new class action in front of Judge Leinenweber, who had presided over and eventually dismissed Thorogood’s original class suit, but he ruled that Sears could obtain adequate relief against being harassed by repetitive litigation by pleading collateral estoppel in Murray’s suit in California. Sears appealed, asking the court to to reverse the district court's denial of  Sears’s motion to enjoin the virtually identical class action suit.

The Seventh Circuit (Judge Posner writing) noted that the class in Murray’s case was smaller than
Thorogood’s because it was limited to California purchasers, but it was still very large. The claims in Murray’s original complaint, when Sears pleaded the defense of collateral estoppel, were identical to Thorogood’s; they challenged the same advertising for the same models of clothes dryer. Murray acknowledged that he was alleging “a similar general set of operative facts as alleged in the Thorogood case.”  That caused the California court to find for Sears on collateral estoppel grounds.  So re judicata saves the day, just like the Illinois district court predicted in denying the requested injunction.

But (wouldn't be a blog-worthy case without the but) Murray then amended his complaint to allege additional facts in an effort to show that he had a different case, perhaps one more amenable to class action treatment. On the basis of the amendment, the district judge in California reversed his earlier ruling, and having thus rejected the defense of collateral estoppel allowed discovery to begin.

Ordinarily the ability to plead res judicata or collateral estoppel gives a litigant adequate protection against being harassed by repetitive litigation by the loser in a previous suit against him. But this case was unusual, said Judge Posner, both because it involved class action litigation and because of the specific tactics employed by class counsel. Class members are interested in relief for the class but the lawyers are primarily interested in their fees, and the class members’ stakes in the litigation are ordinarily too small to motivate them to supervise the lawyers in an effort to align the lawyers’ incentives with their own.  The defendant wants to minimize outflow of expenditures
and the class counsel wants to increase inflow of attorneys’ fees. "Both can achieve their goals if they collude to sacrifice the interests of the class.” Leslie, “The Significance of Silence: Collective Action Problems and Class Action Settlements,” 59 Fla. L. Rev. 71, 79-81 (2007). And when the
central issue in a case is given class treatment and so will be resolved once and for all, a trial becomes a roll of the dice. Depending on the size of the class, a single throw may determine the outcome of an immense number of separate claims (hundreds of thousands, in the dryer
litigation)—there is no averaging of decisions over a number of triers of fact having different abilities, priors, and biases. The risk of error becomes asymmetric when the number of claims aggregated in the class action is so great that an adverse verdict would push the defendant into bankruptcy; in such a case the defendant will be under great pressure to settle even if the merits
of the case are slight.

Moreover, in most class action suits, there is far more evidence that plaintiffs may be able to discover in defendants’ records (including emails, the vast and ever-expanding volume of
which has made the cost of discovery soar) than vice versa. Usually the defendants’ conduct is the focus of the litigation and it is in their records, generally much more extensive than the plaintiffs’ (especially when as in a consumer class action the plaintiffs are individuals
rather than corporations or other institutions), that the plaintiffs will want to go in search of a smoking gun.

There is no way in which Sears could recoup the expense of responding to Murray’s discovery requests and of filing preclusion defenses against even more soon-to-be-filed duplicative class actions in other states. The harm it faces from the denial of the injunction was irreparable and its remedy at law against settlement extortion nonexistent, found the Seventh Circuit.  Sears’s action under the All Writs Act was its only means, other than submitting to plaintiffs' lawyer’s  demands, of avoiding being drowned in the discovery bog.

Here, despite the artful pleading in the amneded complaint in California, there was nothing materially new in Murray’s complaint that should have allowed allow an escape from the bar of collateral estoppel. The critical issue was and is what consumers would understand by representations that the Kenmore dryer has a stainless steel drum. The finding in the first court was that common issues did not predominate in Thorogood’s suit; neither did they in Murray’s; the differences between the suits did not bear on that particulat finding.  Yet, the California court did not agree.

Sears’s motion had been filed under the “All Writs Act,” which authorizes a federal court to issue “all writs necessary or appropriate in aid of [its] jurisdiction and agreeable to the usages and
principles of law,” 28 U.S.C. § 1651(a), and which has been interpreted to empower a federal court “to issue such commands . . . as may be necessary or appropriate to effectuate and prevent the frustration of orders it has previously issued in its exercise of jurisdiction otherwise obtained.” United States v. N.Y. Tel. Co., 434 U.S. 159, 172 (1977). Abuse of litigation is a conventional ground for the issuance of an injunction under the All Writs Act, because without an injunction a defendant might have to plead the defense of res judicata or collateral estoppel in a myriad of jurisdictions in order to ward off a judgment, not without risks, and would be helpless against settlement extortion pressures.

The court of appeals left the details of the injunction to be worked out by the district judge, but noted that it had ordered the class decertified inthe first case because of the absence of issues common to all the class members. That ruling—as the injunction must make clear—does not preclude any of the class members from filing individual suits, should they choose. For it was not a ruling on the merits of any class member’s claim (including Thorogood’s). All that would be precluded is the filing (by members of Thorogood’s class, which includes the members of Murray’s class, or by the lawyers for those classes) of class action suits that are indistinguishable, so far as lack of commonality among class members’ claims is concerned, from Thorogood’s.  The plaintiff lawyers should be included in the injunction, as has been done in other cases. See In re Bridgestone/Firestone, Inc., Tires Products Liability Litigation, 333 F.3d at 769; Newby v. Enron Corp., 302 F.3d 295, 300-03 (5th Cir. 2002).

 

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Last week, a federal district court held that federal food labeling law does preempt state law claims attacking the use of phrases such as “0 Grams of Trans Fat” on snack food packaging. See Peviani v. Hostess Brands Inc., No. 2:10-cv-02303 (C.D. Cal., 11/3/10).

 In this putative class action, plaintiffs alleged that the defendant used misleading and deceptive statements to market the "Hostess 100 Calorie Packs" baked goods. In particular, plaintiffs alleged that the label noting "0 Grams of Trans Fat" was inconsistent with the products containing partially hydrogenated oils (PVHO).  Plaintiffs alleged that PVHO is linked to various health problems, and therefore is supposedly a "dangerous trans fat."

Plaintiffs alleged they purchased the 100 Calorie Pack foods relying on the no trans fat claim.  They asserted false advertising under the Lanham Act, violations of the California Unfair Competition Law, the California False Advertising Law, and the Consumer Legal Remedies Act. The two classes proposed were a restitution and damages nationwide class of those that purchased the foods, and an injunctive relief class of those who commonly purchase such foods.

Defendants filed a motion to dismiss, arguing that the claims were preempted by federal law.  The  court noted that the FDCA sets forth a comprehensive federal scheme for the regulation of food. In 1990, Congress passed the Nutrition Labeling and Education Act, 21 U.S.C. 341, which clarified FDA's authority to require and regulate nutrition labeling on food.  Two provisions directly apply to use of phrases like "0 Grams of Trans Fat."  One provision requires the labeling in the Nutrition Facts Panel to include the amount of saturated fat and total fat in each serving; and this regulation requires that if a serving contains less than 0.5 grams of trans fat, the amount "shall be expressed as zero."  Second, a regulation permits certain nutrient claims outside the Facts Panel about the level or range of a nutrient in the food, such as sodium, or calories or fat.  The NLEA permits such a statement as long as it is not false or misleading. 21 U.S.C. §§ 343(q) and (r).

The court noted that laws regulating the proper marketing of food are within the states' historic police powers, and thus subject to a presumption against preemption.  Nevertheless, consumer protection laws, such as those invoked here, are nonetheless preempted if they seek to impose requirements (through their use in litigation) that contravene the provisions of the federal law.  The NLEA contains an express preemption clause relating to any requirement  in state law that is not identical to the federal provisions.  But the court noted that implied preemption can accompany express preemption, as the essential inquiry always remains the substance and scope of Congress' intent to displace state law.

Plaintiffs alleged that the trans fat label outside of the Nutrition Facts Panel was an express nutrient content claim, and was false and misleading.  But the court noted that the FDA has declined to promulgate any regulation as to whether actual values must be used in labeling or rounded values may be used. In fact, the FDA has said that the difference between actual and rounded values are nutritionally insignificant, and thus either value relays the same basic information.  Here, since the phrase "0 grams of Trans Fat" is not false or misleading when used in the Nutrition Facts Panel, defendant's use of the exact same phrase elsewhere on the product label cannot be found false or misleading. If 0 and less than 0.5 grams mean, nutritionally, the same thing in the important Panel section, use of the exact same claim could not be misleading elsewhere on the label.

In essence, plaintiffs were trying, under state law, to enjoin on the label the use of the very phrase that federal law permits on another part of the label.  Plaintiffs' claims failed because they would impose a state law obligation for trans-fat disclosure that is not required by federal law.  (The plaintiffs' federal claim, for false advertising under the Lanham Act, failed for lack of standing,.)

The decision echoed Chacanaca v. Quaker Oats Co.,  No. 5:10-cv-00502 (N.D. Cal., Oct. 14, 2010), which dismissed similar claims over the phrase “0 Grams Trans Fat” on preemption grounds.

These types of claims illustrate the lengths to which plaintiffs are going to attack the food and beverage industries.  No one was sick from the snacks, which were labeled in exact accordance with explicit federal requirements.  Yet, a multi-count claim is brought in state court, with the legal theory that, in essence, federally approved language in one part of a food label is false and misleading under state law when it appears in another part of the same label. This is not about helping consumers.  How could it benefit consumers and clarify the information they have to make their own free and individual purchase decisions (with all the factors that go into what we decide to buy and eat) if the FDA-approved language in the Nutrient Facts Panel is allowed to be called false and misleading by a state court jury in California?

 

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A federal appeals court has upheld the exclusion of plaintiffs' experts in a design defect case alleging Starbucks Coffee Co.'s tea/coffee cup design caused severe burns to an elderly customer. See Moltner v. Starbucks Coffee Co., No. 09-4943 (2d Cir. 11/2/10).

Plaintiff alleged she purchased a venti-sized cup of tea, served double-cupped and lidded. She had difficulty removing the lid, and in the course of her attempts to pry it off, she alleged that the tea spilled onto her left leg, causing severe burns.

In support of her design defect claim, she presented the reports of four experts. The District Court for the Southern District of New York excluded the experts under Daubert and granted the coffee maker summary judgment.

The Second Circuit unanimously agreed that proof from Moltner's these design defect experts failed to meet the standards of Federal Rule of Evidence 702.  As the district court discussed, and the court of appeals affirmed, the first (Diller) report was unreliable because its conclusions were conclusory, devoid of any factual or analytical basis, and this report thus did not demonstrate a sufficient level of intellectual rigor. The second (Dr. Gerstman) report likewise was unreliable because it does not state the basis or analysis from which its conclusions were derived.  Third, the (Anders) report was the product of a method of testing that was insufficiently reliable and lacked “the same level of intellectual rigor that characterizes the practice of an expert in the relevant field.” The report by a fourth expert (DiMaria), which supported Moltner's negligence claim, was properly barred because it would not assist the jury in determining whether Starbucks breached its duty of care to the plaintiff.

We note this decision not so much for the Daubert analysis (which is not lengthy), but because it strikes us as another good example of what is wrong with so much product liability litigation today.  An elderly woman with serious injury is a sympathetic plaintiff in front of a jury.  But such a case should never get to a jury. The panel also rejected Moltner’s theory of negligence as infirm as a matter of law under Fung-Yee Ng v. Barnes & Noble, Inc., 764 N.Y.S.2d 183, 183-84 (1st Dep’t 2003) (“‘Double cupping’ is a method well known in the industry as a way of preventing a cup of hot tea from burning one’s hand.”).  Products are not defective just because they are capable of being involved in an injury.  Products need not be designed to prevent any injury no matter what the consumer does with the product.   Almost every design choice, including something as simple as double cupping, may have potential impact on the relative risks of injury.   A proper negligence analysis supports the decision to minimize the risk of injuries, yet juries are often incapable of confirming that analysis when confronted with a sympathetic plaintiff.  And while they should, juries confronted with a seriously injured plaintiff may find it difficult to recognize the proper role of personal responsibility in cases like this: regardless of the design of the cup or lid, when you are dealing with a very hot beverage, you must exercise precaution; it's a matter of common sense, common knowledge, common awareness. Hence the need for rules keeping out junk science and the need for courts to grant summary judgment. 

 

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Plaintiffs have failed in a proposed class action against McDonald's in which they alleged that the food company's advertising somehow misleads customers into believing that they can eat fast food daily without any potential health consequences.  Pelman v. McDonald's Corp., No. 02-civ-07821 (S.D.N.Y. 10/27/10).  Yes, loyal readers, you read that correctly: the claim is that the people of New York only know about fast food what they read in (or into) ads.

Plaintiffs in this action were New York State consumers claiming, pursuant to Section 349 of New York’s General Business Law, injury from defendant McDonald’s Corporation’s allegedly deceptive marketing scheme.  Plaintiffs claimed that the effect of defendant’s marketing – from 1985 until the filing of this case in 2002 – was to mislead consumers into falsely believing that defendant’s food products can be consumed on a daily basis without incurring any adverse health effects.  They alleged that, as a result of this marketing scheme, class members suffered injury. Specifically, plaintiffs alleged that defendant attempted to mislead plaintiffs and putative class members with misleading nutritional claims, in widespread advertising campaigns, that its foods were healthy, nutritious, of a beneficial nutritional nature, and/or were easily part of anyone’s healthy daily diet, each and/or all claims supposedly being in contradiction to medically and nutritionally established acceptable guidelines. Plaintiffs claimed that  they suffered injury in the form of the financial costs of defendant’s  products; “false beliefs and understandings" as to the nutritional content and effects of defendant’s food products, and physical injuries in the nature of obesity, elevated levels of  cholesterol, pediatric diabetes, high blood pressure, etc.

Plaintiffs moved for class certification pursuant to Federal Rule of Civil Procedure 23(b)(3).  The court "begins and ends" its analysis of class certification with consideration of the predominance requirement of Rule 23(b)(3). The court concluded that establishment of the causation and injury elements of plaintiffs’ claims would necessitate extensive individualized inquiries; the questions of law and fact which would be common to putative class members would not predominate over questions affecting only individual members. Accordingly, certification of this action for class litigation under Rule 23(b)(3) was not appropriate. 

The court found that the focus was on whether the elements of plaintiffs’ cause of action under GBL § 349 may be established by common, class-wide proof.  The court had earlier in the case ruled that in accordance with GBL § 349’s requirement that plaintiffs’ injuries be "by reason of" defendant’s conduct, the plaintiffs had be aware of the nutritional scheme they alleged to have been deceptive, and that the injuries that were suffered by each plaintiff  were by reason of defendant’s alleged deceptive marketing.  However, allegations of “false beliefs and understandings” did not state a claim for actual injury under GBL § 349.  Neither did allegations of pecuniary loss for the purchase of defendant’s products. (In some states that kind of "the product worked and didn't harm me but I wouldn't have purchased it" argument does fly.)

Accordingly, the only alleged injuries for which putative class members could claim damages under GBL § 349 were those related to the development of certain medical conditions; and the causal connection, if any, for those kinds of injuries depended heavily on a range of factors
unique to each individual. Defendant’s nutritional expert concluded there are many factors that contribute to obesity and to obesity-related illnesses, and thus it is improper to generalize and make assumptions as to causation in any individual.  Many foods, not just defendant's, are high in fat, salt, and cholesterol, low in fiber and certain vitamins, and contain beef and cheese, and there is no evidence to suggest that all who consume such foods develop the kinds of medical conditions which were at issue in this case. 

Moreover, whether or not plaintiffs’ claims (that they ate McDonald’s food because they believed it to be healthier than it was in fact) are true for any particular person was an inquiry which also required individualized proof. A person’s choice to eat at McDonald’s and what foods (and how much) he eats may depend on taste, past experience, habit, convenience, location, peer
choices, other non-nutritional advertising, and cost, etc.

Plaintiffs also argued for issue classes, asserting that the 1) existence; 2) consumer-orientation; and 3) materially misleading nature of the marketing scheme alleged by plaintiffs were each
questions which could be settled upon a showing of objective evidence and legal  argument. Even if true, the court noted that all elements of the class action rule have to be met even for issue classes. Named plaintiffs did not present any specific evidence about the number of other persons within the relevant age group who were exposed to the nutritional marketing at issue, then regularly ate at McDonald’s, and subsequently developed the same medical injuries as those allegedly suffered by named plaintiffs.  So they hadn't even shown numerosity.

 

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Your humble blogger is quoted in the latest edition of the fine publication INSIDE COUNSEL.  See “Proposed Regulation Requires Companies To Go Green,” Inside Counsel, November 1, 2010.

Readers know we have posted on California's Green Chemistry program.  This new article explores its potential impact, which will likely reverberate far beyond that state’s borders.  for example, I spoke to the publication about the impracticality of making two versions of many products, one for California and one for the rest of the nation. 

The article also suggests that plaintiffs attorneys will likely find plenty of litigation opportunities in the initiative, including the argument that changes made to comply with the regulation could and should have been made earlier, as I discussed with the author.

I also pointed out that there doesn’t appear to be an easy mechanism for getting a chemical or product off the state's target list once it’s finalized, highlighting the importance of the initial comment period.

 

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The Consumer Product Safety Commission is in the process of reviewing comments submitted on the impending consumer product safety information database. The agency has posted the comments received.

No surprise, those consumer-oriented interest groups in favor of a database generally praise what CPSC is proposing to do, and industry groups reiterate concerns they have about the implementation of the database concept.

As we have posted before, even back to the time Congress was considering this provision, there remain concerns about the accuracy and confidentiality of reports of alleged injury submitted and conveyed back tot he public in the database;  and the CPSC remains vague about how it will provide "due process" for product sellers who could find the database being used against them even when it contains erroneous, duplicate, or confidential data.  for manufacturers and private labelers.  There seems scant attention to legitimate issues of a manufacturer's goodwill and reputation, to the costs of unnecessary panic among product consumers, and the mischief that plaintiffs' lawyers might cause with unwarranted increase in litigation against manufacturers.

Organizations such as  the National Association of Manufacturers noted that false or inaccurate information does not serve the interests of consumers. Congress knew that counterfeit products are too common in the marketplace and may be confused with real brand name products.  Manufacturers and private labelers of products have a legitimate interest in protecting their brands from inaccurate, defamatory, and intentionally false statements and in protecting trade secret and confidential commercial information.  Accordingly, a request for confidential treatment “is not a matter that should be left to the discretion of a CPSC staffer,” NAM said.

Industry groups also worried about the CPSC's unduly broadening the list of people who can submit a report to the database. Broadening the list of reporting parties does not serve the Congressional interest in providing accurate information to consumers about reports of harm. It is obvious why parties included in CPSC's broad proposed listing of "others" may not be reliable reporters of an incident. CPSC has largely added parties who are more likely to have an agenda that goes beyond merely advising CPSC of an incident. The possibility that someone might attempt to seed the database with inaccurate or misleading information to provide ostensible support for lawsuits is a real concern. 

So far, the Commission has not ensured that the CPSC will deal with accuracy challenges in a timely manner. Conceivably, busy CPSC staff might take weeks, months, or even years to determine whether information that is posted on the database is materially inaccurate.  CPSC has also set up a catch-22 procedure for handling such challenges. CPSC has asked firms who wish "expedited" treatment to submit no more than five pages including attachments to show a problem. However, CPSC has simultaneously set a standard of  "significant evidence" to support claims that information is materially inaccurate.  To provide sufficient evidence to support a challenge, a manufacturer may need to provide more than 5 pages of information; however, if they do so,  CPSC will publish first, and resolve the challenge at some indefinite time in the future.

These parts of the proposal likely will not withstand judicial scrutiny, nor should they have any credibility with the public.

 

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The MDL court overseeing the coordinated federal litigation stemming from a 2007 peanut butter recall recently granted summary judgment to the defendant manufacturer ConAgra Foods in multiple cases.  See Southern v. ConAgra Foods Inc., MDL 1845, No. 09-1544  (N.D. Ga. 9/29/10).

Readers may recall that in 2007, ConAgra Foods Inc. recalled jars of Peter Pan and Great Value peanut butter that were made at its Georgia plant, after the CDC and FDA observed a possible association between these products and reports of salmonella poisoning.  As part of the recall, ConAgra instructed consumers to discard the jar but to save the lid, which contained the product code identifying when and where the peanut butter was manufactured.  After the recall, multiple consumers sued ConAgra, alleging they had contracted salmonella after eating either Peter Pan or Great Value peanut butter. The lawsuits were consolidated in an MDL in the Northern District of Georgia.

To prove causation, each plaintiff must show that it is more likely than not that contaminated peanut butter caused his or her illness. The best way to show that peanut butter is contaminated with Salmonella is to test the peanut butter itself, said the court. The fact that the peanut butter was recalled here does not mean that it was contaminated. In fact, most of the recalled peanut butter was completely free of Salmonella contamination. During discovery, accordingly, ConAgra asked the plaintiffs to provide the product code for the peanut butter that allegedly caused their illnesses. It also asked the plaintiffs whether they submitted a blood, urine, or stool sample to a doctor for testing. Because the symptoms of Salmonellosis are similar to those of other common gastrointestinal illnesses, these samples were important in determining causation, said defendant.

Here, the 19 plaintiffs could not establish causation, as a matter of law. First, they could not show that the peanut butter they ate was manufactured by ConAgra at the Sylvester plant during the outbreak.  Plaintiffs did not know the product codes from their peanut butter. Without these numbers, which indicate when the peanut butter was manufactured, it was impossible to know whether the peanut butter was at risk of contamination.

Second, the plaintiffs did not provide enough evidence to show that they contracted Salmonellosis shortly after eating the peanut butter. Symptoms alone are not enough to permit a reliable diagnosis of this disease because the symptoms of Salmonellosis – usually diarrhea, abdominal cramps, and fever – are more commonly associated with viruses, parasites, fungi, other bacteria, toxins, and various chronic diseases. Indeed, the CDC estimates that nearly 300 million cases of diarrhea and related gastrointestinal symptoms occur each year of other causes. A positive blood, urine, or stool sample is the best way to show that Salmonella caused a plaintiff’s illness. A proper differential diagnosis by a physician who examined and treated a plaintiff during his illness may also support a finding of causation in some cases, said the court.  

But none of the plaintiffs here provided evidence of a differential diagnosis or a positive blood, urine, or stool culture. None of the plaintiffs' available medical records indicated that the plaintiffs’ doctors considered and excluded other causes or performed any form of differential diagnosis or diagnostic tests. To the contrary, the records showed that most plaintiffs did not even visit the doctor until several months after eating the allegedly contaminated peanut butter.

Without more, concluded the court, no reasonable jury could find that it was more likely than not that
contaminated peanut butter caused the plaintiffs’ alleged illnesses.

 

 

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The California Department of Toxic Substances Control (DTSC) and the state's Department of Public Health (DPH) are hosting a brown-bag symposium, "Green Chemistry through the Lens of Public Health," next week.  The program will examine the potential and intended effects of Green Chemistry on public health. It is set for Monday, October 18, 2010, 10 a.m. – 3 p.m.
 

We have posted on the California Green Chemistry Initiative, from the introduction of legislation for the program, to the proposal of draft regulations, to the final rule making stages.  As readers know from previous posts, "green chemistry" is the state's effort to require that chemical products be designed in such a way as to reduce the use or generation of hazardous substances and reduce health and environmental risks, with a clear emphasis on finding alternatives to "chemicals of concern."  Two bills passed in 2008 by the legislature mandated that DTSC develop regulations for identifying and prioritizing chemicals of concern, to create methods for analyzing alternatives to existing chemicals, and to create a mechanism for regulatory response, including possible restrictions or bans on certain chemicals. The laws also created a Green Ribbon Science Panel to advise DTSC, and provided for a Chemical Information Clearinghouse that will make chemical risk information more accessible to the public.

The symposium is scheduled to feature interactive discussions with physicians, scientists and some stakeholders on the impact of the new chemicals policy on public health. The keynote speakers are Dr. Margaret Kripke, Ph.D., immunologist, and Steve Owens from the U.S. Environmental Protection Agency’s Office of Chemical Safety and Pollution Prevention.

The event is open to the public and is supposed to be accessible via a live webcast at www.dtsc.ca.gov/greenchemistry.
 

 

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Last week, the Supreme Court granted review in two product liability cases that raise cutting edge personal jurisdiction issues that may not only impact foreign manufacturers but and may also alter due process/personal jurisdiction jurisprudence. See J. McIntyre Machinery Ltd. v. Nicastro, U.S., No. 09-1343 (certiorari petition granted 9/28/10); Goodyear Luxembourg Tires SA v. Brown, U.S., No. 10-76 (certiorari petition granted 9/28/10).  Personal jurisdiction addresses the reach of the court’s power over a party, and without such jurisdiction, any ruling by the court is not binding on the party. Plaintiff lawyers focus on personal jurisdiction as part of the equation where they can sue; defendants as part of where they can be sued properly.  As a general matter, a defendant can only be sued where it has sufficient minimum contacts with the state such that a suit there does not offend traditional notions of fair play and substantial justice.

The issue framed in Nicastro is: Whether, consistent with the Due Process Clause and pursuant to the stream-of-commerce theory, a state may exercise in personam jurisdiction over a foreign manufacturer when the manufacturer targets the U.S. market for the sale of its product and that product is purchased by a forum state consumer.  The corresponding issue in Brown is: Whether a foreign corporation is subject to general personal jurisdiction, on causes of action not arising out of or related to any contacts between it and the forum state, merely because other entities distribute in the forum state products placed in the stream of commerce by the defendant.

Readers may recall our previous post on Nicastro. The state court held that a foreign manufacturer will be subject to its jurisdiction if it knows or reasonably should know that through its distribution scheme its products are being sold in the state. A manufacturer that knows or reasonably should know that its products are distributed through a nationwide distribution system that might lead to those products being sold in any of the fifty states must expect that it will be subject to the state’s jurisdiction if one of its defective products is sold to a consumer, causing injury, said the state court. The focus under this approach is not on the manufacturer’s control of the distribution scheme, but rather on the manufacturer’s knowledge of the distribution scheme.  If a manufacturer does not want to subject itself to the jurisdiction of a state court while targeting the United States market, then, the court said, it must take some reasonable step to prevent the distribution of its products in that state.

The power of the state to subject a person or business to the jurisdiction of its courts has evolved with the changing nature of the American economy, said the court. As the nation is part of a global economy driven by startling advances in the transportation of products and people and instantaneous dissemination of information, the expanding reach of a state court’s jurisdiction, as supposedly permitted by due process, has reflected those historical developments, found the state court.

The stream-of-commerce doctrine of jurisdiction is particularly suitable in product-liability actions, opined the court. It will not necessarily be a substitute for other jurisdictional doctrines -- such as minimum contacts -- that will apply in contract and other types of cases. The exercise of jurisdiction by New Jersey in this case was called "a reasoned response" to the globalization of commerce that permits foreign manufacturers to market their products through distribution systems that bring those products into the state. With the privilege of distributing, indirectly, products to consumers comes the responsibility of answering in a New Jersey court if one of those consumers is injured by a defective product, concluded the majority in Nicastro. 

"Stream of commerce" personal jurisdiction, if recognized, would allow any state to assume jurisdiction over any product manufacturer whose product found its way into the state, no matter how many independent, separate distributors the product had passed through in separate legal transactions. A lengthy dissent in Nicastro argued that the majority had ignored the fact that the original stream of commerce idea had included the element of a manufacturer's expectation that its products will be purchased in the forum state.  Many foreign and out-of-state manufacturers reasonably should know that their products are distributed through a system that might result in sales in any given state.  As applied in this case, it seems to eliminate any requirement of intentional state-specific activity by the defendant. And in that respect, has potential implications for lots of entities besides foreign product manufacturers. 

You may recall that the Supreme Court took a look at "stream of commerce" jurisdiction over 20 years ago, and split with no majority decision. But a plurality rejected the "stream of  commerce" concept in Asahi Metal Industry Co. v. Superior Court of California, 480 U.S. 102 (1987). 

The Court called for these cases to be argued in tandem.  The Brown case arises from a bus accident in France that killed two North Carolina residents whose families sued foreign affiliates of Goodyear Tires.  Again this case raises the issue whether activities on the part of the foreign manufacturer should subject them to personal jurisdiction in the U.S., and whether there is "purposeful availment" just because the product is sold in a state -- that is, as long as the defendant intentionally placed their products into the stream of commerce without attempting to exclude a specific state. Brown also raises the issue whether the state court confused "specific jurisdiction"--which applies only in suits arising out of or related to the defendant’s contacts with the forum--  with "general jurisdiction," which, where applicable, permits a defendant to be haled
into court in the state on any claim whatsoever, but only when the defendant’s activities in a state are so substantial and of such a nature as to justify suit against it on causes of action arising from dealings entirely distinct from those activities.

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A federal court last week granted defendant's summary judgment motion in a putative class action alleging Nintendo of America Inc. sold defective wrist straps with its Wii controllers.  Elvig, et al. v. Nintendo of America Inc., No. 08-cv-02616 (D. Colo.)

Readers are familiar with the Wii game system. The Wii employs a motion sensing controller that allows the player to manipulate the on-screen action by performing imitative physical actions, such as swinging the controller like a tennis racquet to control the onscreen action in a tennis game. (Readers may recall the classic product liability issues over various lawn dart games; with Wii you can play them in your family room.) To ensure that controllers do not leave a player’s hand during vigorous physical activity, Nintendo includes a “safety strap” to be worn around the player’s wrist. The strap, in turn, connects to the controller by means of a “string sling.” 

Plaintiff sued, alleging the strap was defective, broke, and caused damage to her television. She alleged violation of the Colorado Consumer Protection Act (“CCPA”), of the Colorado Product Liability Act, and a breach of implied warranty or merchantability and of fitness for a particular purpose. To establish a claim under the CCPA, a plaintiff must show: (i) that the defendant engaged in one of several categories of unfair or deceptive trade practices; (ii) the practice occurred in the course of the defendants business or trade; (iii) the practice significantly impacts the public as actual or potential consumers of the defendant’s goods or services; (iv) the plaintiff suffered an injury; and (v) the challenged practice caused the injury. Nintendo argued that Ms. Elvig could not establish the first and last elements – i.e. a deceptive practice and causation of injury.  The court found that plaintiff's vague reference to “false advertising” that “touts the Wii’s athletic usages while making no mention of the straps’ propensity to break” was inadequate in detail and content to make out such a claim.  Plaintiff lacked specifics about what the advertising actually said.

On the product liability claim, Nintendo contended that it gave players adequate warnings of the need to retain possession of the controller and advised them of the possibility that release of the controller during vigorous motion could result in breakage of the strap and damage to persons or property. The court noted the evidence that Nintendo did advise players, via a safety card included with the Wii system, that “If you use excessive motion and let go of the Wii Remote, the wrist strap may break and you could lose control of the Wii Remote. This could injure people nearby or cause damage to other objects.” This, coupled with repeated instructions on the safety card that advise players “DO NOT LET GO OF THE REMOTE DURING GAME PLAY,” ensure that, if the player follows Nintendo’s instructions and heeds its warnings, the Wii system does not pose an unreasonable danger. Ms. Elvig did not dispute that such instructions were included with the Wii she received. Nintendo thus having given an adequate warning to users, it may “reasonably assume that it will be read and heeded,” and thus, has ensured that the product was not “unreasonably dangerous” under the Second Restatement, § 402A, comment j. An interesting take on the relationship of warning and design issues.

On the implied warranty of merchantability, the court cited the lack of evidence that would indicate what the intended purpose of the strap was. One might plausibly assume, as plaintiff did, that the strap was intended to prevent a controller, inadvertently released by the player during vigorous activity, from hurling towards the player’s television (or towards another player) and causing damage.  But equally, one might assume that the strap was simply intended to keep an
inadvertently released controller in the vicinity of the player so that it could be easily retrieved and was was never intended to withstand the forces of high-speed controller release. To withstand summary judgment, plaintiff needed more than one of alternate plausible assumptions; she needed evidence of the ordinary purpose of the strap and proof that it failed the ordinary purpose.

Finally, the court noted that a “particular purpose” differs from the ordinary purpose for which the goods are to be used; in other words, a buyer obtaining goods for a “particular purpose” is one who, for reasons peculiar to the buyer, is obtaining the goods for use other than that which is customarily made of the goods.  Here, there was no evidence that Ms. Elvig obtained the Wii for a “particular purpose” other than that for which it would customarily be used.  The damages occurred when the plaintiff was allegedly playing the Wii bowling game  (no bowling shoes required)-- in the manner and fashion represented by Nintendo in its marketing and promotion materials. In short, using the Wii for its “ordinary purpose” at the time of the accident, not for some “particular” – e.g. unusual – purpose.

Hence, summary judgment for defendant on all claims.

 

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California's proposed "green chemistry" regulation took another step closer to completion last week, as the state Department of Toxic Substance Control (DTSC) submitted the draft regulations to begin the final official rulemaking process.  The public has until Nov. 1, 2010 to make comments.  Under state law passed in 2008, the regulations must be finalized before 2011.

As readers know from previous posts, "green chemistry" is the state's effort to require that chemical products be designed in such a way as to reduce the use or generation of hazardous substances and reduce health and environmental risks, with a clear emphasis on finding alternatives to "chemicals of concern."  Two bills passed in 2008 by the legislature mandated that DTSC develop regulations for identifying and prioritizing chemicals of concern, to create methods for analyzing alternatives to existing chemicals, and to create a mechanism for regulatory response, including possible restrictions or bans on certain chemicals.  The laws also created a Green Ribbon Science Panel to advise DTSC, and provided for a Chemical Information Clearinghouse that will make chemical risk information more accessible to the public.

Earlier in 2010, the agency released a draft Safer Consumer Product Alternatives regulation, then held public meetings and workshops and took written comments.  Last week, the final, slightly revised draft, was issued. DTSC’s regulations call for identifying and prioritizing chemicals in consumer products, for conducting an alternatives assessment, and then an appropriate  regulatory response.

The proposed regulations call for creation of a proposed initial list of Chemicals under Consideration by June 1, 2012, and, from that an eventual list of Priority Chemicals by July 1, 2012. Similarly, the agency is to create a proposed initial list of Products under Consideration (because they contain the relevant chemicals) by March 1, 2013, and eventually a final list of Priority Products by December 1, 2013. In making this determination, the regulations offer a long list of relevant factors, including usage, distribution, disposal and life cycle issues, use by sensitive sub-populations, and a host of toxicity parameters.  One thing for manufacturers to watch: it is unclear how the DTSC will weigh and balance these and other factors. Especially important will be the relative emphasis on realistic, feasible exposure scenarios and dose, as opposed to theoretical risks in the lab.  A second area of potential concern here is that while the proposed regulations include a fairly detailed (and likely lengthy) petition process to challenge regulatory response decisions, they apparently do not include a similar ready process to seek removal of a chemical or product from the priority lists.  Thus, manufacturers and relevant trade associations will have to closely monitor the draft/proposed lists and jump into the comment period before the lists are finalized. Food, drugs, and a few other products are exempt, but the potential list of "consumer products" is quite large.

In the second phase involving Alternative Assessments, product makers will have to provide what may become a quite complex and expensive assessment of potential alternatives to the chemical/product, including a look at hazards, potential exposures, and life cycle.  For example, if the lead of the assessment team works for the manufacturer, the Assessment must be reviewed and verified by an independent third-party consultant.  It is unclear what data DTSC will want to see here, including whether the agency will require additional, new toxicity testing of a product or an alternative.  This may be especially onerous for smaller companies, and for newer technologies (think nano?) in which the existing body of data may not be as robust. One area for companies to watch here is the protection, or lack thereof, of trade secret information.  Ingredients in a product, and possible alternatives that make the product safer, are often a key part of intellectual property, a competitive advantage.  The regulations purport to offer some trade secret protection, but it s not crystal clear how the DTSC will apply this principle.

After receiving the Alternative Assessment, the DTSC is to decide on the best method, if any, to mitigate paternal risks with the product, ranging from no further action to recalls and bans.

The regulations offer a good reminder to double-check company knowledge and comfort with the supply chain, components and agreements, risk sharing provisions, insurance coverage, etc.

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A federal judge has dismissed a class action against Ford Motor Co. over allegedly defective ignition locks. Richard Smith, et al. v. Ford Motor Co., No. 06-00497 (N.D. Calif. 9/13/10).  The case offers an interesting take on the interplay of express warranties and fraud/failure to disclose claims.

Plaintiffs alleged that Ford unlawfully concealed information concerning the failure rate of the ignition locks in its Focus vehicles. An ignition lock is the vehicle part in which the key is inserted and turned to activate the ignition; its purpose is to start the car. When an ignition lock fails, the driver is prevented from turning the key. Following the launch of the Focus, there was a spike in warranty claims related to the ignition locks. In order to counter the relatively high warranty repair rates, Ford and its ignition lock manufacturer made manufacturing and design changes to the subject ignition locks, which resulted in a substantial decrease in the warranty repair rates. Specifically, from a warranty repair rate of 24.3 % for its 2000 model year Focus vehicles, Ford saw the rate drop to 6.9% for its 2001model year vehicles, then drop again to 3.1% for its 2002 model year vehicles.

In their complaint, plaintiffs asserted state law claims against Ford for, inter alia, Unfair and
Deceptive Acts and Practices in Violation of California’s Consumer Legal Remedies Act (“CLRA”), Cal. Civ. Code § 1750 et. seq.; and Unfair, Fraudulent, and Unlawful Practices under the Unfair Competition Law (“UCL”), Cal. Bus. & Prof. Code sections 17200-17209.

Ford moved for summary judgment, arguing that it had no legal duty to disclose the risk that the subject ignition locks would fail, and could stand on its standard three-year, 36,000 mile warranty.

The district court agreed, granting summary judgment.  The court noted first that  under California law, a manufacturer cannot be found liable under the CLRA for failure to disclose a defect that manifests itself after expiration of the warranty period unless such omission (1) is contrary to an express representation actually made by the defendant, or (2) pertains to a fact the defendant was obligated to disclose.  Plaintiffs argued there was an obligation to disclose "material" risks.  But where, as here, a plaintiff’s claim is predicated on a manufacturer’s failure to inform its customers of a product’s likelihood of failing outside the warranty period, the risk posed by such asserted defect cannot be “merely” the cost of the item's repair.  Rather, for the omission to be material, the failure must pose “safety concerns.”  In other words, under California law, a manufacturer’s duty to consumers is limited to its warranty obligations absent either an affirmative misrepresentation or a safety issue. 

Accordingly, because plaintiffs’ CLRA claim here was not based on any misrepresentation made by Ford, but rather was based on an allegation that Ford had a duty to disclose the risk its ignition locks would fail, plaintiffs’ claim, absent evidence of a safety concern, could not succeed. Plaintiffs argued that the ignition lock issue was a substantial "safety concern" because such locks can (1) prevent drivers from starting their vehicles, and (2) prevent drivers from shutting off their vehicles’ engines -- despite the fact that there were no reports that anyone has ever been injured by the failure of an ignition lock.  Plaintiffs hypothesized drivers getting stranded in unsafe locales. Ford argued that the dangers described by plaintiffs were too speculative to amount to a safety issue giving rise to a duty of disclosure.

The court agreed with Ford, noting “security” concerns are distinguishable from “safety” concerns. The dangers envisioned by plaintiffs were speculative in nature, deriving in each instance from the particular location at which the driver initially had parked the vehicle and/or the driver’s individual circumstances. Plaintiffs offered no evidence that the ignition-lock defect causes engines to shut off unexpectedly or causes individuals to stop their vehicles under dangerous conditions.

Similarly, to the extent plaintiffs’ fraudulent concealment claim was based on Ford’s alleged duty to disclose the risk of failure of the subject ignition locks, Ford was entitled to summary judgment on that claim also as there was no duty to disclose a failure rate, post-warranty, for a non-safety issue.  Again, as plaintiffs have failed to show an affirmative duty to disclose the risk of post-warranty failure of the ignition locks, plaintiffs also had not shown that a reasonable customer could have been deceived; as a matter of law, the only reasonable expectation customers could have had about the subject ignition locks was that they would function for the length of Ford’s express warranty. 

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A federal court has dismissed a putative class action accusing Johnson & Johnson Consumer Co. Inc., L'Oreal USA Inc., Kimberly-Clark Corp., and other defendants, of selling children's bath products that contain toxic and carcinogenic substances. See Herrington v. Johnson & Johnson Consumer Co. Inc., et al., No. 09-cv-01597 (N.D. Calif. 9/1/10).

Specifically, plaintiffs alleged that the defendants failed to disclose that their products contain probable carcinogens, other unsafe contaminants, and/or ingredients that have not been shown to be safe. Plaintiffs further contended that defendants deceived consumers by affirmatively misrepresenting the safety of their products.  Plaintiffs averred that they purchased the products for use on their young children, and contended that, had defendants disclosed the contaminants in their children’s products and the fact that all ingredients were not "proven safe," they would not
have purchased the products at all.

To evidence the alleged hazards, plaintiffs cited a press release and a report entitled “No More Toxic Tub,” both of which were published by an extremist anti-business group, the Campaign for Safe Cosmetics. In the report, the Campaign points to trace amounts of chemicals such as formaldehyde allegedly in defendants’ products.

They sued for alleged violations of California’s false advertising statute, Cal. Bus. & Prof. Code §§ 17500, et seq.; California’s Unfair Competition Law (UCL), Cal. Bus. & Prof. Code §§ 17200, et seq.; and California’s Consumer Legal Remedies Act (CLRA), Cal. Civ. Code §§ 1750, et seq.; and
various other state unfair and deceptive trade practices acts, as well as making common law claims for misrepresentation; fraud; and breach of warranties.  Plaintiffs noted they intended to move for certification of a nationwide class and various subclasses.

Defendants filed a motion to dismiss.  They first argued that plaintiffs did not have standing to sue
because they cannot show that they have suffered a concrete, actual injury-in-fact. Plaintiffs responded that they pleaded two injuries sufficient to confer standing: “(1) risk of harm to their children resulting from their exposure to carcinogenic baby bath products; and (2) economic harm resulting from the purchase of these contaminated, defective bath products.”

The court rejected this plaintiff argument, noting that plaintiffs did not cite controlling authority that the “risk of harm” injury employed to establish standing in traditional environmental cases in some states applies equally to what is, at base, a product liability action. To the extent that an increased risk of harm could constitute an injury-in-fact in a product liability case such as this one, in any event, plaintiffs would have to at lease plead a credible or substantial threat to their health or that of their children to establish their standing to bring suit.  But plaintiffs did not allege such a threat. They made general statements about the alleged toxicity of various chemicals, but did not allege that the amounts of the substances allegedly in defendants’ products have caused harm or create a credible or substantial risk of harm.  {Fundamental principle of toxicology - dose matters.}  Plaintiffs did not plead facts sufficient to show that a palpable risk exists. In fact, plaintiffs' own pleading noted that the Consumer Product Safety Commission (CPSC) has stated that, although the presence of certain chemicals “is cause for concern,” the CPSC is merely continuing “to monitor its use in consumer products.”  Seemed a far cry from substantial risk.

The court found this case analogous to Koronthaly v. L’Oreal USA, Inc., 2008 WL 2938045 (D.N.J.), aff’d, 2010 WL 1169958 (3d Cir. 2010), which we posted on before, and which was dismissed on standing grounds. There, the plaintiff was a regular user of the defendants’ lipstick, which, according to another report by the same Campaign group, contained lead.  The plaintiff alleged that she had been injured “by mere exposure to lead-containing lipstick and by her increased risk of being poisoned by lead.”  However, she did not complain of any current injuries. The district court concluded, and the Third Circuit affirmed, that the plaintiff’s allegations of future injury
were “too remote and abstract to qualify as a concrete and particularized injury.” Id. at *5.

The court here also held that the various counts failed to state a claim. For example the fraud-related claims failed to plead, as required by Federal Rule of Civil Procedure 9(b), “the who, what, when, where, and how of the alleged fraud.” See Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106 (9th Cir. 2003).  While plaintiffs tried to argue that their consumer fraud act claims are different from common law fraud, the Ninth Circuit has held that Rule 9(b) applied to a plaintiff’s claims under the CLRA and UCL when they were grounded in fraud.  Also, plaintiffs did not not plead the circumstances in which they were exposed to the alleged false statements. Nor did they plead which of these alleged misrepresentations they relied on in making their purchase of products.  Again, plaintiffs cited In re Tobacco II Cases, 46 Cal. 4th 298 (2009), to argue that they were not required to allege which representations they specifically saw. That case was factually distinguishable on many grounds.  And, in any event, to the extent In re Tobacco II provides that to establish UCL standing, reliance need not be proved through exposure to particular advertisements under some unique factual circumstance, the case does not stand for, nor could it stand for, a general relaxation of the pleading requirements under Federal Rule 9(b).

Similarly, plaintiffs made the general allegation that defendants engaged in unfair business acts or practices but did not allege facts suggesting that consumers have suffered an injury based on the defendants’ alleged conduct. Thus, for the same reasons they lacked Article III standing, they failed to state a claim for those types of claims as well. 

The court gave plaintiffs leave to try to file an amended complaint.

 

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The Consumer Product Safety Commission, aided by Health Canada, has not been able to identify any link between new technology diapers and reports of alleged diaper rash-like injuries in users. CPSC says it looked into nearly 4,700 reports of diaper rash from April to August, 2010, but cannot identify a "scientific connection.”

Readers may recall that we posted about plaintiffs who have sued the Procter & Gamble Co. in a proposed national class action, alleging that new Pampers diapers containing “Dry Max” technology is causing rashes and "chemical burns" in some infants. See Clark, et al. v. Procter & Gamble Co., No. 10-301 (S.D. Ohio, 5/11/10).  What was most interesting for our readers, perhaps, is the fact that this litigation was apparently spurred by the social networking site, Facebook, where some parents have been blaming the new diapers for rashes. This has spread not only word of the incidence of a possible problem, but also the non-scientific, non-expert attribution of causation.

The CPSC said the on-line activism was part of what prompted them to try to get to the bottom of the alleged diaper issues. But it now has reported that the review has not identified any specific cause linking Dry Max diapers to diaper rash. CPSC notes that nearly 85 percent of the complaints came in May and then dropped off significantly -- which, MassTortDefense notes,  wouldn't make sense if the diapers actually were causing problems.

As part of its technical evaluation, staff from each agency considered certain characteristics of the diaper, including the materials used, the construction of the diaper, and heat and moisture retention issues.  In addition, CPSC staff reviewed clinical and toxicological data found in published, peer-reviewed medical literature. CPSC also critically reviewed data submitted by Procter & Gamble and the results of a human cumulative irritation patch study conducted by P&G in May 2010. Further, chemistry, toxicology and pediatric medicine information provided by Health Canada was reviewed by CPSC.

Both agencies say they will continue to evaluate consumer complaints related to Pampers Dry Max diapers and will provide parents with updated information if this assessment of no link somehow changes. Parents and caregivers were advised to seek the attention of a medical professional if they have any concerns about adverse health reactions to any baby product.  But most babies exhibit diaper rash at least once in their lifetime. At any given moment, more than 250,000 babies will experience a serious rash.  Diaper rash is not only very common, it is sometimes severe, regardless of the diaper used. Disposable diapers in fact have helped reduce the incidence of rash by more than 50 percent since they were first introduced in the 1960s because they pull wetness away from a baby's skin.

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The Georgia Superior Court has preliminarily approved a $6.5 million settlement between the Lowe's home improvement stores and a nationwide proposed class of drywall purchasers. Vereen v. Lowe's Home Centers Inc., SU10-CV-2267B (Ga. Super. Ct., Muscogee Cty.).

The proposed resolution of this piece of the drywall litigation would provide Lowe's gift certificates ranging from $50 to $2,000 to any consumer who purchased drywall (not just from China), as well as cash awards of up to $2,500, if the claimant can provide documentation of damages and proof of purchase. That is, plaintiffs who provide proof of purchase of drywall from Lowe's but have no proof of actual damages would receive gift cards valued up to $250. Class members unable to provide a proof of purchase would receive $50 gift cards.

Under the settlement, Lowe's also agreed to pay attorneys' fees and expenses up to 30% of the class fund, as well as $1 million to the plaintiff attorneys for administration of claims. The settlement purports to release Lowe's from all drywall claims.The Georgia court conditionally certified a settlement class and set a final fairness hearing for November 19th.

But the proposed settlement has apparently drawn objections from participants in the federal Chinese drywall multidistrict litigation, who are arguing that the settlement fund is too small and that the settlement would interfere with federal jurisdiction.  The plaintiffs' steering committee for the Chinese drywall multidistrict litigation in the Eastern District of Louisiana went so far as to move to enjoin the state court from moving ahead with the settlement, arguing that the benefit to the class is too small, and the attorneys' fees too large. Ironically, these plaintiff attorneys assert that the form of the class benefit, i.e.,  a gift card, is also improper.

The MDL lawyers assert that the parties involved in the MDL have been negotiating towards a global settlement, and allowing the state court, one-defendant settlement to go forward would simply undermine those efforts.  They called on the federal court, pursuant to the Anti-Injunction Act, to enjoin state court proceedings where, as here, it is allegedly necessary in aid of its jurisdiction or to protect or effectuate its judgments.

Readers will recall that after Hurricanes Katrina and Rita in 2005, drywall was imported from China to address a shortage of drywall required for repairs and new construction. After the drywall was installed, homeowners began to complain of smells, gas emanations, corrosion of appliances and electrical fixtures, and other alleged property damage. The lawsuits typically allege that sulfur compound levels in the drywall are too high, causing issues with air conditioning systems, electrical appliances, internal wiring, and other electrical systems in homes. Plaintiffs also allege the drywall produces a rotten egg-like stench and causes a variety of respiratory and other health problems for those who live in the affected homes.

So far, a few bench or jury bellwether trials have been completed, with mixed results.
 
 

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Earlier this month a trial court in New York denied class certification purchaser of Snapple beverages who complained that drinks labeled “All Natural” are somehow misleading because they contain high fructose corn syrup.  See Weiner v. Snapple Beverage Corp., (S.D.N.Y. 8/3/10).

Off and on, we have commented on the growing and alarming trend for plaintiffs lawyers to concoct consumer fraud class action claims against products, even when consumers were not injured and got basically what they paid for, because of some alleged ambiguity in the label or old-fashioned puffing.

Snapple Beverage Corporation was founded in New York’s Greenwich Village in 1972. Snapple began selling and marketing its teas and juice drinks in the late 1980s. In marketing its beverages, Snapple focused on, among other things, flavor, innovation, and humor. Snapple became known for its quirky personality and funny advertising, as well as its colorful product labels and beverage names. For instance, Snapple’s television advertisements featured, among other things, Snapple bottles dressed in wigs and hats, singing in a Backstreet-esque “boy-band,” running with the bulls (hamsters with cardboard horns) in Spain, and performing synchronized swimming.

When Snapple entered the beverages market in the late 1980s, it avoided putting preservatives, which were then commonly found in some similar beverages, in its teas and juice drinks. Snapple was able to do so by using a “hot-fill” process, which uses high-temperature heat pasteurization to preserve products immediately before bottling. Snapple also used 16-ounce glass bottles instead of aluminum cans or plastic. Hence the term on their label "All Natural."

From their inception, Snapple’s beverages were sweetened with high fructose corn syrup.  HFCS is made from corn ( a natural product last time we checked), and its primary constituents are glucose and fructose, the sugars that comprise table sugar and honey (which also sound pretty natural). It is undisputed that Snapple disclosed the inclusion of HFCS in the ingredient list that appears on the label of every bottle of Snapple that was labeled “All Natural.”

But plaintiffs alleged that they paid a price premium for Snapple beverages as a result of the “All Natural” labeling, and that Snapple’s “All Natural” labeling was misleading because Snapple had HFCS.  They brought a class action on behalf of all people who purchased Snapple in New York.  The FDA is reportedly looking at whether high fructose corn syrup may be considered a natural ingredient, but the court didn't need that guidance to dispose of this bogus class claim.

The court focused on the Rule 23(b)(3) predominance inquiry which tests whether proposed classes are sufficiently cohesive to warrant adjudication by representation. The predominance requirement is met only if the plaintiff can establish that the issues in the class action that are subject to generalized proof, and thus applicable to the class as a whole, predominate over those issues that are subject only to individualized proof.  The issues in turn are determined by the causes of action and defenses to them.  Plaintiffs' main claim was for alleged deceptive acts or practices in the conduct of any business, trade or commerce under N.Y. Gen. Bus. L. § 349. Generally, claims under § 349 are available to an individual consumer who falls victim to misrepresentations made by a seller of consumer goods through false or misleading advertising.

New York's § 349 does not require proof of actual reliance. But the plaintiff must show that the defendant’s material deceptive act caused the injury. In addition, a plaintiff must prove actual injury to recover under the statute.  The court noted that proof of actual injury in this case is bound up in proof of damages, or by how much plaintiffs have been harmed. Only by showing that plaintiffs in fact paid more for Snapple beverages as a result of Snapple’s “All Natural” labeling could plaintiffs establish the requisite elements of causation and actual injury under § 349.

The court concluded that plaintiffs had not proposed a suitable methodology for establishing the critical elements of causation and injury on a class-wide basis. Without a reliable methodology, plaintiffs had not shown that they could prove at trial using common evidence that putative class members in fact paid a premium for the beverage. Because individualized inquiries as to causation, injury, and damages for each of the millions of putative class members would  predominate over any issues of law or fact common to the class, plaintiffs’ § 349 claim could not be certified under Rule 23(b)(3).

In support of their contention that causation and injury were susceptible to generalized proof on a class-wide basis, plaintiffs relied on the expert report of Dr. Alan Goedde, an economist.  In his report, Goedde proposed two “approaches” for determining the purported price premium attributable to Snapple’s “All Natural” labeling: (1) a “yardstick” approach, which would use “class-wide economic data and standard economic methodologies” to “compare the price of products labeled ‘All Natural’ to similar products which do not have ‘All Natural’ labeling;” and (2) an “inherent value”  approach, which would analyze unspecified “studies and market research” to gather “data that can be used to determine the increased value, standing alone, that a product realizes due to the perception of that product being natural.”

The court found Goedde’s testimony unreliable. The witness did not demonstrate in adequate detail how his proposed “approaches” would be used to develop an empirical algorithm to determine, on a class-wide basis, whether there was a price premium as a result of Snapple’s “All Natural” labeling and, if so, how such a premium could be quantified. For example, he did not identify the products to which Snapple should be compared. He did not explain how his approach would isolate the impact of the “All Natural” labeling from the other factors that purportedly affect the price of Snapple and its competitors. He failed to take into account that there was no uniform price for Snapple beverages during the class period, and thus did not explain how his approach would account for the various prices that putative class members actually paid in determining injury
on a class-wide basis.

Goedde relied on two internal Snapple marketing strategy documents to support his alternate hypothesis that Snapple’s “All Natural” label allowed it to command a premium in the marketplace. Yet he did not review the deposition transcripts of Snapple’s witnesses or any of the other  documents produced by Snapple, which would have provided critical context for these documents.

The court accurately spotlighted the common plaintiff tactic in these kinds of cases: the failure to
invest sufficient time and effort to develop a reliable methodology to support an expert opinion at the class certification stage.  Although the court thought plaintiffs correct in arguing that Goedde need not “implement” or fully “test” his methodology at the class certification stage, an expert must still provide sufficient detail about the proposed methodology to permit a court to determine whether the methodology is suitable to the task at hand.

Without Goedde’s testimony, plaintiffs offered no evidence that a suitable methodology is available to prove the elements of causation and actual injury on a class-wide basis. Individualized inquiries would therefore be required in order to determine whether class members in fact paid a premium for Snapple beverages, and whether any such premium was attributable to the “All Natural” labeling. This would require, among other things, an examination of each of the millions of class members’ Snapple purchases, which the evidence showed were made in different locations, at different times, and for different prices, over the nearly eight-year class period.

One further issue of note is class definition.  The court found that plaintiffs failed to show how the potentially millions of putative class members could be ascertained using objective criteria that were administratively feasible. Plaintiffs - typically  - suggested that after certification, the court could require simply that class members produce a receipt, offer a product label, or even sign a declaration to confirm that the individual had purchased a Snapple beverage within the class period. The court labeled this suggestion "unrealistic." Plaintiffs offered no basis to assume that putative class members retained a receipt, bottle label, or any other concrete documentation of their purchases of Snapple beverages bearing the “All Natural” description.  Indeed, putative class members were unlikely to remember accurately every Snapple purchase during the class period, much less whether it was an “All Natural” or diet beverage, whether it was purchased as a single bottle or part of a six-pack or case, whether they used a coupon, or what price they paid. Soliciting declarations from putative class members regarding their history of Snapple purchases would invite them "to speculate, or worse."

However beloved Snapple may be, said the court,  there is no evidence to suggest that its consumers treat it like a fine wine and remove and save its labels.

 

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The South Carolina Supreme Court last week vacated a $31 million verdict for a minor injured in a Ford Bronco rollover accident.  Branham v. Ford Motor Co., 2010 WL 3219499 (S.C. 8/16/10).  The case raises a number of interesting points for our readers.

This was a product liability action involving a Ford Bronco II.   Hale was driving the vehicle with several children as passengers, including her daughter seated in the front passenger seat.  No one was wearing a seat belt.  Hale admittedly took her eyes off the road and turned to the backseat to ask the children to quiet down. When she took her eyes off the road, the Bronco veered towards the shoulder of the road, and the rear right wheel left the roadway. She responded by over-correcting to the left, which allegedly led the vehicle to roll over.

Plaintiff, the parent of one of the injured passengers, sued. The case against Ford was based on two product liability claims, one a defective seat belt sleeve claim, and the other, a “handling and stability” design defect claim related to the vehicle's alleged tendency to rollover.  The jury returned a verdict of $16,000,000 in actual damages and $15,000,000 in punitive damages.

The trial court had dismissed the strict liability claim regarding the seat belt on the basis that the sleeve was not defective as a matter of law. But the negligence claim shared with the strict liability claim the element that the product be in a dangerous condition unreasonably dangerous. The trial court should thus have dismissed it too, the supreme court said.

The court also found that the closing argument of Branham's counsel was designed to and likely did inflame and prejudice the jury. The closing argument relied heavily on inadmissible evidence to pump up the punitives claim in requesting that the jury punish Ford.  This closing argument invited the jury to base its verdict on passion rather than reason, and the supreme court found that it denied Ford a fair trial.

But the more interesting part of the case related to Ford's two-fold argument that: (1) Branham failed to prove a reasonable alternative design pursuant to the risk-utility test; and (2) South Carolina law requires a risk-utility test in design defect cases to the exclusion of the consumer expectations test. 

The court found that plaintiff had produced sufficient evidence of a feasible alternative design to get to a jury.  But, while the consumer expectations test may fit well in manufacturing defect cases, the court agreed with Ford that the test is ill-suited in design defect cases. It thus held that the exclusive test in a products liability design case is the risk-utility test, with its requirement of showing a feasible alternative design.

The very nature of feasible alternative design evidence entails the manufacturer's decision to employ one design over another. This weighing of costs and benefits attendant to that decision is the essence of the risk-utility test.  The court noted that this approach is in accord with the current Restatement (Third) of Torts.  The court noted that the Third Restatement effectively moved away from the consumer expectations test for design defects, and towards a risk-utility test.  While the feasible alternative design inquiry is the core of the risk-utility balancing test in design defect cases, the court went out of its way to note that a jury question is NOT created merely because a product can be made safer. There is a longstanding principle that a product is not in a defective condition unreasonably dangerous merely because it “can be made more safe.” 

 The court sent the case back for a new trial.

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U.S. Senate negotiators apparently reached an agreement last week on food safety legislation in order to have it ready for the full Senate to consider when lawmakers return from the summer recess.

The group that negotiated the framework for the new Senate version of the Food Safety Modernization Act included Tom Harkin, D-Iowa; Mike Enzi, R-Wyo.; the bill's authors Dick Durbin, D-Ill., and Judd Gregg, R-N.H.; and lead co-sponsors Christopher Dodd, D-Conn., and Richard Burr, R-N.C.

The bill would require facilities that manufacture, process, pack, or hold food to have in place risk-based preventive control plans to address identified hazards and prevent adulteration.  It requires importers to verify the safety of foreign suppliers and imported food. It would give the FDA additional resources to hire new inspectors and requires FDA to inspect food facilities more frequently. The bill gives the FDA authority to order a mandatory recall of a food product if the food will cause serious adverse health consequences or death and a company has failed to voluntarily recall the product upon FDA’s request. It has provisions to enhance surveillance systems to detect food-borne illnesses.

Significantly, this version does not include language banning BPA, as originally demanded by Sen. Feinstein.  Her prior insistence, despite a lack of scientific evidence supporting such a ban, was one of the major logjams for the bill. She says she still plans to introduce an amendment to ban BPA from children’s products as soon as the bill arrives on the Senate floor.  Clearly, an abrupt and unnecessary ban on packaging containing BPA would affect consumer ability to find nutritious, valuable, and shelf-stable foods and beverages. The proposed ban runs counter to the fact that BPA has been used for over 30 years to improve the safety and quality of food and beverages, including by providing protective coating for cans. The overwhelming scientific evidence points to the conclusion that at current human exposure levels, BPA is not toxic. What is in fact occurring is that anti-chemical activists are simply manipulating consumers’ fears, and opportunistic politicians are jumping in.

 

 

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The Michigan Court of Appeals ruled last week that two top Toyota executives do not have to give depositions in a personal injury lawsuit involving the death of a Flint, Mich., woman whose vehicle allegedly suddenly accelerated and struck a tree. See Alberto v. Toyota Motor Corporation, No. 296824 (Mich. Ct. App.,  8/5/10).

Plaintiff filed this wrongful death action and claimed that decedent drove a 2005 Toyota
Camry at a speed of less than 25 miles per hour when the vehicle suddenly accelerated to a speed in excess of 80 miles per hour. Plaintiff also asserts that decedent attempted unsuccessfully to apply the vehicle’s brakes, but the vehicle struck a tree, went airborne, struck another tree; plaintiff’s decedent sustained fatal injuries.

Plaintiff noticed the video depositions of Yoshimi Inaba, defendant’s Chairman and Chief
Executive Officer, and Jim Lentz, defendant’s President and Chief Operating Officer, and defendant moved in response for a protective order to prevent the depositions because neither Mr. Inaba nor Mr. Lentz participated in the design, testing, manufacture, warnings, sale, or distribution of the 2005 Camry, or the day-to-day details of vehicle production.  Thus neither officer had unique
information pertinent to issues in the case.  The trial court denied the protective order, and defendant appealed.

This appeal presented the question whether Michigan should formally adopt the apex
deposition rule in the corporate context. As used by other state and federal courts, the apex
deposition rule provides that before a plaintiff may take the deposition of a high-ranking or
“apex” government official, the plaintiff must demonstrate that: (1) the government official or officer possesses superior or unique information relevant to the issues being litigated, and (2)  information cannot be obtained by a less intrusive method, such as by deposing lower-ranking persons. See, e.g., Baine v Gen Motors Corp, 141 F.R.D. 332, 334-35 (M.D. Ala. 1991).  Courts have applied the apex deposition rule not to shield high-ranking officers from discovery, but rather to sequence discovery in order to prevent litigants from deposing high-ranking government officials as a matter of routine procedure before less burdensome discovery methods are attempted. See, e.g., Sneaker Circus, Inc. v. Carter, 457 F Supp 771, 794 n. 33 (E.D.N.Y. 1978).

Courts have reasoned that giving depositions on a regular basis would impede high-ranking government officials in the performance of their duties, and thus contravene the public interest. See, e.g., Union Savings Bank v. Saxon, 209 F. Supp. 319, 319-320 (D.D.C. 1962). In essence, the apex deposition rule prevents high-ranking public officials from being compelled to give oral depositions unless a preliminary showing is made that the deposition is necessary to obtain relevant information that cannot be obtained from another discovery source or mechanism. Baine, 141 F.R.D. at 334-336.

Premised on similar reasoning, several federal appellate and district courts have extended
application of the apex deposition rule to high-ranking corporate executives. Generally, these
cases hold that before a high-ranking corporate executive may be deposed, the plaintiff must
establish that the executive has superior or unique information regarding the subject matter of the
litigation, and that such information cannot be obtained via a less intrusive method, such as by
deposing lower-ranking executives, etc. See, e.g., Salter v. Upjohn Co., 593 F.2d 649, 651 (5th Cir.
1979); Lewelling v Farmers Ins. of Columbus, Inc., 879 F.2d 212, 218 (6th Cir. 1989); Thomas v.
Int’l Business Machines, 48 F.3d 478, 482-484 (10th Cir. 1995); Mulvey v. Chrysler Corp, 106 F.R.D.
364, 366 (D.R.I. 1985); Evans v. Allstate Ins. Co., 216 F.R.D. 515, 518-519 (N.D. Okla. 2003).

Some state courts, including California and Texas, have also adopted the apex deposition rule
in the corporate context. For example, in Liberty Mut. Ins. Co. v. Superior Court, 10 Cal. App. 4th
1282; 13 Cal. Rptr. 2d 363 (1992), the California Court of Appeals, relying on federal decisions
adopted the apex deposition rule in the corporate context and held that the potential deponent, the company President and Chief Executive Officer, could not be deposed absent a showing that the officer had “unique or superior personal knowledge of discoverable information.” Id. at 1289.

The court here adopted the apex deposition rule in the public and private corporate context as consistent with Michigan’s broad discovery policy, which allows a trial court to control the timing and sequence of discovery for the convenience of parties and witnesses and in the interests of
justice. Recognizing that the highest positions within a business entity rarely have the specialized
and specific first-hand knowledge of matters at every level of a complex organization, courts
have adopted the apex deposition rule in the corporate context to: (1) promote efficiency in the
discovery process by requiring that before an apex officer is deposed it must be demonstrated
that the officer has superior or unique personal knowledge of facts relevant to the litigation, and (2) prevent the use of depositions to annoy, harass, or unduly burden the corporate parties.

The rule does not mean that an apex or high-ranking corporate officer cannot be deposed under any circumstances. The rule is to ensure that discovery is conducted in an efficient manner and that other methods of discovery have been attempted before the deposition of an apex officer is conducted.

Adopting the apex deposition rule in the corporate context does not shift the burden of proof, but
merely require the party seeking discovery to demonstrate that the proposed deponent has unique
personal knowledge of the subject matter of the litigation and that other methods of discovery
have not produced the desired information.  It is invoked only after the party opposing discovery has moved for a protective order and has made a showing regarding the lack of the proposed deponent’s personal knowledge and that other discovery methods could produce the required information. In other words, after the party opposing the deposition demonstrates by affidavit or other testimony that the proposed deponent lacks personal knowledge or unique or superior information relevant to the claims in issue, then the party seeking the deposition of the high-ranking corporate or public official must demonstrate that the relevant information cannot be obtained absent the disputed deposition, said the court of appeals.

Here, the record reflected that Mssrs. Inaba and Lentz had only generalized knowledge of Toyota’s alleged unintended acceleration problems, but had no unique or superior knowledge of or role in designing the subject vehicle or in implementing manufacturing or testing processes.

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In 2008, as readers know, the CPSC was granted extensive new regulatory authorities and mandates to on consumer product safety issues through the Consumer Product Safety Improvement Act (CPSIA).   So what's next? The Commission recently completed a strategic planning process intended to help align resources with agency priorities to meet what it sees as the key challenges moving into the next decade.

The CPSC is for only a short time longer accepting comments on a new draft of its 2011–2016 strategic plan.  As globalization and technological advances expand the range of products on the market, the risks and opportunities associated with these advancements make the challenge of overseeing and regulating the thousands of product types all the more complex, says CPSC. Some risks include the growth of global supply chains that assemble products across a vast web of interconnected geographies, the difficulty of identifying product hazards among hundreds of thousands of containers entering US ports, and the new ways in which the public receives product information through the Internet and other media sources.

The revised plan details CPSC efforts to set consumer product safety priorities, efficiently identify and respond to product hazards, improve public outreach efforts, and raise awareness of potential product risks. The plan grew out of interviews and focus groups with 76 internal and external stakeholders to obtain feedback on the CPSC’s performance and how the agency can improve in the future (these individuals and groups included a cross-section of diverse stakeholders: consumer organizations, industry associations, the CPSC headquarters staff, the CPSC field staff, other federal agencies, and states’ attorneys general).

One goal of the plan is to find ways the CPSC can reduce the number of unsafe imported products entering the U.S. marketplace, such as by strengthening its bilateral and multilateral relationships with foreign regulators and manufacturers. The draft also states that CPSC wants to improve its response time for removing hazardous products from the market. 

A third major aspect of the plan relies on the new public product safety database, which is scheduled for launch in March 2011.  The database will allow consumers and others to submit reports of alleged harm in a Web-based, publicly search-able format to the CPSC. The database is to be designed with the needs of multiple types of users in mind. Creation of the database is being guided by a series of public hearings, focus groups, and joint workshops with CPSC staff to determine how manufacturers, retailers, and consumer advocates expect to use the database and how they think it should work. The new system is supposed to make it simple for consumers, industry representatives, health officials, and any other member of the public to report safety incidents and view publicly reported incident information that the CPSC has amassed on a particular consumer product safety concern.

We reported earlier this year on the notice of proposed rulemaking that would establish a publicly available consumer product safety information database. As we have noted at MassTortDefense, CPSC still needs to develop a rigorous and timely process for addressing false and inaccurate reports-- those that will scare consumers, harm business, and generate no additional safety gains. The commission needs to employ means to prevent the submission of fraudulent reports of harm while not discouraging the submission of valid reports. CPSC also needs to think about specific disclaimers it should make with regard to the accuracy of the information contained in the public database, and not put any governmental imprimatur on voluntary data that has not been verified. A sufficient time period should also be allocated for manufacturers to evaluate and respond to any proposed report.
 

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A federal court last week refused to dismiss most claims by a putative class challenging health claims in vitaminwater beverage labeling. Ackerman v. Coca-Cola Co., CV-09-0395 (E.D.N.Y., 7/21/10).

Here at MassTort Defense we have warned companies about the dangers of consumer fraud class actions and highlighted some of the many ridiculous, far-fetched, beyond belief claims that plaintiffs make about being misled about some product.  This one is near the top of the list. Plaintiffs allege that the name, "vitaminwater," along with a description of the vitamins in the water are somehow deceptive because they supposedly mislead people to believe that the beverages do not have sugar or calories in them. Plaintiffs are not alleging that vitaminwater doesn't have water or doesn't have vitamins or that the particular vitamins in vitaminwater fail to provide the benefit claimed. Rather, they claim that vitaminwater’s labeling and marketing are misleading because they "bombard" consumers with a message that supposedly draws consumer attention away from the significant amount of sugar in the product. About the sugar? The FDA-mandated label on each bottle bears the true facts about the amount of sugar per serving.

(The opinion also rejected defendant's argument that the claim was expressly and/or impliedly preempted by statutes and regulations preventing states from imposing labeling requirements that are different from those imposed by the FDA.)

The complaint alleged claims of unlawful business acts and practices in violation of California Business and Professions Code (“Cal. BPC”) § 17200 et seq. (“Unfair Competition Law” or “UCL”); Cal. BPC § 17500 et seq. (“False Advertising Law” or “FAL”); and California’s Consumers Legal Remedies Act, Cal. Civ. Code § 1750 et seq. (“CLRA”); (2) unfair business acts and practices in violation of California UCL; (3) fraudulent business acts and practices in violation of California UCL; (4) misleading and deceptive advertising in violation of California FAL; (5) untrue advertising in violation of California FAL; (6) unfair methods of competition or unfair or fraudulent acts or
practices in violation of § 1770(a)(7) of the CLRA; (7) deceptive acts or practices in violation of
New York General Business law (“GBL”) § 349; (8) false advertising in violation of New York
GBL § 350; (9) violation of New Jersey Consumer Fraud Act (“NJCFA”), N.J.S.A. 56:8-1 et
seq.; (10) breach of an express warranty; (11) breach of an implied warranty of merchantability;
(12) deceit and/or misrepresentation; and (13) unjust enrichment.

The claims were brought on behalf of three purported classes of plaintiffs: all California Residents who purchased vitaminwater at any time from January 15, 2005 to the present, (the “California Class”); all New York residents who purchased vitaminwater at any time from January 30, 2003 to the present, (the “New York Class”); and all New Jersey residents who purchased vitaminwater at any time from January 22, 2003 to the present (the “New Jersey Class”).

So what's misleading? The court found that plaintiffs had sufficiently pleaded that the collective effect of the marketing statements was to mislead a reasonable consumer into believing that vitaminwater is either composed solely of vitamins and water, or that it is a beneficial source of nutrients.   Despite the fact that the sugar content was plain as day to anyone who would look at the label. The court found that the fact that the actual sugar content of vitaminwater was accurately stated in an FDA-mandated label on the product does not eliminate the possibility that "reasonable" consumers may be misled. The court relied on Williams v. Gerber Products Co., 552 F.3d 934 (9th Cir. 2008), for the notion that the mere fact that an FDA-mandated nutritional panel provided
accurate nutritional information on a product did not bar claims that reasonable consumers could
be misled. Reasonable consumers should not, said the court, be expected to look beyond representations on the front of the box to discover the truth from the ingredient list in smaller print on the side of the box. But unlike the Gerber case, there were no allegations here that the packaging for vitaminwater contained any false statements or pictures. As noted, plaintiffs concede that vitaminwater actually contains the vitamins the marketing says it does. And it hardly seems like an unfair burden on a "reasonable" consumer to turn from the word "vitaminwater" on one part of the bottle to the label in close proximity on the very same bottle.

As a matter of law, plaintiffs should not be permitted to move forward with a claim about the presence of an ingredient that is clearly disclosed on the Nutrition Facts label, exactly where FDA tells the manufacturer to put that information.  And, of course, the problem with allowing the claim to proceed past the motion to dismiss claim is that the case will proceed through expensive discovery to reach a stage where common sense prevails and summary judgment is granted -- if a defendant is not blackmailed into settling.  And a common thread in many of these consumer fraud class actions is the fundamental notion by plaintiffs' attorneys --implicit in their theory-- that the public must be stupid, cannot read labels, and cannot make legitimate product choices for itself. In fact, the public speaks just fine with its wallets and pocketbooks. Fortified beverages are not new and are one of the fastest-growing market segments. Consumers are indeed able to read nutrition labels and ingredient listings and make smart choices, for themselves, without the help of the plaintiffs' bar.  Contrast this case with recent comon sense decisions.

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The judge overseeing the Toyota unintended acceleration MDL has issued an order permitting expanded discovery. In Re: Toyota Motor Corp. Unintended Acceleration Marketing, Sales Practices, and Products Liability Litigation, Case No. 8:10ML2151 JVS (Order No. 5: Phase I Discovery Plan, July 20, 2010).

Judge Selna (C.D. Calif.) noted that the Phase I Discovery Plan being promulgated was intended solely to educate the parties about foundational issues involved in the litigation, including the identification of the proper parties to this litigation, the identity of relevant third-parties, organizational structure, the identify of relevant witnesses, and identity, nature, and location of relevant documents. The court expects that discovery on foundational issues during Phase I will enable the parties to develop a more narrowly tailored discovery plan for subsequent phases of the litigation and to be more focused, economical and efficient in subsequent phases of discovery. In addition to the foundational information to be provided to plaintiffs by Toyota, Phase I will also provide Toyota the opportunity to obtain foundational, threshold information from plaintiffs, the class representatives, and relevant third-parties.

Phase I Discovery will last for 100 days, and the parties agreed the Phase I discovery plan needs to be coordinated to the extent feasible with related cases pending in state courts.

Under the order, the Toyota Defendants are to produce witnesses pursuant to Rule 30(b)(6) to testify concerning the twenty-one issues, including:

• organizational structure,
• the roles and responsibilities of each of the various Toyota companies with respect to the design, manufacture and sale of Toyota vehicles,
• the identity, nature, location and retention of documents related to the design, evaluation, manufacture, and testing of the ETCS system and any modifications or adaptations of the ETCS system for Toyota vehicles,
• the identity of the persons and departments involved in the design, evaluation, testing and manufacture of the ETCS and its components,
• the identity, nature, location and retention of documents related to information Toyotas has received about speed control, surge, and SUA events in Toyota and Lexus vehicles, including specifically warranty records, customer complaints, claims and lawsuits,
• procedures employed for investigating and responding to complaints of unintended acceleration by owners or operations of any Toyota vehicles, and
• the internal decision-making process by the Toyota Defendants about what and when to inform Toyota customers, governmental agencies and the public about SUA events and the identities of the persons and departments involved in that decision-making process and the identity of the persons and departments involved in that process.

The court ruled that during this litigation the parties must endeavor to avoid duplicative depositions or repetitive questions and to avoid deposing any witness more than once on the same subject matter. But it held off on ruling on Toyota’s position that no Toyota witness deposed during Phase I
would be deposed again in subsequent phases of this litigation on the same subject matter, except by agreement of the parties. Plaintiffs did not agree with Toyota’s position.

Plaintiffs are to provide completed Plaintiff Fact Sheets and Class Representative Fact Sheets, including the production of any documents responsive to the fact sheets. Fact Sheet Responses to information requests are deemed interrogatory responses pursuant to FRCP 33 and may be treated as such at time of trial, under the order. Responses have to set forth all information known or reasonably ascertainable to the party and/or their counsel. The parties are obligated to make a reasonable search and diligent inquiry for information or documents responsive to the request.
Fact Sheet Responses to document requests and the production of documents are deemed responses and production under FRCP 34. 

Additionally, the Toyota Defendants shall be permitted to conduct inspections of the subject vehicles.  Plaintiffs and class representatives have to identify whether the subject vehicle exists, and if so, its current location, general condition, and vehicle identification number, if known.  The parties agreed that vehicle inspections would be permitted commencing in Phase I. The protocol for vehicle inspections will apparently be determined on a case-by-case basis. 

 

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Sometimes, manufacturers have to wonder, what good does a warning do if the courts won't require people to read and heed the warning given?

Harley Davidson is an iconic American product manufacturer. In 1903, William S. Harley and Arthur Davidson made available to the public the first production Harley-Davidson® motorcycle. The bike was built to be a racer, with a 3-1/8 inch bore and 3-1/2 inch stroke. The factory in which they worked was a 10 x 15-foot wooden shed with the words "Harley-Davidson Motor Company" crudely scrawled on the door.

William and Arthur would likely be scratching their heads over a recent ruling denying the company's summary judgment motion on a failure-to-warn claim in a suit filed after a motorcycle crash. Steven Morris v. Harley-Davidson Motor Co., et al., No. 3:09-cv-74 (M.D. Ga.).

Plaintiff alleged that the rear tire of his motorcycle failed, resulting in a crash that killed plaintiff’s wife and left plaintiff seriously injured. Plaintiff contended that the defendants (including the tire company) failed to provide an adequate warning regarding the dangers of overloading the motorcycle. With a full tank of gas weighing 31 pounds, the plaintiff's Ultra Classic’s Gross Vehicle Weight Rating (GVWR) allowed for an additional 420 pounds of weight capacity for the rider, any passenger, cargo, and accessories. Plaintiff, who weighed 250 pounds, was with his wife, who weighed 204 pounds, riding as a rear passenger. Plaintiff was also pulling a trailer.

When plaintiff purchased the Ultra Classic, he was provided with an owner’s manual, which contained warnings and instructions regarding the Ultra Classic. Specifically, the Owner’s Manual warned against exceeding the GVWR; that exceeding these weight ratings can affect stability and handling, which could result in death or serious injury; explaining that GVWR is the sum of the weight of the motorcycle, accessories, and the maximum weight of the rider, passenger and cargo that can be safely carried.  It tells the owner that the GVWR is shown on the information plate located on the frame steering head.

The court found it significant that the weight of the trailer was not listed in the components of the GVWR, but that was because the Owner’s Manual also warned against pulling a trailer, ever: “Do not pull a trailer with a motorcycle. Pulling a trailer can cause tire overload, reduced braking efficiency and adversely affect stability and handling, which could result in death or serious injury.”  That is exactly what happened, according to plaintiff!

Plaintiff admitted he never read the Owner’s Manual. But in addition to the warnings in the Owner’s Manual, there were also warnings on the Ultra Classic. One warning was located inside the storage compartment on the back end of the Ultra Classic, over the rear wheel, and behind the passenger’s seat, and the Ultra Classic also contained an information plate on the steering head, which listed the Ultra Classic’s GVWR, recommended tire pressures, and other information.  Plaintiff testified that he did not see these warnings either.

Harley-Davidson contended that plaintiff’s failure to warn claim failed as a matter of law because he did not read the warnings in the Owner’s Manual or the warnings on the Ultra Classic.  The court construed  the claim as not relating to the substance of the warning, but the procedure, the method by which the information was communicated.  The court concluded that plaintiff contended that he never read the warnings because Harley-Davidson failed to communicate them adequately. Failure to read a warning does not bar recovery when the plaintiff is challenging the adequacy of the efforts of the manufacturer or seller to communicate the dangers of the product to the buyer or user, found the court.

Failure to communicate an adequate warning involves such procedural questions as location and presentation of the warning. The court found that it was a jury question whether or not the manufacturer was negligent in failing to place a warning in such position, color and size print or to use symbols that would adequately convey the information. Thus, based on the present record, said the court, a reasonable fact-finder could conclude that Harley-Davidson failed to place useful load information regarding the Ultra Classic where a user would likely see it.

But, even accepting the substance/procedure distinction, the only evidence the court focused on concerning the alleged inadequacy of the warnings was plaintiff's self-serving testimony. A plaintiff should not be able to create an issue of fact on the procedural aspects of the warning simply by saying, "I didn't see it, so it must have been inadequate." Where was the genuine issue of fact?  Where was the proof that the vehicle's Owner's Manual is not the right place to put a warning about safe operation of the vehicle.    Bottom line - there can be no genuine issue of fact when an admittedly adequate warning is placed in the Owner's Manual and the owner never opens the manual. Where is the genuine dispute about warnings right on the motorcycle itself? Where was the proof of where else the manufacturer was supposed to put a warning?

 

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A federal judge has issued an opinion explaining her Daubert and summary judgment rulings in a case brought by a consumer who alleged he contracted lung disease from the fumes of microwave popcorn. Newkirk et al. v. ConAgra Foods Inc., No. 2:08-cv-00273 (E.D. Wash. 7/2/2010).

Readers of MassTortDefense may be familiar with the so-called "popcorn lung" litigation in which plaintiffs have alleged they contracted a series of diseases, including Bronchiolitis obliterans, from inhaling the chemical diacetyl which had been used in the artificial butter on microwave popcorn.  Most of the claims have been made by workers with alleged industrial-level exposures on a daily basis in popcorn factories several years ago.  There are, however, a handful of cases by consumers claiming they somehow had sufficient exposure in their homes to have the same respiratory injuries.  These latter cases raise significant issues of general and specific causation, arising from the central tenet of toxicology: the dose makes the poison.  The studies relied on by plaintiffs noted that the cumulative exposure to diacetyl was correlated with chronic effects on lung function in plant workers.

Plaintiff Newkirk claimed that the natural and artificial butter flavoring in ConAgra's Act II Butter and Act II Butter Lovers popcorn products caused him severe and progressive damage to the respiratory system, extreme shortness of breath, and reduced life expectancy.  He claimed that he ate between five and seven bags of ConAgra's popcorn every day for more than a decade.

The motions centered around plaintiff's burden to prove causation. Plaintiffs in toxic tort cases must establish both general and specific causation. Golden v. CH2M Hill Hanford Group, Inc., 528 F.3d 681, 683 (9th Cir.2008). Evidence supporting general causation addresses “whether the substance at issue had the capacity to cause the harm alleged.” In re Hanford Nuclear Reservation Litigation, 292 F.3d 1124, 1133 (9th Cir.2002). Specific causation, by contrast, concerns whether a particular individual suffers from a particular ailment as a result of exposure to the substance. Defendants challenged plaintiff's proof of both under Daubert.

Plaintiffs retained Dr. Egilman to offer an opinion on general causation, as well as to examine Mr. Newkirk, diagnose him, and offer an opinion regarding the specific cause of his condition. The expert opinion testimony of Dr. Egilman was the plaintiffs’ primary evidence supporting general causation. (All of the Newkirks’ other causation expert witnesses assumed that general causation already has been established.)  He opined that,  “There is no known safe level of diacetyl exposure. Existing scientific studies also suggest that levels of diacetyl exposure below and around 1 ppm can cause BO and other respiratory illnesses.”

The court found, however, that Dr. Egilman's attempt to analogize kitchen to industrial exposures failed. He offered no sufficient basis or methodology for support for the conclusion that there is no important (medically relevant) qualitative difference between the vapor from butter flavoring slurry in a mixing vat in a popcorn plant and the vapor from butter flavoring that is emitted from microwave popcorn in the home. There was nothing to support Dr. Egilman’s conclusions that were at the heart of this case: that the vapors emitted from a microwave popcorn bag contain the same proportion of chemicals or in sufficient doses or that all of the substances in the two instances are identical. In other parts of his reports and testimony, the court found, Dr. Egilman relied on some existing data, mostly in the form of published studies, but drew conclusions far beyond what the study authors concluded.

Or, Dr. Egilman manipulated the data from those studies to reach misleading conclusions of his own. Slip opin. at 25. For example, he relied on statements by a Dr. Cecile Rose, on a patient (and another consumer plaintiff), Mr. Watson, who allegedly contracted disease from popcorn fumes. But this was in the nature of a single case report, and in it even Dr. Rose did not assert that her conclusions could be extrapolated to other consumers in the absence of publication or peer review; Dr. Egilman acknowledged that Dr. Rose did not publish the exposure levels measured in Mr. Watson’s home -- so no such comparison was possible.  Dr. Rose herself qualified her conclusions: “It is difficult to make a causal connection based on a single case report. We cannot be sure that this patient’s exposure to butter flavored microwave popcorn from daily heavy preparation has caused his lung disease.” 
 

The expert also relied on testing conducted by Dr. John Martyny in a kitchen (not of a consumer), despite that doctor's own reflections that the methodology underlying the work could not support extrapolating to general causation for a broader group of consumers.  The expert also relied on animal studies. Expert opinion relying on animal studies to reach an opinion on causation in humans is usually admissible only when the expert explains how and why the results of the animal toxicological study can reliably be extrapolated to humans. General Electric Co. v. Joiner, 522 U.S. 136, 143-45 (1997).  Dr. Egilman offered no such analytical bridge between the animal studies finding harm from high levels of diacetyl exposure to lab rats and his conclusion that those studies demonstrate that diacetyl exposure causes decreased lung function in humans. He offered no sufficient explanation for how and why the results of those studies could be extrapolated to humans, let alone low-dose consumer contexts.

Without Dr. Egilman's testimony to support causation, the plaintiffs' other expert witnesses couldn't establish this element either.

Note also that the court excluded Dr. Egilman's "legal conclusions" from his expert report and affidavits, since the witness was no more capable than the fact-finder to draw such a conclusion. See Nationwide Transp. Fin. v. Cass Info. Sys., 523 F.3d 1051, 1059-60 (9th Cir.2008) (expert witness cannot give an opinion as to her legal conclusion, i.e., an opinion on an ultimate issue of law). For example, Dr. Egilman tried to opine that about what the defendant "knew" and "failed to warn" consumers. This is another useful precedent against plaintiffs' mis-use of the conduct "expert" who provides mere legal conclusions and invades the province of the jury.

(Dechert is involved in the diacetyl litigation, but not this case.)

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 A federal court has dismissed a proposed class action against PepsiCo Inc. alleging that consumers were somehow being misled to believe that the company's Cap'n Crunch's Crunch Berries breakfast cereal contain real fruit.  Roy Werbel v. PepsiCo Inc., No: C 09-04456 SBA (N.D. Cal. 7/1/2010).

Here at MassTortDefense we have railed against the trends in consumer fraud class actions, as plaintiff lawyers seek class status for alleged economic-only harm claims, when they find some word or image in advertising that they can quibble about or argue is somehow ambiguous to a client.  No one is really harmed; no one is misled; no one is defrauded.  The theories of the case make a mockery of common sense and personal responsibility. But, hey, fees may be available. This case is part of an appropriate response to such claims.

Cap'n Crunch debuted in 1963, and Crunch Berries came along in 1967. The Cap'n was drawn by the same guy that created Dudley Do-Right, George of the Jungle, and Moose and Squirrel (Rocky and Bullwinkle.)  Perhaps some of our readership will remember the original commercials featuring the canine Sea Dog, who sailed with the Cap’n on his ship, The Good Ship Guppy. The crew was tasked with keeping the cereal safe from the Cap’n’s nemesis, Jean LaFoote, the Barefoot Pirate.  Trivia question: what is the Cap'n's full name?  See below.

Plaintiff Roy Werbel brought the putative class action against defendant on behalf of consumers who allegedly were misled into believing that “Cap’n Crunch’s Crunch Berries” cereal derives some of its nutritional value from real berries or fruit.  On the package, immediately below the product name is a product description, which states: “SWEETENED CORN & OAT CEREAL.”  The display panel also depicts a ship’s captain in cartoon form standing behind a bowl of cereal, and holding a spoonful of multi-colored Crunch Berries. Plaintiff alleged that the colorful Crunchberries [sic] on the box conveyed only one message: that Cap’n Crunch "has some nutritional value derived from fruit.”  Although the product contains strawberry juice concentrate, that ingredient allegedly is for flavoring only.  According to plaintiff, the only reason that the front display panel on the Cap’n Crunch cereal box refers to “berries” is “to lead consumers to believe that the Product contains nutritional content derived from fruit.”

Plaintiff alleged statutory violations under California’s Unfair Competition Law (“UCL”), Cal. Bus. & Prof.Code § 17200, et seq., False Advertising Law (“FAL”), id. § 17500, et seq., and Consumer Legal Remedies Act (“CLRA”), Cal. Civ.Code § 1750, et seq., along with common law causes of action for intentional misrepresentation and breach of express and implied warranty. Claims made under these statutes are governed by the “reasonable consumer” test which focuses on whether “members of the public are likely to be deceived.” Williams v. Gerber Prods. Co., 552 F.3d 934, 938 (9th Cir. 2008) (citing Freeman v. Time, Inc., 68 F.3d 285, 289 (9th Cir. 1995)).

In response to the theory that members of the public were likely to be deceived into believing that Cap’n Crunch derives nutrition from actual fruit by virtue of the reference to Crunch Berries, the court gave a one word conclusion: "Nonsense."   It was obvious from the product packaging that no
reasonable consumer would believe that Cap’n Crunch derived any nutritional value from
berries. As an initial matter, the term “Berries” was not used alone, but always was preceded by the
word “Crunch,” to form the term, “Crunch Berries.”  Even the image of the Crunch Berries showed four cereal balls with a rough, textured surface in hues of deep purple, teal, chartreuse green and bright red. These cereal balls do not even remotely resemble any naturally occurring fruit of any kind we have ever seen; there are no pictures or images of any berries or any other fruit depicted on the Cap’n Crunch cereal box.  

Moreover, there were no representations that the Crunch Berries are derived from real fruit or are nutritious because of fruit content. To the contrary, the packaging clearly stated that product is a “SWEETENED CORN & OAT CEREAL.” In short, no reasonable consumer would be deceived into believing that Cap’n Crunch has some nutritional value derived from fruit. 

The warranty claim, that defendant allegedly warranted that Cap’n Crunch “contains berries” and “was a substantially fruit-based product deriving nutritional value from fruit,” was deemed "frivolous." No such claim was made expressly or impliedly anywhere on the Cap’n Crunch packaging or marketing material cited by plaintiff.

Case dismissed, with NO leave to amend to try to salvage some treasurer from nothing.  The Cap'n lives on.

Trivia answer: In May 2007 Cap'n Crunch's full name was revealed as Captain Horatio Magellan Crunch.

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Last week, the California Assembly’s Committee on Environmental Safety and Toxic Materials approved the Consumer Right to Know Act, S.B. 928.  The bill passed the California State Senate last April, and is currently pending in the California Assembly’s Committee on Appropriations.

This bill would ban the manufacture, sale, or distribution of certain consumer products unless the manufacturer publishes a comprehensive list of ingredients on a publicly available website and directs consumers to a web address on the product’s label. The ingredients would have to be identified with a Chemical Abstract Service (CAS) number. Additionally, they should be identified by either the Consumer Specialty Products Association Consumer Product Ingredients Dictionary (CSPA dictionary) name or the International Nomenclature Cosmetic Ingredient (INCI) name.

As originally drafted, the bill applied to all consumer products as defined by the federal Consumer Product Safety Act. As amended, the current bill applies only to “designated consumer products.” So far, those products include: air care products, automotive products, cleaning products, and polish or floor maintenance products. But, according to observers, the scope of products is under review and could be changed by the legislature before enactment.

One huge issue with the bill is its inadequate protection for legitimate intellectual property, including trade secret information.

As it is currently drafted, S.B. 928 purports to protect trade secrets from disclosure, but it also restricts this ostensible protection in several problematic ways.

• First, “hazardous” ingredients cannot be trade secrets for purposes of the bill. And the bill has an overbroad broad definition of “hazardous.” That is, a “hazardous substance” is defined as a chemical, or chemical compound, including breakdown products, identified by any state or federal agency or other governmental body or the World Health Organization as potentially having properties of eye and skin irritation, sensitization, acute or chronic toxicity, carcinogenicity, cytotoxicity, neurotoxicity, developmental or reproductive toxicity, or both, endocrine disruption or ecotoxicity.  Any chemical has the "potential" to be toxic at the wrong dose. Even substances universally regarded as safe can cause sensitization in a few hyper-allergic persons.

 

• Second, hazardous incidental ingredients—those without a technical or functional effect, which, for example, can be present in very small quantities from processing or the production of other products—cannot be protected as trade secrets.

 

• Third, if a product or its ingredients or incidental ingredients can be reverse engineered, it should not receive trade secret protection. Of course, it is impossible for manufacturers to know in advance what is capable of being reversed engineered for the purposes of disclosing ingredients.

Such disclosure of all chemical ingredients in products may lead to final product manufacturers being placed in the awkward situation of asking suppliers to divulge ingredient information, unique combinations of ingredients, and/or formulas that are patented, proprietary, or considered trade secrets. Many times these formulas are provided to final product manufacturers only under confidentiality agreements. The legislation, in those cases, would appear to require manufacturers to violate those confidentiality agreements by disclosing chemical ingredient information.

In addition, the bill requires that a manufacturer complete a complicated and unworkable formal process to have product information protected as a trade secret. This includes a showing of how secrecy leads to value, the ease of duplication if disclosure is made, how the chemical identity relates to how the chemical is made, how the manufacturer maintains secrecy, and how hard it is to reverse engineer the product. Most importantly, this includes disclosure of the basis for the manufacturer’s determination that its ingredients are not hazardous. That is, prove the negative. 

Finally, if the state Department of Toxic Substances Control (DTSC) determines that the product is not deserving of trade secret protection for any number of listed reasons, including request from the public, the government can affirmatively disclose the product information. In order to prevent disclosure, the manufacturer will have 30 days to file for an injunction. That is an unfair and unworkable time frame.

A coalition of business interests led by the California Chamber of Commerce is opposing the bill on the grounds it increases costs to consumers and will expose confidential business information.  It fears that the definition of product will be expanded "to include everything under the California sun."

The bill would also eliminate trade secret protection after six years unless the manufacturer renews its claim. There is no apparent purpose for such a sunset provision on a trade secret claim other than to burden and place additional expense on the manufacturer. Finally, the bill provides no protections against private rights of action, including actions that may arise under California consumer fraud laws.

We could go on, but isn't that enough reason to conclude the bill strikes the wrong balance?

 

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The Eleventh Circuit recently  affirmed a judgment for defendant Evenflo Co. in a suit by a plaintiff who had alleged that the car seat manufacturer was responsible for her son's autism. Hendrix v. Evenflo Co., 2010 WL 2490760 (11th Cir., 6/22/10).

Plaintiff alleged that her son sustained traumatic brain injuries when a child restraint system manufactured by Evenflo allegedly malfunctioned during a minor traffic accident. Hendrix further alleged that those brain injuries caused the son to develop autism spectrum disorder (“ASD”). The district court excluded testimony from two of Hendrix's expert witnesses that the accident caused the ASD, concluding that the methods used by Hendrix's experts were not sufficiently reliable under Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993). See Hendrix v. Evenflo Co., Inc., 255 F.R.D. 568 (N.D.Fla. 2009). The lower court then granted partial summary judgment to Evenflo on Hendrix's ASD claim, determining that without the excluded testimony there was no reliable evidence to support Hendrix's theory that the accident caused the ASD. Hendrix voluntarily dismissed, with prejudice, her remaining damages claims and filed a notice of appeal.

Hendrix's experts relied primarily on the controversial differential etiology method to link the child's traumatic brain injury to his ASD diagnosis. Differential etiology, said the court, is a medical process of elimination whereby the possible causes of a condition are considered and ruled out one-by-one, leaving only one cause remaining. It is a questionable extension of the method by which doctors diagnose a disease into the area of what caused the disease.

The Eleventh Circuit has previously held that, when applied under certain circumstances that it thinks will ensure reliability, the differential etiology method can provide a valid basis for medical causation opinions. The reliability of the method must be judged by considering the reasonableness of applying the differential etiology approach to the facts of this case and the validity of the experts' particular method of analyzing the data and drawing conclusions therefrom. According to the court, a reliable differential etiology analysis is performed in two steps. First, the expert must compile a comprehensive list of hypotheses that might explain the set of salient clinical findings under consideration; the issue at this point in the process is which of the competing causes are generally capable of causing the patient's symptoms. See Clausen v. M/V New Carissa, 339 F.3d 1049, 1057-58 (9th Cir.2003). Second, the expert must eliminate all causes but one.

With regard to the first step, the district court must ensure that, for each possible cause the expert “rules in” at the first stage of the analysis, the expert's opinion on general causation is derived from scientifically valid methodology.  Hollander v. Sandoz Pharm. Corp., 289 F.3d 1193, 1211 (10th Cir.2002); Siharath v. Sandoz Pharms. Corp., 131 F.Supp.2d 1347, 1362-63 (N.D.Ga.2001). This is because a fundamental assumption underlying differential etiology is that the final, suspected cause must actually be capable of causing the injury. Thus, here, the experts' purported use of the differential etiology method will not overcome a fundamental failure to lay the scientific groundwork for the theory that traumatic brain injury can, in general, cause autism.

The Eleventh Circuit has distinguished cases in which the medical community generally recognizes that a certain chemical or product can cause the injury the plaintiff alleges from those in which the medical community has not reached such a consensus. In the second category of cases, the district court must apply the Daubert analysis not only to the expert's methodology for figuring out whether the agent caused the plaintiff's specific injury, but also to the question of whether the drug or chemical or product can, in general, cause the harm plaintiff alleges. Thus, the district court must assess the reliability of the expert's opinion on general, as well as specific, causation.  In this regard, the court (like most) rejects the “post hoc ergo propter hoc fallacy" which assumes causality from temporal sequence; a mere temporal relationship between an event and a patient's disease or symptoms does not allow an expert to place that event on a list of possible causes of the disease or symptoms. Case studies and clinical experience, used alone and not merely to bolster other evidence, are also insufficient to show general causation.

Here, none of the medical textbooks and epidemiological studies submitted by the expert came close to providing useful evidence of a definitive causal link between traumatic head injuries and autistic disorders, and none provided even marginal support for plaintiff's theory of a relationship between abnormal cerebral spinal fluid pressure and problems with cerebellum pressure, leading to autism. For example, the text chapter listing the known etiological factors involved in ASD does not mention acquired trauma in the perinatal brain.

Plaintiff also attempted to sidestep the deficiencies in the medical literature by focusing on the expert's experience and training. Merely demonstrating that an expert has experience, however, does not automatically render every opinion and statement by that expert reliable. The witness must explain how that experience leads to the conclusion reached, why that experience is a sufficient basis for the opinion, and how that experience is reliably applied to the facts. The trial court's gatekeeping function requires more than simply “taking the expert's word for it.”

Judgment for defendant affirmed.

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The Natural Resources Defense Council brought suit last week against the FDA for allegedly failing to take timely action in response to its petition asking the agency to ban the chemical bisphenol A. NRDC v. Sebelius, D.C. Cir., No. 10-1142 (filed 6/29/2010).

NRDC is one of a number of advocacy groups who allege that this important chemical, used to make polycarbonate plastics in water bottles and epoxy resins used to line cans containing food, causes harmful health effects, particularly to infants and children, including early puberty, reproductive abnormalities.

However, both the scientific process and the public interest are better served by allowing the FDA to complete its ongoing review of the science surrounding the safety profile of BPA -- at its own pace.  Just this January, the U.S. Department of Health and Human Services and the FDA made it clear that BPA has not been proven to harm children or adults.  EPA released its bisphenol A Action Plan in March 2010. Importantly, the agency clearly indicated that it does not intend to initiate regulatory action under TSCA at this time on the basis of human health concerns.

This observation is consistent with a draft assessment issued by FDA in 2008, and the scientific conclusions of many other government regulatory agencies around the world. In January 2010, the German Federal Institute for Risk Assessment (BfR, Bundesinstitut für Risikobewertung) wrote, “Following careful examination of all studies, in particular the studies in the low dose range of bisphenol A, BfR comes to the conclusion in its scientific assessment that the normal use of polycarbonate bottles does not lead to a health risk from bisphenol A for infants and small children. BfR is not alone in this assessment. The European Food Safety Authority (EFSA) and the U.S. Food and Drugs Administration (FDA) share this opinion. Japan, which has conducted its own studies on bisphenol A, does not see any need for a ban either.”
 

In January 2010, FDA Deputy Josh Sharfstein was quoted as noting the FDA does support the use of baby bottles with BPA because the benefits of sound infant nutrition currently outweigh the known risks from BPA. Nevertheless, and perhaps not surprisingly, the California Assembly passed legislation last week to ban the use of bisphenol A in children's food and drink containers beginning in 2012.  The bill passed by a vote of 43-31 vote. The Toxics-Free Babies and Toddlers Act (S.B. 797) moves to the state Senate for approval, since the Senate initially passed a different version early last month.

The bill provides that if the state Department of Toxic Substances Control begins to regulate the chemical through its “green chemistry’’ initiative, S.B. 797 would be repealed.  In the meantime, the law would would limit the level of BPA in baby bottles, toddlers' cups, and food and drinking containers.  Infant formula manufacturers would have until July, 2012, to stop using BPA in the coatings used to line their metal containers.

 

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In an interesting products/fire case, the Texas Supreme Court confirmed last week that a plaintiff's expert must explain or disprove alternative causation theories to establish plaintiff's causation theory. See Wal-Mart Stores Inc. v. Merrell,  No. 09-0224  (Tex. 6/18/10).

Plaintiffs' decedents died from smoke inhalation in the bedroom of their rented home. When police officers arrived, they found in the living room a badly burned recliner, a damaged pole-style floor lamp, and other furniture covered in soot and smoke. There were candles, melted wax, an ashtray, and smoking paraphernalia throughout the house, including ash trays, a "bong," and marijuana cigarette butts. The fire marshal declared the fire accidental and of unknown origin. Then, plaintiffs brought wrongful death and survival claims against Wal-Mart, alleging that a halogen lamp in the apartment, purchased from Wal-Mart, caused the fire.

Merrell’s expert, Dr. Beyler, attributed the fire to “nonpassive failure" of the lamp igniting the recliner below it.  He opined that the lamp’s halogen bulb exploded, sending burning glass shards onto the recliner, which smoldered for several hours. Beyer admitted there were possible other mechanisms.  But he purported to rule out smoking materials as the cause because none
were found in the immediate “area of origin” of the fire. He also purported to rule out the candles as the cause of the fire because, had the candles been the source of ignition, the candle wax on the
table allegedly would not have survived the exposure.

Wal-Mart’s expert, John Lentini, testified that the more likely cause of this fire was careless disposal of smoking materials.

Wal-Mart contended on appeal that even if Beyler’s testimony was properly admitted, it constituted no evidence of causation because his opinion lacked factual substantiation and therefor was too
conclusory.  Specifically, Wal-Mart contended that Beyler’s testimony did not show that the lamp was more likely to have caused the fire than any other obvious potential sources.

The general rule here is that opinion testimony that is conclusory or speculative is not relevant evidence, because it does not tend to make the existence of a material fact more probable
or less probable. Such conclusory statements cannot support a judgment. 

The Court conducted a careful review of the record, reminding readers how important the details, nuances, language of expert reports and testimony can be, especially in close cases. While much attention is given to the support the expert has for the chosen theory, equal attention should be given to the expert's attempt to rule out other possible mechanisms.

The Court concluded that Beyler did not really answer why a burning cigarette could not have caused the fire. He dismissed as irrelevant the fact that post-mortem toxicology reports revealed that the decedents had been smoking the very night of the fire because, according to Beyler, that
evidence did not provide data relevant to the investigation of causes available in the area of
origin.  But, relating to the recliner, it was unexplained why not having found evidence of burnt cigarettes right there was significant when there was likewise no evidence of charred or exploded glass either in the recliner or anywhere else in the house -- which was his adopted theory. So, while Beyler did undertake to eliminate one potential cause of the fire that might otherwise seem on a par with the lamp theory, the melted candle wax, he provided no coherent explanation for why lit smoking materials could not have been the source.

An expert’s failure to explain or adequately disprove alternative theories of causation makes his or her own theory speculative and conclusory. See Gen. Motors Corp. v. Iracheta, 161 S.W.3d 462, 470 (Tex. 2005) (expert eliminated the obvious possibility that fuel or vapors from the tank filler neck ignited only by saying so, offering no other basis for his opinion. Such a bare opinion was not
enough.).

Causation opinion insufficient. Judgment for defendant.

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The contrast is striking.  Recently, the San Francisco Board of Supervisors voted 10-1 vote in favor of an ordinance requiring cell phone retailers in that city disclose cell phones' specific absorption rate, or SAR, to customers.

The same day, a study was published that further substantiates the safety of cell phone use.  Mobile phone base stations and early childhood cancers: case-control study, BMJ 2010;340:c3077.  The study, in the British Medical Journal, showed no link between proximity to cell phone towers and increased cancer risk to children whose mothers were pregnant while living near such towers.

The study looked at almost 7,000 children and incidence of early childhood cancers across Great Britain.  This was compared with data from Britain's four national mobile phone operators -- Vodafone, O2, France Telecom's Orange, and Deutsche Telekom's T-Mobile -- on more than 80,000 mobile phone towers used from 1996 to 2001.   The researchers found that those who developed cancer before the age of five were not more likely to have been born close to a tower than their peers. The scientists found no association between risk of cancer in young children and estimated exposures to radiofrequency from mobile phone base stations during pregnancy.

MassTortDefense notes some strengths in the study: its size and national coverage, avoiding selection and reporting bias in the choice of cases and areas for study. Also, because it focused on early childhood cancers, it avoided issues of long latency that can affect interpretation of some mobile phone studies in adults.

The study adds to a growing body of scientific research which has found no links between cell phones and cancer. Use of mobile phones has increased markedly in recent years. In the United Kingdom, the number of mobile connections has risen from just under nine million in 1997 to almost 74 million in 2007.

In light of the real science, we wonder if the ordinance will actually mislead consumers with point of sale requirements implicitly suggesting that some phones are "safer" than others based on radiofrequency (RF) emissions. In fact, all phones sold in the U.S. must comply with the Federal Communications Commission's safety standards for RF emissions.  

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We are generally hesitant to post about some of the ridiculous industry-bashing that many anti-science, anti-capitalism groups spout -- for fear of spreading their misguided word one inch farther.  But sometimes, when litigation is threatened, you just have to stop biting your tongue.

The self-proclaimed Center for Science in the Public Interest has apparently threatened to sue McDonald’s if the popular food company does not stop marketing toys with its Happy Meals.  The claim is that the toys included in the meals instill unhealthy eating habits in children.  CSPI sent a letter to McDonald's last week demanding that the company immediately pull toys from its Happy Meal children’s meals. By advertising that Happy Meals include toys, McDonald’s somehow supposedly unfairly and deceptively markets directly to children.   Advertising a small toy in a Happy Meal box is supposedly deceptive because children under the age of 8 are not advanced enough to understand the "intent" of the marketing.

Well, how wrong can one misguided group be?  Let's count the ways.  Last time we checked, in a democracy with a free market economy, product sellers were free to make their products attractive to consumers, free to advertise them, and free to market their wares with accurate and truthful statements.  A Happy Meal is advertised to contain a toy.  It does.  It has a meal, just like promised.  And as a dad, I can attest to the fact the box meal does make kids happy.  Where is the deception?  There is none. The group cites a variety of state consumer fraud acts in the letter, but not a single case supporting its preposterous legal theories -- because there aren't any. For example, the group cites the Massachusetts law (93A), but the recent case Rule v. Ford Dodge Animal Health Inc., 2010 WL 2179794 (1st Cir. 6/2/10), makes clear that there is no valid consumer claim when the customer does not suffer a traditional and real economic injury.

Next, last time we checked, very few small children were behind the wheel in the drive-through line.  Parents can decide what their kids eat.  And parents can still say "no" when little Johnny or Suzie wants burgers and fries too often. When did we cross the line from parents raising their kids to the best of their ability, to the government (regulators or the courts through a suit) determining how kids should be raised, down to what they can eat and whether they get a small toy to play with after dinner?  According to CSPI, many children will pester their parents to take them to McDonald’s.  So what?  Kids pester; that's what they do.  Parents say "no."  That's what they do.  Problem solved -- without a class action.

Next, the rabble rousers complain that the Happy Meals are slightly higher in calories than the group thinks is reasonable.  Thank goodness for the self-appointed calorie police who think that the best way to tackle the issue of weight in this country is to have the courts force all food companies to make food that looks and tastes like cardboard and is boring, anything but "happy."  How about we get kids to put down the remote control and exercise and play sports more?  Problem solved -- without the litigation.

But, cries the group, the toys build brand loyalty and send the customers back again in the future.  Since when was it an actionable wrong to actually provide your customers with a product they like so much they come back and buy it again in the future?  What kind of economy does this group want?

CSPI needs to worry more about junk science than junk food.  In fact, in my area, McDonald's heavily advertises the four-piece Chicken McNuggets Happy Meal, which includes Apple Dippers, low-fat caramel dip and 1 percent low-fat white milk.  Maybe the issue is that the parents of the CSPI members never told them "no."  Not to worry, they will soon hear it from the courts if they pursue this threatened litigation.
 

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We have posted before about legislative efforts to make it easier for U.S. consumers to sue foreign product manufacturers.

Last week the the House Subcommittee on Commerce, Trade, and Consumer Protection held a legislative hearing on H.R. 4678, the “Foreign Manufacturers Legal Accountability Act.”  The House bill  was introduced last February. The Senate's version, S. 1606, was introduced in August, 2009.

Witnesses included a representative of the Consumer Product Safety Commission, the Consumers Union,  American Association of Exporters and Importers, and a Professor from American University College of Law.

The Act would require foreign manufacturers and producers of several kinds of products to establish registered agents for service of process and to consent to jurisdiction here.  It appears to have bipartisan support, but raises a number of constitutional issues, and may not address the key issue of the enforceability of judgments handed down by U.S. courts.

Supporters of the bill note that the Hague Convention on Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters – of which the United States and many of its major trading partners, including China, are parties – provides a means of serving process on foreign manufacturers in their home countries.  However, this method can be time consuming and costly, because all the legal documents must be translated into the foreign manufacturer’s native language and then provided to a governmental central authority, which in turn attempts to serve the documents on the manufacturer. It can take many months for the central authority to serve the documents on the manufacturer.   In addition, even if a plaintiff successfully serves process on a foreign manufacturer, argue the supporters, the manufacturer will likely challenge the exercise of personal jurisdiction over it by a U.S. court. Before a U.S. court can exercise personal jurisdiction over a defendant it must consider: 1) the defendant’s purposeful minimum contacts with the state in which the court sits, and 2) fairness to the defendant of being subjected to jurisdiction in that state’s courts.  Foreign manufacturers have increasingly turned to litigating this issue to avoid being hauled into U.S. courts.

The Act would require foreign manufacturers and producers that import products into the United States to designate a registered agent who is authorized to accept service of process here in the United States. The agent would have to be registered in a state with a substantial connection to the importation, distribution, or sale of products of the foreign manufacturer or producer. CPSC, the Food and Drug Administration, and the Environmental Protection Agency would each be required to determine, based on the value or quantity of goods manufactured or produced, which foreign manufacturers and producers under their respective authority would be required to designate a registered agent. Registering an agent consistent with the Act constitutes acceptance by the manufacturer of personal jurisdiction of the state and federal courts of the state in which the agent is located.

AAEI, on the other hand, is particularly concerned about the impact H.R. 4678 would have on U.S. exporters if this bill is enacted by Congress. If the United States enacts H.R. 4678 requiring foreign manufacturers to appoint a registered agent to receive service of process, they anticipate that our trading partners will enact similar measures. It will be difficult and expensive for American exporters to maintain registered agents in all the foreign markets to which it exports. Moreover, having a registered agent in foreign markets increase the likelihood that these companies will be
subject to litigation before foreign courts in countries with legal proceedings which are less
transparent than the United States, argued AAEI.

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In a case that may impact some of the litigation rising from the Gulf Oil Spill, the Florida Supreme Court last week ruled in favor of a group of commercial fishermen who alleged damages arising from pollution in the Tamp Bay. See Howard Curd, et al. v. Mosaic Fertilizer LLC, (No. SC08-1920 Fla. 6/17/2010). The issue on appeal -- which the court took as a certified issue of great public importance -- was whether Florida law permits commercial fishermen to recover for economic losses proximately caused by the negligent release of pollutants, despite the fact that the fishermen do not own any property damaged by the pollution.

The defendant owned/operated a phosphogypsum storage area near Archie Creek in Hillsborough County. The storage area included a pond enclosed by dikes, containing waste water from a phosphate plant.  The dike gave way and pollutants were allegedly spilled into Tampa Bay.
The fishermen claimed that the spilled pollutants resulted in a loss of underwater plant life, fish, bait fish, crabs, and other marine life. They did not claim an ownership in the damaged marine and plant life, but claimed that it resulted in damage to the reputation of the fishery products the fishermen were able to catch and sought to sell.

The lower court concluded that the state statute on water pollution did not permit a claim by these fishermen for monetary losses when they did not own any real or personal property damaged by the pollution. After initially permitting the fishermen to proceed on their claims of negligence and strict liability, the lower court ultimately ruled that these claims were not authorized under the economic loss rule. The court reasoned that an action in common law either through strict liability or negligence was not permitted because the fishermen did not sustain bodily injury or property damage. The strict liability and negligence claims sought purely economic damages unrelated to any damage to the fishermen's property. Accordingly, the court further reasoned that Mosaic did not owe the fishermen an independent duty of care to protect their purely economic interests. 

The state supreme court disagreed.  The court pointed to a number of factors on the statutory claim:  it expressly protected public and private interests; it is to be liberally construed to effect the purposes set forth in the state statute and the Federal Water Pollution Control Act.  Moreover, the Florida  Legislature found and declared that escape of pollutants “poses threats of great danger and damage . . . to citizens of the state, and to other interests deriving livelihood from the state.”   Also, under the definition of statutory damages cited above, one can recover for damages to real or personal property and for damages to natural resources, including all living things. Finally, not owning property affected was not a listed defense to the cause of action in the act.

The lower court found that the economic loss rule barred the common law claims, as the fishermen's negligence and strict liability claims sought purely economic damages unrelated to any damage to the fishermen's property. Second, Mosaic did not owe an independent duty of care to protect the fishermen's expectation of profits. The supreme court found instead that neither the contractual nor products liability economic loss rule was applicable to this situation. The parties to this action were not in contractual privity. Moreover, the defendant in this case was not  a manufacturer or distributor of a defective product that has caused damage to itself.  Rather, plaintiffs brought traditional negligence and strict liability claims against a defendant who had allegedly polluted Tampa Bay and allegedly caused them injury.

Turning to the issue whether Mosaic owed an independent duty of care to protect the fishermen's purely economic interests—that is, their expectations of profits from fishing for healthy fish, the court found Mosaic did owe a duty of care to the fishermen, a duty that was not shared by the public as a whole.  The court admitted that as a general principle of common law negligence, some courts have not permitted recovery for purely economic losses when the plaintiff has sustained no bodily injury or property damage. See Union Oil Co. v. Oppen, 501 F.2d 558, 563 (9th Cir. 1974) (noting “the widely recognized principle that no cause of action lies against a defendant whose negligence prevents the plaintiff from obtaining a prospective pecuniary advantage”). The reasoning behind this general rule is that if courts allowed compensation for all losses of economic advantages caused by a defendant's negligence, a defendant would be subject to claims based upon remote and speculative injuries that it could not foresee. Such courts have concluded that the negligent defendant owes no duty to plaintiffs for such losses.

The Florida court concluded that the defendant here did owe a duty of care to these commercial fishermen, and that the commercial fishermen thus had a cause of action sounding in negligence. Under Florida law, the question of whether a duty is owed is linked to the concept of foreseeability. In the present case, the duty owed by Mosaic arose out of the nature of Mosaic's business and the special interest of the commercial fisherman in the use of the public waters. The court concluded that Mosaic's activities created an appreciable zone of risk within which Mosaic was obligated to protect those who were exposed to harm. Mosaic's business involved the storage of pollutants and hazardous contaminants. It was foreseeable, said the court, that were these materials released into the public waters, they would cause damage to marine and plant life as well as to human activity in the water.

Further, the commercial fishermen had a special interest within that zone of risk, an interest not shared by the general community, found the state supreme court.  The fishermen were licensed to conduct commercial activities in the waters of Tampa Bay, and were dependent on those waters to earn their livelihood. Mosaic's activities placed the fishermen's peculiar interests directly within the zone of risk created by the presence of its facility. As a result, Mosaic was obligated to exercise prudent foresight and take sufficient precautions to protect that interest.

As pointed out in the dissent, the majority opinion decided the case for a more narrow class than those bringing the suit -- and more narrowly than the claims they alleged. Although Curd's proposed class consisted of “all fishermen and those persons engaged in the commercial catch and sale of fish,”  the majority's decision did not extend to distributors, seafood restaurants, fisheries, fish brokers, or the like whose incomes may also have been affected by the alleged pollution. Additionally, the majority only addressed economic harm that allegedly resulted from the depletion of marine life and the resulting inability to harvest the commercial fishermen's usual yield—not from harm to reputation as alleged in the complaint. The fishermen presumably must still prove all of the elements of their causes of action, including damages.
 

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The First Circuit affirmed last week the lower court's dismissal of a putative consumer fraud class action involving a re-called heartworm medication for dogs. Rule v. Ford Dodge Animal Health Inc., 2010 WL 2179794 (1st Cir. 6/2/10).

Plaintiff, Rule, purchased two doses of ProHeart 6, a medicine for preventing heartworm in dogs, and had them administered to her dog Luke. She later filed a putative class action against Wyeth, alleging that defendant had sold ProHeart 6 without disclosing safety concerns revealed in initial testing and in subsequent use.  She alleged these concerns ultimately led Wyeth to recall the product at the FDA's request. According to plaintiff, adverse reactions were suffered by dogs after receiving ProHeart 6 during trials and in general use after the product was released. Importantly, the class representative conceded that Luke had not suffered any harm from the drug, and that Luke had not developed heartworm while using the drug.

Plaintiff's first cause of action was based on breach of the implied warranty of merchantability and the other based on the state consumer fraud statute, Mass. Gen. Laws ch. 93A. For damages on these two counts, Rule asserted that she and others similarly situated were entitled to the difference between the price they actually paid for ProHeart 6 and what it would have been worth had safety risks been adequately disclosed; for the chapter 93A count, she sought statutory damages if greater than actual damages and also trebling of damages. 

On the warranty count, the alleged unmerchantability (unfitness for ordinary use) of ProHeart 6 lay in its potential for causing harm to a dog. Rule conceded, however, that neither of the two doses injured Luke. So, while the sale to Rule may have been of an "unfit" drug, its unfitness did not give rise to any injury to Rule against which the warranty was designed to guard. Nor did she suggest that Luke became more susceptible to injury, as might be the case where one bought and installed a defective car tire that has not yet run its life. Recovery generally is not available under the warranty of merchantability where the defect that made the product unfit caused no injury to the claimant, the threat is gone, and nothing now possessed by the claimant has been lessened in value.

On the consumer fraud count, the act provides a cause of action for a plaintiff who has been injured by unfair or deceptive acts or practices. In Rule's view, she purchased Proheart 6 because of a deception (failure to disclose the risk), the product was “in reality” worth less than she paid for it (because of that undisclosed risk), and so she suffered damage measured by the difference between what she paid and what she would have paid if the risk had been disclosed. One problem with plaintiff's scenario was that she also alleged that had the risks been known, ProHeart 6 could not be sold at all, given FDA requirements.

But even assuming otherwise, Rule's suit was brought after her purchases and use of the drug, and she admitted that she got both the protection and convenience she sought and that the risk did not manifest itself in injury to her or her dog. Nor was she still holding a product that was worth less than she paid for it; she used the product up entirely and in fact suffered no economic injury at all. Indeed, her theory would not be adopted by deceived buyers whose dogs were actually injured or killed; they could seek not some modest reduction in price but the full cost of added veterinary bills and, if the dog died, its value.

So to the extent chapter 93A injury requires that a plaintiff who seeks to recover show “real” economic damages, Rule did not qualify. If, instead, a different notion of injury had sufficed - such as injury as a violation of some abstract “right” like the right not to be subject to a deceptive act that happened to cause no economic harm - then she would arguably have had a claim under chapter 93A and perhaps could obtain statutory damages.  The First Circuit observed some "tension" in the language used as between the earlier and the later state SJC decisions on the statute and especially where deception and risk are involved. However, said the court of appeals, the most recent SJC cases on point appear to have reaffirmed the notion that injury under chapter 93A means economic injury in the traditional sense.

Finally, the First Circuit addressed plaintiffs' typical policy-based argument that deceptive conduct needs to be deterred through a class action. While the alleged conduct such as that attributed to defendant needs to be deterred, that need not necessarily come from those who bought the product but were not injured.  It could be deterred by those with actual injury.
 

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A report issued last week by the Institute of Medicine (IOM) and the National Research Council (at the request of Congress) concludes that the FDA is not well equipped to handle potential problems with the food supply.  "Enhancing Food Safety: The Role of the Food and Drug Administration" notes that food-borne illnesses cause more than 300,000 hospitalizations and 5,000 deaths in the U.S each year. Food-borne diseases are caused by a variety of bacteria—such as Escherichia coli or Salmonella—viruses, parasites, or chemical residues.  

The severity of these diseases and the frequency with which they occur spurred this evaluation of how well the current food safety system protects the public’s health. While food safety is regulated by several agencies, the FDA oversees approximately 80 percent of the U.S. food supply, including all produce, seafood, and cheeses. Some food safety experts and some in the media have criticized the FDA’s food safety system and questioned whether it properly safeguards Americans from food-borne diseases. Congress asked the IOM to examine the possible gaps in the current food safety system under the purview of the FDA and to identify the tools needed to improve food safety.

Readers know that many of these food issues have led to litigation.

The IOM determined that the FDA lacks a comprehensive vision for food safety and should take a risk-based approach in order to properly protect the nation’s food. In addition, the FDA should provide standards for food inspection so that states and the federal government follow the same rigorous methods for inspections, surveillance, and outbreak investigations. Most notably, the IOM recommends that Congress take legislative action to provide the FDA with the authority it needs to fulfill its food safety mission. Americans will continue to suffer from food-borne illnesses unless the FDA reevaluates and reworks its approach to food safety management, claims the report.

The FDA, which sponsored the report, responded that through the President's Food Safety Working Group, which includes all agencies involved in food safety, it feels it is making significant progress to ensure government agencies are working seamlessly to protect the American public. But the IOM concludes that in order for the FDA to better ensure food safety, legislative and organizational changes may be necessary. Most notably, it says, Congress should consider taking legislative action to provide the FDA with the additional authority it needs to fulfill its food safety mission. Within the FDA, authority over field activities should shift from its Office of Regulatory Affairs to its Office of Foods. Such a change will ensure that responsibility lies with well-trained personnel with specialized expertise in food safety and risk-based principles of food safety management, says the IOM.

Recognizing that organizational reform will pose challenges, the report recommends that the federal government move toward the establishment of a single food safety agency to unify the efforts of all agencies and departments with major responsibility for safety of the U.S. food supply. The committee recommends establishing a centralized, risk-based analysis and data management center in order to improve efficiency and work toward a safer food supply. This center would include staff and support resources necessary to conduct rapid and sophisticated assessments of short- and long-term food safety risks and to ensure that the comprehensive data needs to support the risk-based system are met.

With regard to legislative changes, Senator Harkin (D-Iowa), head of the Health, Education, Labor and Pension Committee is trying to bring legislation overhauling the food safety system to the Senate floor later this month. He is pushing S. 510, the Food and Drug Administration
Food Modernization Act , which is co-sponsored by Sens. Dick Durbin (D-Ill.), and Judd Gregg (R-N.H.), among others.  The  bill would give the FDA new authority to track, detect, and halt contaminated food coming from either domestic or foreign suppliers. Food-handling facilities would be required to share additional information with the FDA. Inspections would be more frequent and industry would nee to construct risk-based preventive control plans. The FDA would also get new recall authority.

The House passed its own version of food safety legislation in July, 2009, as we noted.

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Plaintiffs have sued the Procter & Gamble Co. in a proposed national class action, alleging that  new Pampers diapers containing “Dry Max” technology is causing rashes and "chemical burns" in some infants. See Clark, et al. v. Procter & Gamble Co., No. 10-301 (S.D. Ohio, 5/11/10). Plaintiffs seek reimbursement for the cost of diapers, as well as for alleged medical expenses and treatment.  The plaintiffs allege that P&G knew or should have known that the diapers with Dry Max technology could harm kids' bottoms. They assert causes of action for breach of implied warranty of merchantability, breach of  implied warranty of fitness for a particular purpose, violation of consumer fraud acts, negligence, unjust enrichment, and strict liability.  Then came word that the Consumer Product Safety Commission would review consumer complaints regarding Pampers with the new Dry Max technology.

P&G notes that the Dry Max technology is a significant innovation in diapers. The Dry Max technology allows the diapers to be thinner and lighter, but still absorbent.  The Proctor & Gamble website notes the safety of the diapers  for babies, and the heavy testing -- the product is one of the most tested diapers in the company's history. To date, there have been in excess of two billion diaper changes using the new product, with only a handful of rash complaints, none of which were shown to be caused by the type of materials in the product. In fact, the company has received fewer than two complaints about diaper rash for every one million diapers sold, which apparently is average for the diaper business and does not deviate from the number of calls received prior to Dry Max.

It is hard to imagine that common issues will predominate over the individual issues arising from causation and injury, in the putative class action. Diaper rash is very common, and sometimes severe, regardless of the diaper used. At any given moment, more than 250,000 babies will experience a serious rash. Disposable diapers in fact have helped reduce the incidence of rash by more than 50 percent since they were first introduced in the 1960s because they pull wetness away from a baby's skin. It is very common for long-time consumers of child care or personal care products to correlate a change in product style or design with an adverse effect.

What is most interesting for our readers, perhaps, is the fact that this litigation was apparently spurred by the social networking site, Facebook, where some parents have been blaming the new diapers for rashes.  This has spread not only word of the incidence of a possible problem, but also the non-scientific, non-expert attribution of causation.  Here, for example, there have actually been very few complaints to the CPSC, but the CPSC said the on-line activism was part of what has prompted them to examine the alleged diaper issues.

Sites like Facebook give consumers a bigger platform to voice their opinions and find other similarly situated individuals, and product sellers need to realize how that can spur litigation. Social media alone do not produce litigation, of course.  But from a potential liability standpoint, the social networking sites are becoming a new resource for plaintiff product liability  attorneys.   Facebook provided plaintiff attorneys potential access to thousands of product users documenting their experiences with the product.  Some even have posted relevant photographs. The diaper Facebook group apparently grew to more than 10,000 members. Such Internet activity can include product users talking about the possibility of litigation and searching for attorneys. Some members of the plaintiff bar have used on-line media to communicate with potential clients, and identify ideal class representatives.  

Defense lawyers need to recognize they can research and learn from plaintiffs' on-line activities, as well, particularly before the involvement of plaintiff attorneys. Discovery requests for
Facebook profiles, forensic examinations of computers, or, at proper times, third-party requests directly to the social networking site, may be part of their arsenal.  There may be information about named class representatives, or the class in general. After litigation is filed, some class members continue to participate in Facebook groups.  People will say things in that informal environment that they might not say in a deposition.

Of course, several advisory ethics opinions remind litigators that rules of professional responsibility apply when accessing social networks for case purposes. Contacting parties or witnesses through a “friend request” must be done in accordance with the applicable Rule of Professional Conduct.

 

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The Consumer Product Safety Commission last week announced the results of testing performed by the Lawrence Berkeley National Laboratory on allegedly defective drywall samples.  Among the findings, most of the drywall that has allegedly caused personal injury and corroded electrical components in various homes throughout the U.S. was indeed manufactured in China;  specifically,  the most reactive sulfur-emitting drywall samples were all produced in China, according to the CPSC.  The worst-testing samples of the Chinese drywall showed emission rates of hydrogen sulfide 100 times greater than non-Chinese drywall samples.

CPSC released the names of the 10 worst-performing samples, including those of Knauf Plasterboard (Tianjin) Co. Ltd. for drywall manufactured in 2005, Taian Taishan Plasterboard Co. Ltd. for drywall manufactured in 2006, Shandong Taihe Dongxin Co. for drywall manufactured in 2005, Beijing New Building Materials for drywall manufactured in 2009.  Drywall samples manufactured in the United States in the same period contained low or no detectable emissions of hydrogen sulfide, according to the agency. 

At the U.S.-China Strategic and Economic Dialogue meetings in Beijing May 24-25, U.S. officials reportedly pressed the Chinese government to facilitate a meeting between CPSC and the Chinese drywall companies whose products were used in U.S. homes, and which exhibit the emissions identified during the testing procedures. The Strategic and Economic Dialogue represents the highest-level bilateral forum to discuss a broad range of issues between the two nations.

Federal cases concerning the drywall products are coordinated in multidistrict litigation pending in the U.S. District Court for the Eastern District of Louisiana. More than 7,000 plaintiffs have claimed that Chinese-made drywall in their homes emits sulfide gases that corrode electrical wiring and/or cause personal injury such as nasal damage and other respiratory problems.  In the first trial, the court ordered Taishan Gypsum to pay $2.6 million to seven plaintiffs last April. In the second trial, the court ordered Knauf Plasterboard to pay a plaintiff family $164,000.  In re: Chinese-Manufactured Drywall Products Liability Litigation, MDL No. 2047 (E.D. La.).

Cases are also pending in state court, and a state trial court in Miami recently certified a class in this litigation. Harrell v. South Kendall Construction Corp. et al., No. 09-008401 (11th Judicial Circuit, Fla.). Following a hearing last Thursday, Judge Farina granted class certification, the first Chinese drywall case to be certified. The class consists of approximately 150 claimants who were purchasers of homes in three subdivisions of the Keys Gate community there. The class alleged that those homes were built using Chinese drywall. Defendants are home builder Kendall Construction Corp., Palm Isles Holdings LLC, broker Keys Gates Realty Inc, and supplier Banner Supply Co.

The court found that a predominating common issue in each class member's case is whether the drywall installed in his or her house was defective. The trial court found that the alleged defect, the potential to emit sulfur gases that can cause damage, is inherent in the physical characteristics of the product and thus has a uniform nature. With one supplier and one builder allegedly involved, the court distinguished the case from other product defect cases in which individual issues are typically found to predominate.

The opinion noted that differences among proof of damages has typically not defeated class certification. The court stressed that if individual class member homeowners were to file their own separate actions, the court would be confronted with a multiplicity of lawsuits that would unnecessarily burden the court system and create the risk of inconsistent rulings and contradictory judgments.

While the court was clearly influenced by the belief that the issues surrounding the allegedly defective product were "unaffected by outside variables," like the way the product was used, its analysis of predominance is quite questionable.  For example, it concluded that a common issue was whether the defective drywall damaged the homes of the putative class members, and thus that the issue of injury (whether the drywall damaged all the homes) could be proved with class-wide evidence.  The fact is that enough of the drywall was imported to damage more than 50,000 homes; yet only a small percentage of that has been observed. Thus, it may be that any number of factors may be impacting the damage drywall is or is not causing in a particular house. Moreover, it is far too simplistic to talk about the injury or "damage" being caused, when there are hotly debated issues about whether there is injury to, or the need for remediation of, non-problem drywall, insulation, flex duct, molding, encapsulated wiring, counter tops, and a whole host of house components. Similar issues will relate to the causation of corrosion of a home’s electrical wiring or AC system.  

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The Consumer Product Safety Commission has issued a notice of proposed rulemaking that would establish a publicly available consumer product safety information database.  Readers may know that Section 212 of the Consumer Product Safety Improvement Act of 2008 (‘‘CPSIA’’) amended the Consumer Product Safety Act (‘‘CPSA’’) to require the Commission to establish and maintain a publicly available, searchable database on the safety of consumer products, and other products or substances regulated by the Commission. We posted on some of the potential issues before.  Serious questions surround the potential posting of inaccurate, incomplete, or confidential information as part of the database.

The proposed rule would interpret the various statutory requirements pertaining to the information to be included in the database and also would establish provisions regarding submitting reports of harm; providing notice of reports of harm to manufacturers; publishing reports of harm and manufacturer comments in the database; and dealing with confidential and materially inaccurate
information.  The new regs would consist of four subparts:  Subpart A—Background and Definitions; Subpart B—Content Requirements; Subpart C—Procedural Requirements; Subpart D—Notice and Disclosure Requirements.

Some of the highlights: A submitter of a report of harm must affirmatively verify that he or she has reviewed the report of harm and that the information contained therein is true and accurate to
the best of the submitter’s knowledge, information and belief.  As part of verifying the report, submitters of reports of harm must indicate which category they are in (consumer,
government agency, health care professional etc.).

Proposed § 1102.12(a) would state that manufacturers who receive a report of harm transmitted from the CPSC may submit comments. Proposed § 1102.12(b) would propose that comments may be received via an on-line manufacturer portal where the manufacturer can register to submit comments on a secure nonpublic portal that will be provided through the Commission’s database. The proposal also would specify that comments may be submitted via electronic mail or regular mail. The Commission will publish a manufacturer’s comments related to a report of harm if the comment specifically relates to a report of harm, contains a unique identifier assigned to it, contains the manufacturer’s verification of the truth and accuracy of their comment (similar to the verification required of a submitter of a report of harm) as well as their consent for publication in the database. The proposed rule would require a manufacturer to affirmatively request that its comment be published and to affirmatively consent to such publication in order for the manufacturer comment to be published in the database.

CPSC says it will not publish confidential information in the database. Proposed §1102.24 explains how the Commission will define ‘‘confidential information’’ and would set forth criteria which must be followed to assert a claim of confidentiality. The Commission notes its view that most reports of harm received from consumers will not likely contain confidential information. However, where such a claim for a portion of information on a report of harm is asserted, the proposal would require affirmative statements that would assist the Commission in an evaluation of the merits of the request. The proposal would establish parameters for asserting and supporting a claim of a portion of a report of harm as confidential. For example, proposed § 1102.24(b)(3) would require an explanation on whether the asserted confidential portion of the report is commonly known or readily ascertainable by outside persons with a minimum of time and effort. Proposed § 1102.24(b)(5) would explain that the manufacturer also must support a confidentiality claim by describing how release of the information could cause competitive harm. Overall, one wonders whether the CPSC is trying to create a barrier to a valid claim of confidentiality much higher than in other contexts.

Proposed § 1102.26 would contain definitions and the process for how claims of materially inaccurate information contained in reports of harm may be asserted and how they will be evaluated. Materially inaccurate information in a report of harm means information that is false or misleading in a significant and relevant way that creates or has the potential to create a substantially erroneous or substantially mistaken belief in a database user about information in a report of harm relating to:
(i) The identification of a consumer product;
(ii) The identification of a manufacturer or private labeler; or
(iii) The harm or risk of harm related to use of the consumer product.

Written comments must be received by July 23, 2010.  It is not clear that the database plan offers adequate safeguards or assurances that the information posted will be true and accurate, will not simply lead to consumer confusion, and will not give rise to lawsuits based on a rumor repeated through the echo chamber of the Internet.  Although not as strong as we have called for here at MassTortDefense, § 1102.42 does have a disclaimer to the effect that the Commission does not guarantee the accuracy, completeness or adequacy of the contents of the Database, particularly with respect to the accuracy, completeness, or adequacy of information submitted by persons outside of the CPSC. The Consumer Product Safety Information Database will contain a notice to this effect that will be prominently and conspicuously displayed on the database and on any documents that are printed from the database.
 

 

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Sen. Dianne Feinstein (D-Calif.) announced last week that she would seek to ban the chemical bisphenol-A in food and drink containers as part of an amendment to the proposed Food Safety Modernization Act (S.510). That move has the double distinction of lacking in scientific merit and threatening to undermine the bipartisan support for the good parts of the pending bill.  The Grocery Manufacturers of America and the Chamber of Commerce had expressed support for the food safety bill, but may oppose it if the bill contains language banning the chemical. The food safety bill is expected to come up after Congress returns from its Memorial Day break.

The Senator's ill-supported approach by-passes the safety review that belongs with the FDA, and is ongoing, with a re-review assessment due in 2011. NIH has also launched a study on the safety of low level exposure to BPA.  World-wide regulatory agencies who have reviewed BPA have thus far concluded that BPA is safe for use in canned products.  The European Food Safety Authority has announced a delay in delivering its own latest BPA report, needing more time to review the body of research on the chemical.

Clearly, an abrupt and unnecessary ban on packaging containing BPA would affect consumer ability to find nutritious, valuable, and shelf stable foods and beverages.  The proposed ban runs counter to the fact that BPA has been used for over 30 years to improve the safety and quality of food and beverages, including by providing protective coating for cans. The overwhelming scientific evidence points to the conclusion that at current human exposure levels, BPA is not toxic.  What is in fact occurring is that anti-chemical activists are simply manipulating consumers’ fears, and opportunistic politicians are jumping in.

Even though there is no persuasive scientific evidence that BPA causes the type of harm the politicians speculate about, litigation is well underway in both the Western District of Missouri (MDL 1967) and the Western District of Kentucky (MDL 2137). The former involves class action suits against manufacturers of baby bottles and sippy cups. The claims include alleged violation of state consumer protection acts, fraud, breach of warranty, unjust enrichment, strict product liability, and negligence. MDL 2137, on the other hand, involves suits against an aluminum bottle manufacturer claiming that the manufacturer marketed its product as an alternative to BPA-containing plastic even though its metal bottles were allegedly lined with an epoxy resin containing BPA.  

 

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A federal court recently certified a class of Minnesota building owners in litigation over issues with plumbing systems. See In re: Zurn Pex Plumbing Products Liability Litigation, MDL No. 08-1958, 2010 WL 1839278 (D.Minn. 5/6/10).

The issue for our readers is not so much what happened, but what should have happened but did not.  I recently posted about the7th Circuit decision in American Honda Motor Co., Inc. v. Allen, 2010 WL 1332781 (7th Cir., April 7, 2010), mandating that trial courts rule on the admissibility of expert testimony at the certification stage of litigation when the testimony is critical to certification.  That is the only approach that makes any sense. Otherwise, the court risks certifying a class -- and engaging the parties in  the massive discovery and notice process that accompanies it  -- based on testimony that fails the Daubert test, is unreliable, and eventually inadmissible under the Federal Rules.  Here, the court refused to exclude the testimony of two plaintiff experts at the certification stage.  The court noted that the 8th Circuit had not yet adopted the approach of the 7th Circuit. 

Historically, potable water plumbing systems used copper pipes. In the 1990's, some companies designed plumbing systems using polybutylene plastic. After a wave of litigation involving allegedly failed polybutylene plumbing systems, defendant Zurn designed a cross-linked polyethylene plumbing system, commonly referred to as “pex,” as an alternative to polybutylene systems and copper plumbing systems. Plaintiffs were individuals who owned a home with a Zurn pex plumbing system. in several lawsuits, plaintiffs alleged that defective fittings used in the pex system caused their plumbing systems to leak resulting in damage to their properties. Plaintiffs also alleged that Zurn failed to adequately test the brass crimp fittings in their anticipated environments before marketing its product. In 2008, the Judicial Panel on Multi-District Litigation determined that the pex plumbing cases met the MDL test, and that centralization of the cases in Minnesota was appropriate.

Plaintiffs moved for certification of a class of all persons and entities that own a structure located within the State of Minnesota that contains a Zurn Pex plumbing system with brass crimp fittings.  Defendants, in turn, moved to exclude portions of the testimony of plaintiffs' experts, Dr. Wallace Blischke and Dr. Roger Staehle.  

Dr. Blischke, a statistician, performed an analysis of Zurn's warranty claims data and estimated that millions of Zurn's brass fittings will fail within the twenty-five year warranty period; he concluded that the fittings have a mean time to failure of 40 years.  Defendants offered evidence that the 40 years was based on unsupported assumption, not data.  The court admitted that as merits discovery unfolded and more information becomes available, Dr. Blischke's 40 year estimate for the mean time to failure "may or may not be admissible," but it would consider the expert testimony in support of class certification anyway and "has given such testimony proper weight."

Dr. Staehle then conducted a round of testing known as the U-bend test of brass specimens from Zurn's fittings. Defendants offered evidence that the reliability of Dr. Staehle's U-bend testing was undermined by his use of an artificially inflated level of strain, and they challenged the correctness of Dr. Staehle's calculation of the strain. The court concluded that "at this point" it would not exclude the testimony, which could be the subject of cross examination.

The certification battleground was 23(b)(3) predominance.  Defendants stressed that there were lots of possible causes of the failure of any particular plumbing system, and thus individual issues predominated.  Plaintiffs -- and here we see where the denial of a Daubert inquiry has its pernicious effect -- responded that the brass crimp fittings used in the pex plumbing system suffer from an inherent design and manufacturing defect, and that the parts were substantially certain to fail within the 25 year express warranty provided by Zurn and/or the useful life of the fittings.  And this was a set of predominating common issues, they said.  But they only get there through the testimony of the experts, not only on the merits, but on the presentation that the defects and useful life were demonstrable on a common basis through expert testimony about testing and time-to-failure.  So, for example, in certifying a warranty class for those plaintiffs whose systems had not yet failed, the court readily acknowledged being influenced by the fact that plaintiffs "allege, and intend to prove by expert testimony, that Zurn's brass crimp fittings suffer from a uniform, inherent design and manufacturing defect...."

Similarly, with regard to a class relying on a negligence cause of action, the court concluded that if plaintiffs can prove that the crimp fittings suffer from a uniform, inherent design and manufacturing defect, and that the defect is the only cause of failure in the majority of the cases, then proximate cause will not involve predominately individual determinations, and resolution of that issue would be common the class. For class certification purposes, the court was "convinced that Plaintiffs have adduced sufficient evidence to support their theory of the case."  But, of course, that evidence was arguably inadmissible expert testimony.

Since proof of reliance will likely vary among class members, and since defendants are entitled to present individualized defenses to reliance under Minnesota law, plaintiffs failed to show that the reliance component of their consumer protection claims could be proven by common evidence. Accordingly, class certification as to plaintiffs' consumer protection claims was denied.

But imagine how easy it can be to show "predominance" of common issues when your proof is unreliable, inadmissible, unscientific, expert testimony that just doesn't get screened.  Why should the gatekeeper role not impact entrance to the expensive, protracted world of a class action as much as to trial?

 

 

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The three attorneys serving as interim plaintiffs' counsel in the Toyota multidistrict litigation have filed a joint Preliminary Report, pursuant to the Court’s April 14, 2010 CMO No. 1. See  In re Toyota Motor Corp. Unintended Acceleration Marketing, Sales Practices, and Products Liability Litigation, No. 8:10-ml-02151-JVS-FMO (C.D. Cal.,  4/30/10).

Among the topics covered were many of the basic MDL structural issues, including the proposed structure and roles of designated counsel.  The parties recommended 18 attorneys to serve in leadership positions. More than 80 law firms and attorneys had filed applications by the May 3rd deadline to serve as lead counsel or in some other leadership role in this MDL.

The plaintiffs' attorneys also recommended establishment of a core discovery committee led by the co-lead counsel for the two types of cases, personal injury and economic loss.  Plaintiffs’ outlined their Core Discovery (types of information and documents, and types of discovery). Proposed core discovery  included: (i) Floor Mat,  (ii) Pedal, and (iii) Electronic Throttle systems issues. Plaintiffs' core discovery includes probing allegations of the existence of a defect in Toyota vehicles responsible for alleged sudden unintended acceleration; and the design and manufacture process for the engine throttle control system (including pedals, floor mats, electronic control systems, accelerator pedals, throttle bodies, etc.).  They also outlined proposed document discovery, as far back as the 1990s, claiming that design of that system began in the 1990s and that it was put in place in some vehicles as early as model year 1998.

Similarly, defendants outlined their proposed discovery in personal injury cases and economic loss cases. A key issue for them is the preservation of the vehicles in testable condition.

The parties offered a brief statement of the facts and legal issues, including class certification issues, standing issues, the application of the economic loss rule, choice of law, and the statute of limitations. Defendants’ specifically requested coordination with state court proceedings. There are now reportedly about 100 cases in 22 states.

Toyota has previously announced that it had retained an outside engineering and scientific consulting firm to conduct a comprehensive, independent analysis of Toyota and Lexus vehicles using the ETCS-i system (Electronic Throttle Control System with intelligence) for concerns related to unintended acceleration.

Toyota has provided members of Congress with an interim, first phase report from this expert on its evaluation of the ETCS-i system, consistent with the company’s commitment to transparency regarding the quality and safety of its vehicles

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Readers know how California's often extreme statutory and regulatory initiatives can influence toxic tort litigation.  Now comes word that California regulators last week released a proposed framework for forthcoming regulations to reduce certain chemicals in consumer products, as part of its “green chemistry” initiative.

The California Department of Toxic Substances Control’s release of an outline of the Draft Regulations for Safer Products is a second step in identifying "chemicals of concern" in California. The outline proposes guidelines for scientific and systematic prioritization of chemicals and products of concern, certification of alternatives assessment and development of DTSC’s regulatory response. Those responses may include banning substances or products, and end-of-life management issues. It also described a process manufacturers could use to evaluate the chemicals and safer have to perform an "Alternatives Assessment" for the product. Note that any public or private entity or individual may petition the Department to evaluate a chemical or a chemical and product combination during the prioritization process.

DTSC called for feedback on the outline.  The next step will be creating actual draft regulations based on the outline. The agency said that draft regulations will be released in the very near future, and that it will begin a formal rule-making process. State law requires the regulations be adopted by January 1, 2011.

California's green chemistry initiative, a statutory mandate since 2008, is an effort to identify and to reduce the use of chemicals that regulators conclude pose the greatest risk to public health and the environment. 

 

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The Coca-Cola Co. has successfully obtained summary judgment in a case alleging that the company unfairly marketed its Coca-Cola Classic soft drink as “original formula” despite allegedly having substituted high-fructose corn syrup for the ordinary table sugar it used when the drink was introduced. Judge Patrick Murphy issued an order last week in the U.S. District Court for the Southern District of Illinois.

Plaintiffs Amanda Kremers and Jason McCann, sued on behalf of themselves and a proposed class of Illinois citizens, alleging that Coca-Cola’s conduct in labeling cans and bottles of “Classic” Coke with the terms “Original Formula” constitutes a deceptive and unfair trade practice. This is because, plaintiffs contended, the “Original Formula” of Coke, which was invented in 1886, called for Coke to be sweetened using sucrose (ordinary table sugar, in essence), whereas “Classic” Coke currently is sweetened using high fructose corn syrup (“HFCS”). They alleged violation of the Illinois Consumer Fraud and Deceptive Business Practices Act (“ICFA”), and unjust enrichment.

Proposed class rep Kremers conceded at her deposition that she has known since the 1990's that “Classic” Coke contained HFCS and that “Classic” Coke is marketed as the “Original Formula” of Coke.  Kremers admitted also that she read the words “Original Formula” on a container of “Classic” Coke in the 1990s.  That was sufficient to put her on notice to inquire about her alleged claims, and that she knew or reasonably should have known of her so-called injury. Thus, her claim was barred by the statute of limitations, even with the discovery rule.

Turning to the merits of the case, the state statutory cause of action requires: (1) a deceptive act or practice by the defendant, (2) the defendant’s intent that the plaintiff rely on the deception, (3) the occurrence of the deception in the course of conduct involving trade or commerce, and (4) actual damage to the plaintiff (5) proximately caused by the deception.  To prove that element of proximate causation in a private cause of action brought under the ICFA, a plaintiff must allege that he was, in some manner, actually deceived. 

McCann’s testimony at his deposition was that he wasn't actually deceived.  He never read the key language until after he was approached by counsel for plaintiffs in this case about serving as the representative of the proposed class. Hence, he could not prove proximate causation for purposes of a claim for deceptive trade practices under the ICFA.

To establish a prima facie case of unfair trade practices under the ICFA, a plaintiff must prove that a defendant intentionally engaged in an unfair practice in the course of conduct involving trade or commerce, and that this practice proximately caused harm to the plaintiff. The court found that as a matter of law, the sales here were not unfair trade practices. The trade practices in dispute in this case were not deceptive acts (as above). No public policy of Illinois proscribed the use of HFCS as a sweetening agent in beverages and foodstuffs. The facts concerning plaintiffs' use hardly suggested they had been oppressed by Coca-Cola’s trade practices, or had been afforded the lack of meaningful choice necessary to establish unfairness.

Perhaps most importantly, McCann could not show the necessary substantial harm for an unfair trade practice, given the small amount of the product he purchased, the fact that he continued to purchase "Classic” Coke after the commencement of this suit and despite knowledge that the product contains HFCS, and because the alleged injury was one any consumer of “Classic” Coke quite easily could have avoided, by, for example, simply drinking a different soft drink or other beverage.

Although fraud is not an element of a claim for unjust enrichment under Illinois law, the Seventh Circuit nevertheless has made clear that where the plaintiff’s claim of unjust enrichment is predicated on the same allegations of fraudulent conduct that support an independent claim of fraud, resolution of the fraud claim against the plaintiff is dispositive of the unjust enrichment claim as well.

Class motion dismissed as moot.

 

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As readers know, much of the recent policy focus of the Consumer Product Safety Commission (as well as Congress) has been on the safety of products used by children. But what is a "children's product"?  The CPSC has announced it is issuing a proposed interpretive rule aimed at providing further guidance as to what constitutes a “children's product” to mitigate potential confusion among manufacturers about how to comply with the relevant new safety requirements, such as under the Consumer Product Safety Improvement Act.  The proposal would provide additional guidance on the factors that must be considered when evaluating what is a children's product. Written comments and submissions in response to this notice must be received by June 21, 2010.

Section 3(a)(2) of the CPSA (as amended by the CPSIA) defines a "children's product'' as a consumer product designed or intended primarily for children 12 years of age or younger. A determination of whether a product is a "children's product'' will be based on consideration of  four specified statutory factors, but because each of those four factors incorporates the concept of  "use'' by the child in some manner, under the proposed rule the Agency would further interpret the term "for use'' by children 12 years or younger to generally mean that children will physically interact with such products based on the reasonably foreseeable use and misuse of such product.

First factor: a manufacturer's statements about the product's intended use, including a label on such product; a manufacturer's statement that the product is not intended for children does not preclude a product from being regulated as a children's product if the primary appeal of the product is to children 12 years of age or younger. Similarly, a label indicating that a product is for ages 10 and up does not necessarily make it a children's product if it is a general use product. Such a
label may recommend 10 years old as the earliest age for a prospective user, not necessarily the age for which the product is primarily intended.

Second factor: if the product is represented in its packaging, display, promotion, or advertising as appropriate for use by children 12 years of age or younger. These representations can be express
(such as product advertising declaring that the product is for use by children 12 years of age or younger) or implied (such as product advertising showing the product being used by young children). These representations may be found in packaging, text, illustrations and/or photographs depicting consumers using the product, instructions, assembly manuals, or advertising media used to market the product. The prominence, conspicuousness, and or other emphasis given to each portrayal of a product's uses or intended users on packaging or in advertising media can be weighted differently according to which images or messages are the strongest and most obvious to the consumer at the point of purchase. For example, labeling in large, high contrast letters on the front of a package can send a stronger message than block letters in a small box on the package's side panel. Besides labeling and illustrations, a product's physical location in a retail outlet or visual associations in the pages of an on-line distributor's Web site could imply its suitability for a certain age group. The close association of a product in a store or on a Web site with other products that are clearly intended for children 12 years of age or younger could affect consumer perceptions of the intended age group for that product.

Third factor: whether a consumer product is designed or intended primarily for a child 12 years of age or younger is whether the product is commonly recognized by consumers as being intended for use by a child 12 years of age or younger. For example, traditional board and table games like chess, checkers, backgammon, playing cards, or Chinese checkers are commonly recognized as equally attractive to children and adults because the level of difficulty increases or decreases depending on the player's skill. Versions of these games, and similar games commonly considered by consumers to appeal to a general audience, are not considered children's products. However, if a manufacturer adds marketing portrayals or other features to the game or its packaging that make it more attractive to or suitable for children than a general use product would normally be, then the game could be  considered a children's product. Examples include small sizes that would not be comfortable for the average adult; exaggerated features (large buttons, bright indicators) that simplify the product's use by kids; safety features that are not found on similar products intended for adults; colors commonly associated with childhood (pinks, blues,
bright primary colors); features that do not enhance the product's utility, (such as cartoons), but contribute to its attractiveness to children 12 years of age or younger.

Fourth factor: the Age Determination Guidelines (``Guidelines'') issued by the CPSC staff in 2002, which focus on an age determination for a given product's intended user group,  The Guidelines provide information about the primary goals of play that are seen for different ages throughout childhood. For example, toddlers consistently want to mouth objects because mouthing is a primary strategy for exploration of any object at that age. Early  childhood entails lots of exploration and discovery. High levels of detail in their toys are not necessary, and toddlers like bright
colors. However, during middle childhood, children become very interested in role-playing, and they desire increasingly more realistic props during their playtime, and more realistic colors become
important. After a certain age, children do not consider the simplistic, brightly colored toys intended for toddlers to be intended for them and may find them very unappealing or even insulting. Nine to
12 year old children are interested in developing new motor skills and exercising their increasingly complex problem solving abilities. The factors that make various objects appealing to children of different ages are discussed at length in the Guidelines.

The proposed rules also offer examples in a number of product lines.

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A federal court recently sent back to China various Chinese families' product liability cases stemming from alleged melamine contamination of infant formula. See Tang v. Synutra International Inc., 2010 WL 1375373 (D. Md.).

Plaintiffs, one hundred Chinese citizens residing in China, brought suit on their own behalf as parents and on behalf of fifty-three minor children who allegedly suffered adverse health
conditions, predominantly the development of kidney stones, as a result of ingesting contaminated milk products produced by Defendants’ Chinese subsidiaries.  The principal place of business of both defendants, Synutra International, Inc., and Synutra, Inc., is in Maryland. Plaintiffs sought compensatory damages of at least $5.5 million for each child and $1.5 million for each parent, as well as a collective punitive damages award of $500 million. Defendants filed their motion to
dismiss on, inter alia,  the grounds of forum non conveniens.

In September 2008, the Chinese Administration of Quality Supervision, Inspection and
Quarantine (“AQSIQ”) initiated an emergency testing program of the country’s dairy supplies. Later that month, AQSIQ announced that certain lots of infant formula were found to have contained melamine, a chemical commonly used as an industrial component in plastics, adhesives, countertops, etc.  Melamine is not a food additive. It is not approved for human consumption.

By December 2008, approximately 300,000 Chinese infants were found to have ingested dairy products contaminated with melamine. Allegedly as a result, at least six infants have died and scores of others have required medical treatment for maladies associated with kidney damage. AQSIQ found varying amounts of melamine in sixty-nine batches of infant milk powder produced by several companies, including defendants' subs. In response to this crisis, the Chinese government, in conjunction with the China Dairy Industry Association, established a compensation program, funded by the dairy companies, that produced the contaminated milk products and totals approximately $160 million. It offered a lump-sum payment to the families of affected children, according to the extent of injury. To date, the families of approximately ninety-five percent of the injured children have reportedly accepted the remedies provided by the plan. Of those who have not, some have opted instead to bring suits in Chinese or U.S. courts.

The adequacy of the Chinese courts to adjudicate these suits was a significant point of contention between the parties; indeed, it was the critical factor of the forum non conveniens analysis in this case.

At the outset of any forum non conveniens inquiry, the court must determine whether there exists an alternative forum. The defendant bears the burden of establishing that the alternative forum is
available to all parties and that an adequate remedy is available to the plaintiff.  Although some courts conflate these issues, the availability and adequacy of the supposed forum are better seen as raising independent issues that warrant separate consideration by the court.

Ordinarily, a defendant can satisfy the availability element by showing that it is “amenable to process” in the alternative forum. Where the remedy offered by the alternative forum is so clearly inadequate or unsatisfactory that it is no remedy at all, however, the court may conclude that dismissal would not be in the interests of justice. Many courts have presumed the adequacy of the alternative forum and placed at least the burden of production on the plaintiff to establish otherwise.

Although plaintiffs here challenged both the availability and adequacy of the alternative forum to adjudicate their claims, there was no question in the court's mind that the Chinese forum was
available, since the defendant showed that it is “amenable to process” in the alternative forum.

Whether China constitutes an adequate forum was the primary issue in dispute. The dispute as to the adequacy of the Chinese forum boiled down to the competing declarations of the parties' China law experts. Defendants’ declarant opined that Chinese courts are adequate to resolve plaintiffs’ dispute and described that Chinese law provides causes of action for personal injury and products liability, a right to present evidence and argument in court, the power to compel witness testimony, and a right to appeal. Plaintiffs would be entitled to recover compensatory damages for expenses such as loss of income, related travel expenses, food subsidies, living expenses for dependents, as well as compensation for emotional damages, but not punitive damages.

Plaintiffs' experts claimed that “several volunteer milk attorneys” were summoned to a meeting held at the Beijing Bureau of Justice, a government entity, where an official demanded all attorneys to withdraw from representation on tainted-milk cases. The experts also asserted that the Chinese courts have denied litigants access to the courts, as well as the right to appeal an adverse ruling, because none of the complaints filed by contaminated-milk victims has been “either accepted or formally denied,”  resulting in the cases remaining perpetually in limbo. They also asserted that families of “seriously sickened children” receive $4,400, and “those suffering from other kidney problems” receive $292 under the government compensation scheme, and this is not “a legal remedy,” but rather “a settlement offer" made by the dairy companies,  In essence, plaintiffs asserted that the Chinese courts were deviating from normal process with respect to melamine claims and pressuring lawyers to withdraw representation of these claimants, thereby forcing the
unfortunate victims into a Hobson’s choice between pursuing futile litigation or accepting the "meager remedy" provided by the compensation program.

The court granted the motion, finding China an adequate forum.  The guiding principles included that the prospect of delay presented by the alternative forum does not typically render the alternative forum inadequate. The complaints had not yet been rejected in China. The court was not wiling to make the value judgment, on the basis of what it called limited evidence presented, that corruption in the Chinese judiciary would systematically deny access to a legal remedy there.  Courts have traditionally been reluctant to cast such aspersions on foreign judicial systems absent a substantial showing of a lack of procedural safeguards.

Second, even if the Chinese courts were not open to plaintiffs, another remedy was indisputably available to them, namely, the compensation program. While the plaintiffs characterized the
program as a “government-sanctioned settlement plan” from the companies that produced the contaminated milk products, as opposed to a legal remedy , they cited no authority for the proposition that the available remedy need be purely “legal” in nature. Regardless of whether it was enacted by the Chinese legislature or sanctioned by the judiciary, it is undisputed that the compensation program developed in China in the wake of the melamine contamination crisis was organized and sanctioned by government entities working in conjunction with the dairy industry and administered through an insurance provider.

Third, although the remedy offered by the compensation program was far less lucrative than what plaintiffs sought in the U.S., the courts have made clear, that the test is not to compare the rights, remedies, and procedures available under the law that would be applied in each forum to determine whether the law applied by the alternative forum is as favorable. 

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U.S. Consumer Product Safety Commission Chairwoman Inez Tenenbaum testified last week at a  hearing before the U.S. Senate Subcommittee on Financial Services and General Government.  She noted that her agency was preparing to staff up for 2011 in anticipation of greater enforcement efforts under the Consumer Product Safety Improvement Act of 2008.  

Tenenbaum was seeking a slight increase in CPSC's approximately $118 million funding. She testified that the budget will allow CPSC to hire 46 new full-time employees, bringing total staffing staffing levels more than 1.5 times the complement as recently as in 2008.  Tenenbaum also noted that the CPSC would work closely with small businesses to ensure that CPSIA third-party verification requirements do not become a costly burden, by dedicating a business ombudsman to address concerns.

She testified that the CPSC is currently in the process of building the Consumer Product Safety Risk Management System, a Web-based database that is supposed to change the way CPSC collects, analyzes and deploys data about regulated products. She reiterated that the system is scheduled to be up and running by March 11, 2011.

We have posted about this database before.  And we had the opportunity to hear the Chair speak on the issue at the recent DRI Products Liability Annual Meeting.  She noted she understand the level of concern about the database.  The CPSC has issued a proposed notice of rulemaking on the database, and the recent Open Commission Briefing/Meeting on Public Database - Notice of Proposed Rules-making is available. To concerns from the manufacturing community about whether the database might allow for unconfirmed reports about their products, she noted that the CPSC does not want to publish inaccurate or confidential information. Every report of harm that is submitted will be reviewed by a member of the agency’s staff and, further, every report that identifies a manufacturer will be sent to that manufacturer, generally within 5 business days. She stressed the creation of a non-public manufacturer portal to speed receipt of and replies to these reports. She also stated that the agency will protect proprietary and confidential information from the companies.

While those goals are worthy, CPSC needs to develop a rigorous and timely process for addressing false and inaccurate reports-- those that will scare consumers, harm business, and generate no additional safety gains. The commission needs to employ means to prevent the submission of fraudulent reports of harm while not discouraging the submission of valid reports. CPSC also needs to think about specific disclaimers it should make with regard to the accuracy of the information contained in the public database, and not put any governmental imprimatur on voluntary data that has not been verified. A sufficient time period should also be allocated for manufacturers to evaluate and respond to any proposed report.

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We previously posted about a case in which a federal judge threw out  a purported class action against L’Oreal USA Inc. and Procter & Gamble Distributing LLC that accused the companies of selling Cover Girl and Maybelline lipsticks containing lead. Koronthaly v. L’Oreal USA, Inc., et al., No. 07-5588 (D.N.J. July 29, 2008).

The U.S. Court of Appeals for the Third Circuit has affirmed the decision. Koronthaly v. L'Oreal USA,  No. 08-4625 (3d Cir. 3/26/10).

Koronthaly purchased lipstick products manufactured, marketed, and distributed by appellees L’Oreal. and P&G. She alleged these lipstick products contained lead. The FDA does not regulate the presence of lead in lipstick, but Koronthaly asserted that the lipstick contained lead in greater amounts than permitted in candy by the FDA. Koronthaly alleged that she did not know when she purchased the products that they contained any lead, and when she learned of the lead content she immediately stopped using them. Moreover, had she known of the lead she claims she would not have purchased the products.

To prove constitutional standing, said the court of appeals, a plaintiff must demonstrate (1) an injury-in fact that is actual or imminent and concrete and particularized, not conjectural or hypothetical, (2) that is fairly traceable to the defendant’s challenged conduct, and (3) is likely to be redressed by a favorable judicial decision. Summers v. Earth Island Inst., 129 S. Ct. 1142, 1149 (2009). In this case, standing foundered on the first requirement, injury-in-fact, said the court.

Koronthaly’s argument that she was misled into purchasing unsafe lipstick products was belied by an FDA report finding that the lead levels in the defendants’ lipsticks were not dangerous and therefore did not require warnings. Moreover, Koronthaly conceded that she has suffered no adverse health effects from using the lipsticks. Koronthaly therefore had to fall back on only a subjective allegation -- that the trace amounts of lead in the lipsticks were unacceptable to her, not an injury-in-fact sufficient to confer Article III standing. See Lujan v. Defenders of Wildlife, 504 U.S. 555, 564 (1992)(injury-in-fact must be accompanied by “continuing, present adverse effects”); Georgine v. Amchem Prods., Inc., 83 F.3d 610, 636 (3d Cir. 1996) (Wellford, J., concurring) (“Fear and apprehension about a possible future physical or medical consequence . . . is not enough to establish an injury in fact.”).

Furthermore, to the extent that Koronthaly contended that the injury-in-fact was the loss of her “benefit of the bargain,” she mistakenly relied on contract law, said the court. See Rivera v. Wyeth-Ayerst Labs., 283 F.3d 315, 319-21 (5th Cir. 2002) (plaintiff, whose only claim was that she “would like her money back” for having purchased a product that failed to make certain disclosures and allegedly was defective, did not have an injury-in-fact sufficient to create standing). Her lipstick purchases were not made pursuant to a contract involving lead levels, and therefore she could not have been denied the benefit of any bargain. Absent any allegation that she received a product that failed to work for its intended purpose or was worth objectively less than what one could reasonably expect, Koronthaly had not demonstrated a concrete injury-in-fact.

The dismissal was affirmed. In the lipstick wars, attention now will focus on Stella v. LVMH Perfumes and Cosmetics USA Inc., N.D. Ill., No. 1:07-cv-06509, dismissed 4/3/09; which is currently on appeal before the Seventh Circuit.
 

 

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The Seventh Circuit issued a very interesting opinion on the interplay of class certification and Daubert issues. American Honda Motor Co., Inc. v. Allen, 2010 WL 1332781 (7th Cir., April 7, 2010).  Specifically, the defendant asked the court to resolve whether the district court  must conclusively rule on the admissibility of an expert opinion prior to class certification when that opinion is essential to the certification decision. Since this is the type of question that Rule 23(f) was designed to address, the court of appeals took the appeal -- and agreed with Honda. 

Plaintiffs were purchasers of Honda's Gold Wing GL1800 motorcycle; they alleged that the motorcycle has a design defect that prevents the adequate dampening of “wobble,” that is, side-to-side oscillation of the front steering assembly. Plaintiffs moved for class certification pursuant to Rule 23(b)(3). To demonstrate the predominance of common issues, they relied heavily on a report prepared by a motorcycle engineering expert, who opined about a "reasonable wobble decay" standard. Honda moved to strike the report pursuant to Daubert, arguing that this wobble decay standard was unreliable because it was not supported by empirical testing, was not developed through a recognized standard-setting procedure, was not generally accepted in the relevant scientific, technical, or professional community, and was not the product of independent research.

The district court said that it had "definite reservations" about the reliability of the expert's wobble decay standard. Nevertheless, the court declined to exclude the report in its entirety "at this early stage of the proceedings.”  The trial court denied Honda's motion to exclude “without prejudice,”  and granted plaintiffs' motion for class certification.

The 7th Circuit has already noted that a district judge may not duck hard questions by observing that each side has some support. Tough questions must be faced and squarely decided, if necessary by holding evidentiary hearings and choosing between competing perspectives. But the court had not yet specifically addressed whether a district court must resolve a Daubert challenge prior to ruling on class certification if the testimony challenged is integral to the plaintiffs' satisfaction of Rule 23' s requirements.  Here, it did hold that when an expert's report or testimony is critical to class certification, as it was in this case, a district court must conclusively rule on any challenge to the expert's qualifications or submissions prior to ruling on a class certification motion. That is, the district court must perform a full Daubert analysis before certifying the class if the situation warrants. If the challenge is to an individual's qualifications, a court must make that determination by comparing the area in which the witness has superior knowledge, skill, experience, or education with the subject matter of the witness's testimony. The court must also resolve any challenge to the reliability of information provided by an expert if that information is relevant to establishing any of the Rule 23 requirements for class certification.

Here, while the trial court began to ask the right questions, it never finished. The court's effective statement of admissibility left open the questions of what portions of the expert's testimony it may have decided (or will decide) to exclude, whether the expert reliably applied the standard to the facts of the case, and, ultimately, whether plaintiffs had actually satisfied Rule 23(b)(3)'s predominance requirement -- because they relied on the expert opinions. As a result, the district court never actually reached a conclusion about whether the expert report was reliable enough to support plaintiffs' class certification request.  This was not sufficient. Indeed, it was an abuse of discretion, according to the court of appeals.

The court went on to examine the record, which revealed to it that exclusion was the inescapable result when the Daubert analysis is carried to its conclusion. The expert originally developed the standard for use in a lawsuit in which he testified as an expert against Honda; despite its publication in one journal, there is no indication that this wobble decay standard had been generally accepted, or indeed, accepted by anyone other than this author. The expert never conducted any rider confidence studies to determine when motorcycle riders perceive wobble, or performed any tests to determine the minimal wobble amplitude at which riders detect oscillation.  He did test a single, used 2006 GL1800, ridden by a single test rider, but then extrapolated his conclusions to the entire fleet of GL1800s produced from 2001 to 2008 -- arguably too small a sample size from which reliable extrapolations can be made. 

The court therefore granted Honda's petition for leave to appeal, vacated the district court's denial of Honda's motion to strike and its order certifying a class, and remanded for proceedings consistent with this opinion.

 

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A federal court last month dimissed claims by plaintiffs concerning hip implants, with an analysis important for other consumer protection-type class action claims. Watkins v. Omni Life Science, Inc., 2010 WL 809820 (D.Mass. 2010).

Plaintiffs were recipients of the Apex Model Replacement Hip. Although neither plaintiff alleged an Apex Hip malfunction, they claimed that the allegedly relatively high rate of failure of the Apex Hip placed them and members of the proposed class at serious risk of future harm.  The failure rate was also alleged to have diminished the market value of their hip implants and those of the putative class members. Plaintiffs claimed that they would not have selected the model Hip over other alternative devices but for the representations made by the defendant manufacturer. Plaintiffs asserted claims for breach of implied warranty, breach of contract, unjust enrichment and constructive trust, violations of the Massachusetts consumer protection statute, and violations of the consumer protection laws of all other states (for the class).

Omni filed a motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6), arguing that no legally cognizable injury was pled in any of plaintiffs' claims. Plaintiffs' reply argument, as is typical, was a benefit of the bargain theory. Plaintiffs claimed that an accident-related injury or a manifested defect need not be shown as a predicate of recovery on their consumer claims. They claimed that their sufficient injuries consisted of: (1) the apprehension caused by the prospect of an increased risk of hip failure and (2) the extra money that they paid for an overvalued Apex Hip.

First, the court said, although plaintiffs' claims were styled as contract and breach of warranty claims, they actually were tort allegations. A plaintiff cannot disguise a tort claim with mere contract langauge. In Massachusetts, the economic loss doctrine applies, and purely economic losses cannot be recovered in tort or product liability actions in the absence of personal injury or property damage. The court added that the economic loss rule applied to the plaintiffs' consumer protection act claims as well.

As tort claims, plaintiffs failed to allege sufficient injury. Apprehension of a heightened risk stemming from an allegedly defective product that has not failed or caused harm to this plaintiff is insufficient as a matter of law to support a claim. See Anderson v. W.R. Grace & Co., 628 F.Supp. 1219, 1231 n. 6 (D.Mass.1986) (“The weight of authority would deny plaintiffs a cause of action solely for increased risk because no ‘injury’ has occurred.”). Plaintiffs' overpayment argument was also based on a theory of economic loss that has no place in a tort context. See Iannacchino v. Ford Motor Co., 451 Mass. 623, 633, 888 N.E.2d 879 (2008).

To the extent an allegation sounding in fraud was underlying some of the claims, read in the aggregate, the court found that Omni's alleged misrepresentations, as pled, lacked the capacity to mislead consumers, acting reasonably under the circumstances, to act differently from the way they otherwise would have acted. Under Rule 9b, in alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake.  This was not done.

 

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A recent state supreme court decision offers an interesting take on the use of experts in product liability cases. Watson v. Ford Motor Company , No. 26786 (S.C. March 15, 2010).

Plaintiffs filed a products liability suit against Ford, alleging that the cruise control system on the accident vehicle was defective and the cause of a serious accident. Watson testified that when she entered the interstate, she promptly set the cruise control, but shortly thereafter, the vehicle began to suddenly accelerate. Watson testified that she pumped her brakes to no avail before crashing. Plaintiff's theory of the case was that the vehicle's cruise control system was defective because it allowed electromagnetic interference (EMI) to affect the system. To support this theory, they presented Dr. Antony Anderson, an electrical engineer, who testified as to his theory that EMI can interfere with the speed control component of a cruise control system and cause a vehicle to suddenly and uncontrollably accelerate. Dr. Anderson further opined that this was the cause of the accident, and that Ford could have employed a feasible alternative design to prevent EMI.  Plaintiffs also presented testimony from Bill Williams who was qualified as an expert on “cruise control diagnosis.”

The jury found Ford liable on the cruise control products liability claim, and awarded compensatory damages of $15 million to Watson and $3 million to the estate of passenger Patricia Carter.

The appeal presented three issues: did the trial court err in qualifying Bill Williams as an expert in cruise control systems; did the trial court err in allowing Dr. Anderson’s expert testimony regarding EMI and alternative feasible design; did the trial court err in allowing evidence of other incidents of alleged sudden acceleration in Explorers?

On question one, the court found error. Williams testified that he had worked in the automotive industry since the early 1980s and was currently conducting seminars to train automobile technicians who focus on the brake systems in vehicles. While Williams may have been qualified as an expert in other aspects of automobile components, such as the brake system, the trial court failed to properly evaluate Williams’ qualifications specific to cruise control systems. Notwithstanding this error, the court did not believe that this error alone prejudiced Ford’s defense. Williams’ testimony essentially consisted of a description of the system accompanied by models and diagrams of the components. Furthermore, the trial court prohibited Williams from testifying to matters outside of his scope, specifically noting he could not testify as to electrical engineering matters.

On the second issue, the court addressed an issue that reflected the lack of fit between the opinion and the witness' qualifications in the particular area of expertise. Beyond that, Ford claimed that Dr. Anderson's theory regarding EMI as the cause of the sudden acceleration failed to meet the reliability requirements for the admission of expert testimony. The court reiterated several factors that the trial court should consider when determining whether scientific expert evidence is reliable:(1) the publications and peer review of the technique; (2) prior application of the method to the type of evidence involved in the case; (3) the quality control procedures used to ensure reliability; and (4) the consistency of the method with recognized scientific laws and procedures.

Dr. Anderson’s background involved working with massive generators which have entirely different electrical wiring systems and different voltage levels. He had no experience in the automobile industry, never studied a cruise control system, and never designed any component of a cruise control system. Dr. Anderson had not even operated an automobile with a cruise control system before this litigation; yet, he offered testimony regarding EMI and its effect on the cruise control system.  While he was an expert, perhaps not in the area he opined about.

Even assuming Dr. Anderson was properly qualified as an expert in this area, his testimony was found not reliable. Dr. Anderson declared that the alternative design (twisted pair wiring) would have prevented EMI but did not explain how twisted pair wiring could be incorporated in to a cruise control system and did not offer any model comparison. Furthermore, Dr. Anderson concluded that this design was economically feasible, but offered no basis to support this conclusion.

Dr. Anderson admitted that his theory had not been peer reviewed, he had never published papers on his theory, and he had never tested his theory. He also admitted that he would not be able to determine exactly where the EMI (which he opined caused the cruise control to malfunction) originated or what part of the system it affected. He further testified that it would not be possible to replicate the alleged EMI malfunction of a cruise control system in a testing environment.

The court concluded that there was no evidence indicating that Dr. Anderson’s testimony contained "any indicia of reliability." He had never published articles on his theory nor had he tested his theory. Importantly, Dr. Anderson admitted that it was not possible to test for EMI. Furthermore, although it is not a prerequisite in South Carolina that scientific evidence attain general acceptance in the scientific community before it is admitted, the court found it instructive that not only had the underlying science not been generally accepted, Dr. Anderson’s theory was rejected in the scientific community.  Next, the court found that Ford was prejudiced by the admission of this testimony. Indeed, the only evidence plaintiffs presented to support their theory that the vehicle was defective was Dr. Anderson’s testimony.

On the third issue, evidence of similar accidents, transactions, or happenings is admissible in South Carolina where there is some special relation between the accidents tending to prove or disprove some fact in dispute. Typically, a plaintiff must present a factual foundation for the court to determine that the other accidents were substantially similar to the accident at issue. The court will look at whether (1) the products are similar; (2) the alleged defect is similar; (3) causation related to the defect in the other incidents; and (4) exclusion of all reasonable secondary explanations for the cause of the other incidents.

Here, plaintiffs failed to show that the incidents were substantially similar and failed to establish a special relation between the other incidents and the relevant accident. The other incidents involved Explorers that were made in different years and were completely different models with the driver’s seat located on the right side of the vehicle. More importantly, plaintiffs failed to show a similarity of causation between the malfunction in this case and the malfunction in the other incidents. Plaintiffs presented only the testimony of the other drivers and did not present any expert evidence to show that EMI was a factor in the malfunction in the other incidents.

This evidence was highly prejudicial. Courts require a plaintiff to establish a factual foundation to show substantial similarity because evidence of similar incidents may be extremely prejudicial. Plaintiffs' counsel highlighted this improper evidence in closing arguments and thereby possibly induced the jury to speculate as to other causes of the accident not supported by any evidence.

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An up and down class action proceeding involving Listerine has taken a new turn. Pfizer Inc. v. Superior Court of Los Angeles County, No.B188106 (Cal. App. 3/2/10).

Plaintiffs brought a proposed class action on behalf of California consumers who allegedly purchased Listerine on the claim that the mouthwash prevented plaque and gingivitis as effectively as dental floss, relying on the state's Unfair Competition Law (UCL) (Bus. & Prof. Code, § 17200 et seq.) and the False Advertising Law (FAL) (§ 17500 et seq.).  The trial court certified a California class consisting of all individuals who purchased Listerine between June, 2004 and January, 2005.  The appeals court initially ruled in 2006 that the trial court’s certification was overbroad, relying on Proposition 64 which amended standing requirements in such actions and requires proof that the proposed class suffered injury.  Following the decertification order, however, the California Supreme Court ordered the appeals court to revisit the issue in light of its intervening decision in In re: Tobacco II, 46 Cal.4th 298 (2009). 

Upon remand, the court of appeals vacated the prior opinion, received supplemental briefs from the
parties and amici curiae, and reconsidered. Upon reflection, the appeals court concluded that the circumstances of the case still did not warrant class certification.

The court noted that the causation requirement for purposes of establishing standing under the UCL, and in particular the meaning of the phrase "as a result of" in section 17204, holds that a class representative proceeding on a claim of misrepresentation as the basis of his or her UCL action must demonstrate actual reliance on the allegedly deceptive or misleading statements, in accordance with well-settled principles regarding the element of reliance in ordinary fraud actions. Those same principles, the state supreme court had said Tobacco II in an amazingly result-driven fashion, do not require the class representative to plead or prove with an "unrealistic degree of specificity" that the plaintiff relied on particular advertisements or statements when the unfair practice is a fraudulent advertising campaign. But Tobacco II does not stand for the proposition that a consumer who was never exposed to an alleged false or misleading advertising or promotional campaign is entitled to restitution.

The certified class, consisting of all purchasers of Listerine in California, was overbroad because it presumed there was a class-wide injury. However, the record reflected that of 34 different Listerine mouthwash bottles on sale, 19 never included any label that made any statement comparing Listerine mouthwash to floss. Further, even as to those flavors and sizes of Listerine mouthwash bottles to which defendant did affix the labels which were at issue, not every bottle shipped between in the class period bore such a label. Also, although Pfizer allegedly ran four different television commercials with the “as effective as floss” campaign, the commercials did not run continuously and there is no evidence that a majority of Listerine consumers viewed any of those commercials. Thus, many, perhaps the majority of, class members who purchased Listerine during the pertinent period did so not because of any exposure to any allegedly deceptive conduct, but rather, because they were brand-loyal customers or for other reasons. As to such consumers, there is absolutely no likelihood they were deceived by the alleged false or misleading advertising or promotional campaign. Such persons cannot meet the standard of having money restored to them because it “may have been acquired by means of” the unfair practice.

Finally, plaintiff testified he did not make his purchase based on any of the four television commercials or other ads, and that he bought Listerine due to the bottle’s red label (which differed from the other labels), which he recalled said “as effective as floss.”  Because the various commercials and labels contained different language, with some even expressly advising consumers to continue flossing, his testimony as to his reaction to the Listerine label is not probative of his, or absent class members’, reaction to different language contained in television commercials and other labels. Therefore, named plaintiff lacked standing to assert a UCL claim based on those television commercials or other labels.

 

 

 

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We have posted before about one of the more controversial aspects of the Consumer Product Safety Improvement Act, the to-be-created publicly accessible database of product safety information.

The CPSIA mandates that the database be completed by March, 2011. The agency views its task as the creation of a public portal and a publicly accessible, searchable database of consumer product incident reports. Through the public portal, consumers will theoretically be able to report potential product safety hazards to CPSC in ways that are supposed to improve the quality, value, and accuracy of the data collected. Manufacturers will be able to investigate and respond to product hazard reports more quickly, and to share information with both CPSC investigators and with the public through the public database. And consumers are supposed to be able to use the public portal and database to find more information about hazards in order to keep their families safe.

Unless done very carefully, the database will be of little use to the average consumer, but subject to potential mischief in the hands of plaintiff lawyers.

Since last Fall, the CPSC has held various meetings and a two-day public workshop to gather stakeholder input on the new database. A number of affected groups have submitted comments on the implementation of the new product safety database, including the Soap and Detergent Association.  A common theme for the comments is the need for the CPSC to focus on verifying and ensuring the accuracy of safety incident reports submitted to the commission. Factual accuracy and veracity are two fundamental elements underpinning a credible incident database. 

CPSC needs to develop a process for addressing false and inaccurate reports that will scare consumers, harm business, and generate no additional safety gains. The commission needs to employ means to prevent the submission of fraudulent reports of harm while not discouraging the submission of valid reports.  CPSC also needs to think about specific disclaimers it should make with regard to the accuracy of the information contained in the public database, and not put the governmental imprimatur on voluntary data that has not been verified.  A sufficient time period should also be allocated for manufacturers to evaluate and respond to any proposed report.    

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Previously we alerted readers to the introduction of The Foreign Manufacturers Legal Accountability Act of 2009 (S. 1606),  introduced in the Senate in August 2009 by Sen. Sheldon Whitehouse (D-R.I.). The bill followed up on hearings last Spring during which witnesses testified about the perceived delays and difficulties with serving foreign manufacturers with process and establishing jurisdiction.

Last week, Rep. Betty Sutton (D-Ohio) and several co-sponsors introduced in the House their own version of the Foreign Manufacturers Legal Accountability Act of 2010 (H.R. 4678). The operative provisions of the House bill overlap those in the Senate bill, although the Senate bill also includes a section which discusses the alleged need for the legislation.

The proposed legislation would impact five categories of products: drugs, devices and cosmetics; biological products; chemical substances; pesticides; and consumer products. The bills only apply to manufactured products “in excess of a minimum value or quantity established by the head of the applicable agency" in regulations applying the legislation.

Both bills make consent to jurisdiction and service of process a condition of importing products into the United States. That is, the bills instruct several relevant product-regulating agencies to issue regulations requiring foreign manufacturers and producers to designate a registered agent. A person would not be able to import into the United States a covered product (or component part that will be used in the United States to manufacture a covered product) if such product or any part of such product (or component part) was manufactured or produced outside the United States by a manufacturer or producer who does not have a registered agent. 

Such a system which requiring an agent for service of process for every foreign manufacturer or producer who imports products into the U.S. would render the Hague Convention's  methods for service abroad unnecessary for such companies, and raises the risk that other countries may choose to create similar rules, subjecting U.S. companies to litigation in those other countries where their products may be sold.

Under the bills, a foreign manufacturer or producer of covered products that registers an agent as above thereby consents to the personal jurisdiction of the State or Federal courts of the State in which the registered agent is located for the purpose of any civil or regulatory proceeding.  Presumably, the expanded jurisdiction would also make it easier for U.S. companies to pursue indemnification claims against foreign manufacturers who were upstream suppliers.

Currently, foreseeing that one's product may enter a state is not, on its own, a sufficient basis for that state to assert jurisdiction. Asahi Metal Industry Co., Ltd. v. Superior Court, 480 U.S. 102, 112(1987); but cf. Nicastro v. McIntyre Machinery America Ltd., No. A-29-08 (N.J. 2/2/10).  It has been argued that Congress cannot create jurisdiction where the Constitution would forbid it. And it may be that a constitutional challenge would lie to some applications of the proposed bills. E.g., Texas Trading & Milling Corp. v. Federal Republic of Nigeria, 647 F.2d 300 (2d Cir. 1981). Presumably, the sponsors are looking to bypass the due process concerns by providing for consent to jurisdiction.

It is unclear what the effect of the bills might be on countries around the world regarding their willingness to enforce judgments entered in the United States, as the issue of the lack of foreign manufacturer assets in the U.S. is not addressed by the proposed legislation.

 

 

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From time to time, we have noted the significant litigation that may arise from food recalls.  For those readers interested in this area, we flag a recent article in the International Journal of Food Microbiology. Questeda, et al.,  "Trends in technology, trade and consumption likely to impact on microbial food safety," 10 I.J. Food Micro. 1016 (2010).

Experts from Unilever, the UK Food Standards Authority, and the US National Center for Food Safety and Technology outline what they think of as the key future threats to food safety, and strategies to tackle them. The article looks at current and potential future trends in technology, consumption, and trade of food that may impact on food-borne disease.  Among the most important factors driving an increase in the burden of food-borne disease in the next few decades were found to be the anticipated doubling of the global demand for food; the growing international trade in food; and a significantly increased consumption of certain high-value food commodities such as meat and poultry and fresh produce.

The article opines that the most important factor in reducing the burden of food-borne disease was an improved ability to first detect and investigate a food safety issue and then to develop effective control measures. Given the global scale of impact on food safety that current and potentially future trends have, it is observed that a key role may be played by intergovernmental organizations and by international standard setting bodies.

  

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The Senate Committee on Environment and Public Works' Subcommittee on Superfund, Toxics and Environmental Health held a hearing earlier this month entitled, "Current Science on Public Exposures to Toxic Chemicals."   Readers from the chemical and energy industries in particular will want to take note of the discussion.

Chairman Lautenberg (D.N.J.) opined that  TSCA fails to give EPA the tools it needs to protect against unsafe chemicals.He claimed that in three decades EPA has tested only 200 of the more than 80,000 chemicals in the products people use every day. He mentioned unnamed "studies" that allegedly have found that as much as five percent of cancers, ten percent of neuro-behavioral disorders and 30 percent of asthma cases in children are associated with hazardous chemicals. That is why, he said, he will soon introduce a bill that will overhaul our nation’s chemical laws, with the "simple goal" to force chemical makers to prove that their products are safe before they end up in a store. 

This bill would fall into place with the ideas of other proponents of radical reform and supporters of the so-called precautionary principle.  Common sense would suggest that principles for any regulatory or statutory changes to TSCA should be based on the best available science, including risk assessment; must include cost-benefit considerations; must protect proprietary information; and must prioritize reviews for existing chemicals. Senator Lautenberg's notion would encourage litigation, allow for activist rather than government enforcement, and would compel unnecessary product substitution that will further damage our weak economy.  Indeed, it would harm small and medium-sized companies and could harm innovation.

Other witnesses at the hearing included Steve Owens, Assistant Administrator, Office of Prevention, Pesticides and Toxic Substances Environmental Protection Agency;  Dr. Henry Falk  of the CDC; and Dr. Linda Birnbaum, Director  of the National Institutes of Environmental Health Sciences.

A number of witnesses also talked about bio-monitoring, the concept to potentially identify the concentration of chemicals actually taken up by the human body and the metabolic fate of those chemicals; to identify susceptible populations or particular at-risk groups (e.g. genetic polymorphisms) for chemical toxicity; and to inform discussions regarding levels of exposure consistent with no adverse effects (thresholds). However, bio-monitoring cannot eliminate potential confounders or alternative explanations for identified associations between chemical exposure and disease.  Any environmental chemical will be present to some extent in those who ingest, inhale or otherwise are exposed to it. Thus, the rabble-rousing about  “neurotoxins”, “endocrine disruptors”, or other “harmful chemicals” is essentially meaningless, without specific relationship to dose, exposure timing, and comparison to appropriate control populations. Our ability to measure substances at very low concentrations has outstripped our ability to determine causation.

Unfortunately, bio-monitoring has been abused as a tool. The practical problem with overstating exposure-disease associations is seen every day by medical professionals who evaluate people who are fearful of being “poisoned” by the latest chemical touted in a study as the cause of the same disease blamed on another compound just the month before, noted witness Dr. Charles McKay.

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A federal court has dismissed a class action that accused Bayer Corp. of misrepresenting the cancer-preventing nature of its men's vitamin products. Johns v. Bayer Corp. et al., (S.D. Cal. Feb. 9, 2010).

Readers of MassTortDefense know how a government investigation or advocacy group's criticism of a product can spawn products liability and other class action litigation.  But can plaintiffs walk too closely in the footsteps of the government?

Plaintiff David Johns filed a putative class action alleging that defendants misrepresented on product packaging, commercial advertisements, their website, and in other marketing materials, that one of the product line's key ingredients, selenium, has the ability to reduce the risk of prostate cancer in men. Plaintiff alleges that, despite emerging evidence, selenium does not in fact prevent or reduce the risk of prostate cancer. Plaintiff alleged he purchased one bottle of Men’s Health in July 2009 for approximately $8.  He alleges he read the information regarding selenium on the product packaging and relied on those statements in making his purchasing decision.

Plaintiff then brought a proposed class action on behalf of all persons in the United States or, alternatively, all California residents, who since 2005 purchased the men's health vitamin products. Plaintiff alleged claims for: (1) violation of California’s Unfair Competition Law, California Business & Professions Code § 17200 (“UCL”), (2) violation of the Consumers Legal Remedies Act, California Civil Code § 1750 (“CLRA”), and (3) unjust enrichment.

Defendants moved to strike key aspects of the complaint because the allegations seemingly were simply borrowed from the language of an FTC investigation of the vitamin product line. Defendants argued that these allegations violated plaintiff’s duty under Rule 11 to conduct a reasonable factual investigation into the allegations to be made in a complaint. Attorneys have a duty to make a reasonable inquiry into whether the factual contentions made in a complaint have evidentiary support. Fed. R. Civ. Pro. 11(b).

That FTC lawsuit resulted in a settlement and consent decree; there was no adjudication on the merits and no admission of wrongdoing or fault on the part of Bayer.  Thus, quotes from the government pleadings were, at best, a repetition of mere allegations, including of a special interest advocacy group that had complained to the government.  The federal court thus struck these allegations. See also In re Connectics, 542 F. Supp. 2d 996, 1005-06 (N.D. Cal. 2008).  Because the court granted defendants’ motion to strike the various paragraphs of the complaint, there were no factual allegations remaining to support the claim that defendants’ advertising was deceptive. Accordingly, the motion to dismiss was granted without prejudice.

The court went on to address several issues "as guidance if Plaintiff chooses to file an amended
complaint."  The court noted that in two recent opinions, the Supreme Court had clarified the  standard of review for Rule 12(b)(6) motions. See Ashcroft v. Iqbal, 129 S.Ct. 1937 (2009); Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007). To survive a motion to dismiss under this standard, “a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim for relief that is plausible on its face.’” Iqbal, 129 S.Ct. at 1949 (citing Twombly, 550 U.S. at 570).  For example, the court pointed out a standing issue: plaintiff did not allege that he saw any advertisements for one of the products in the line, Men’s 50+, nor that he read the packaging on the product, nor that he even considered purchasing the product. Plaintiff cannot expand the scope of his claims to include a product he did not purchase or advertisements relating to a product that he did not rely upon. The statutory standing requirements of the UCL and CLRA are narrowly prescribed and do not permit such generalized allegations.

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A recurring theme at MassTortDefense has been the risks associated with the plaintiffs' bar growing creativity in the use of state consumer fraud acts to substitute for traditional product liability claims.  In particular, plaintiffs assert that class actions pursuant to state unfair or deceptive trade practices acts ought to be more easily certifiable than traditional personal injury class actions. A recent case in this area is notable not only for its actual holding rejecting a nationwide class, but also for the philosophy expressed by the court on these kinds of proposed class actions. Schnall v. AT&T Wireless Inc., 2010 WL 185943 (Wash. Jan. 21, 2009).

Customers of AT&T Wireless Services filed a nationwide class action alleging the company misled consumers when it billed them for a charge that was not included in advertised monthly rates and was allegedly not described clearly in billing statements. An immediate issue loomed concerning choice of law, which can have a dramatic impact on several aspects of the certification process, including the elements of commonality, predominance, and manageability.  The parties initially disputed whether the choice of law clauses in the customers' contracts were enforceable. The choice of law clauses in this case required customers to litigate asserted violations of their contract in the respective jurisdiction where they signed the contract. (Such jurisdiction is often based on the customer's area code.)  The court concluded that AT&T should not  be forced to face the "enormous cost and complexity presented by a nationwide class action" when they conscionably included choice of law provisions in their customers' contracts and the choice of forum is, in any event, dictated by the consumer.

The choice of law clauses, along with the interpretation of the contract terms, the differences in the materials and information each potential class member received, and the availability of differing affirmative defenses created a predominance of individual issues over common ones.  But even where courts find that a nationwide, state law governed class otherwise meets Rule 23(a) and 23(b)(3) criteria, the court opined that “the choice-of-law inquiry will ordinarily make or break certification.”  This is because if the laws of 50 jurisdictions apply to plaintiffs' claims, the variations in the laws of the states may swamp any common issues and defeat predominance. (citing Castano, Georgine, and In re American Medical System.)

Of particular interest, the court found that the state of Washington has no interest in seeing contracts executed by AT&T representatives in other states with citizens of those states examined and adjudicated in Washington courts. Certified as a nationwide class action, this case would have presented an unwarranted and unnecessary burden on the state judicial system, all at a large cost to state taxpayers. See R.J. Reynolds Tobacco Co. v. Engle, 672 So.2d 39, 41 (Fla.Dist.Ct.App.1996) (“No doubt a tremendous number of retired judges, special masters, and general masters would have to be appointed by the court in order to complete this herculean task within a reasonable period of time--all at a staggering cost to the taxpayers.”)(of course, even the state-wide Engle class was a disastrous mistake by the Florida courts). The court concluded that there is no sound reason to force Washington trial courts to entertain the contract claims of citizens from around the nation. Their state courts are equally as prepared, if not better situated to apply the contract laws of their own states.

That conclusion was bolstered by the observation that nothing in Washington law indicates that Consumer Protection Act claims by nonresidents for acts occurring outside of Washington can even be entertained under the statute. Because the laws of each state are designed to regulate and protect the interest of that state's own residents and citizens, each state has a measurable, and usually predominant, interest in having its own substantive laws apply.  While it is true that Washington has a strong interest in regulating any behavior by Washington businesses which contravenes the CPA, the CPA indicates the legislature's intent to limit its application to deceptive acts that affect the citizens and residents of Washington. To state a CPA claim, a person must show that the unfair or deceptive act affected the people of the state of Washington. This geographic and jurisdictional limitation originates in the CPA's history as a tool used by the State attorney general to protect the citizens of Washington. (as is the situation with many such state statutes.)

The court remanded the case for consideration of a state-wide class claim, but note the better view that where, as here, the plaintiffs allege that their damages were caused by deceptive, misleading, or fraudulent statements or conduct, as a practical matter it is not possible that the damages could be caused by a violation of the Act without proof of reliance on the statements or conduct alleged to violate the statutes. Cf. Group Health Plan, Inc. v. Philip Morris, Inc., 621 N.W.2d 2, 13 (Minn.2001); Hageman v. Twin City Chrysler-Plymouth Inc., 681 F.Supp. 303, 308 (M.D.N.C.1988) (“To prove actual causation, a plaintiff must prove that he or she detrimentally relied on the defendant's deceptive statement or misrepresentation.”); Feitler v. Animation Celection, Inc., 170 Or.App. 702, 13 P.3d 1044, 1047 (2000) (holding causal element of misrepresentation claim requires reliance by the consumer); cf. Siemer v. Assocs. First Capital Corp., 2001 WL 35948712, at *4 (D.Ariz. Mar.30, 2001) (“The injury element of the [state consumer protection statute] claim occurs when the consumer relies on the misrepresentations.”); see generally S. Scheuerman, The Consumer Fraud Class Action: Reining in Abuse by Requiring Plaintiffs to Allege Reliance as an Essential Element, 43 Harv. J. on Leg. 1 (2006).
 

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Not long ago we blogged about the economic loss rule, noting that the doctrine had some variants among the states.  Recently, the South Carolina Supreme Court pulled back on an exception to the economic loss rule, concluding that its 2008 opinion expanding the ability to recover in tort for purely economic damages had been wrongly decided. Sapp v. Ford Motor Co., 2009 WL 4893648 (S.C., 12/21/09). Very refreshing to see a court recognize an issue quickly, and act promptly to correct the error.

Economic loss generally refers to damages that occur through the loss of the value or use of the goods sold or the cost of repair, when there has been no claim of personal injury or damage to property other than the product. The economic loss doctrine has held that such damages, a product injuring itself in essence, is a claim about a breach of the commercial relationship, and thus must be brought in contract/warranty, and not a tort claim sounding in negligence or strict liability. Most states have adopted some form of the economic loss rule, although with some variation in detail. Some carve out exceptions, and in South Carolina there has long been an exception for economic damage to a residence. The reasoning was that a home is often an individual's largest investment and different in kind from other manufactured goods. The courts also looked at the unequal bargaining power between builders and home purchasers.

But in Colleton Preparatory Academy Inc. v. Hoover Universal Inc., 379 S.C. 181, 666 S.E.2d 247 (S.C. 2008), the court seemed to expand the exception even farther, into commercial property.  In Colleton Prep, which concerned allegedly defective materials used in constructing a school building, the state court held that a tort suit could go forward even where only the product itself is damaged, if there is also a clear, serious and unreasonable risk of injury or death, as was the case in a school. The defense bar termed this a very surprising opinion, because it extended the seemingly narrow exception so far that it threatened to swallow the rule, appearing to create tort liability for mere potential harm or risk.

In Sapp, actually two cases consolidated for appeal, plaintiffs sued over allegedly defective cruise-control systems on Ford Motor Co. F-150 trucks, which allegedly caused fires. The lower courts dismissed the claims, saying that under the economic loss doctrine, tort recovery was not available because the damage was only to the allegedly defective products themselves. At oral argument on plaintiffs' appeal, they argued the new expanded exception, suggesting the truck fire created that clear and serious risk of injury. 

The supreme court seemed to recognize the problems it had created. The court recognized that
the exception for residences was a very narrow one.  And the court clarified it  no intention of the exception extending beyond residential real estate construction and into commercial real estate construction. "Such a progression was in error and we now correct that expansion. Much less did we intend the exception to the economic loss rule to be applied well beyond the scope of real estate construction in an ordinary products liability claim.” Accordingly, the court overruled Colleton Prep to the extent it could be read to expand the narrow exception to the economic loss rule beyond the residential builder context.

In South Carolina, as in many states, the purpose of the economic loss rule is to define the line between recovery in tort and recovery in contract. In the context of products liability law, when a defective product only damages itself, the only concrete and measurable damages are the diminution in the value of the product, cost of repair, and consequential damages resulting from the product's failure. Stated differently, the consumer has only suffered an economic loss. When only damage is to the product itself, what has happened is the consumer's expectations have not been met, and he has lost the benefit of the bargain. Accordingly, where a product damages only itself, tort law provides no remedy and the action lies in contract; but when personal injury or other property damage occurs, a tort remedy may be appropriate.  The traditional economic loss rule provides a more stable framework and results in a more just and predictable outcome in product liability cases.

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A federal judge has granted defendant's summary judgment motion in a putative consumer class action over contact lens solution. Degelmann, et al. v. Advanced Medical Optics Inc., No.07-0317 (N.D. Calif. 1/4/10).

Defendant, in 2007, issued a recall notice for their contact lens solution product, following an announcement by the U.S. Centers for Disease Control and Prevention that a small number of users of the contact lens solution might have developed a rare, but potentially serious, corneal infection, due to contamination.  The CDC report indicated that the epidemiological evidence showed that the product may be less effective than other solutions in disinfecting against the particular contamination. [Epidemiology, sometimes termed the "science of long division" or the "science of making the obvious obscure" is crucial to most toxic tort claims.]

Plaintiff brought a proposed nationwide class action under California Business & Professions Code § 17200 (Unfair Competition Law) and  § 17500 (False Advertising Law), and alleged that defendant AMO made false statements concerning its contact lens solution, and concealed certain known risks of using the solution. Plaintiffs did not allege that they suffered any physical injury from their use of the product.  Rather, the focus of the complaint was on AMO’s allegedly false representation that the product was a “disinfecting solution” or was a solution that “disinfects.”

AMO argued that the name plaintiffs had suffered no legally cognizable injury, and therefore lack both Article III standing and statutory standing under the UCL/FAL, among other summary judgment theories.  The court found that plaintiffs lack Article III standing, and granted the motion (without reaching the other issues).

The Constitution limits the federal judicial power to designated “cases” and “controversies.” U.S. Const., Art. III, § 2. Standing is an “essential and unchanging part of the case-or-controversy requirement of Article III.”  Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992). Article III standing requires a plaintiff to show an “injury in fact,” a causal connection between the injury and the conduct complained of, and a likelihood that the injury will be redressed by a favorable decision. Id. at 560-61; see also Sprint Communications Co., L.P. v. APCC Services, Inc., 128 S.Ct. 2531, 2535 (2008). In order to establish standing, plaintiffs must show that they have suffered actual loss, damage, or injury, or are threatened with impairment of their own interests. The “injury in fact” requirement must involve an invasion of a legally protected interest which is (a) concrete and particularized and (b) actual or imminent, not conjectural or hypothetical.  Lujan, 504 U.S. at 559-60

The court found that named plaintiffs could not show injury in fact because they  never contracted the infection at issue, and were never harmed by their use of the product. Because they stopped using the solution long before the recall, they could not allege that the recall caused them to discard unused solution, which is a typical "economic" harm argument plaintiffs try to make.  Moreover, they could not claim to have lost the money they spent purchasing the product in the first place, as they would have bought another, comparably priced, contact lens solution if they had not bought this one.  As plaintiffs sustained no damage and no injury, and made no showing of any sufficient  threatened injury that was likely to occur, they did not have standing under Article III.  Motion granted.

Defendants will want to not overlook the standing argument , especially when confronted with the concocted class claims of plaintiffs who were never really injured, and seek to recover for alleged bad conduct without showing any causal link between the conduct and an injury suffered.
 

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The Environmental Protection Agency recently issued its first Chemical Action Plan (CAP).  The plan deals with  phthalates, which are found in some food packaging and cosmetics.  But anyone in the chemical industry should take notice, as this CAP comes as part of EPA’s efforts to enhance the existing chemicals program under the Toxic Substances Control Act. EPA has identified an initial list of widely recognized chemicals, including phthalates, for action plan development based on one or more of the following factors: their presence in humans; persistent, bioaccumulative, and toxic  characteristics; use in consumer products; or production volume.

Although many in industry support  EPA’s effort to update agency actions for prioritized chemicals under TSCA, there is much to question in this effort so far, including the fact that the initial set of chemicals seem to have been selected based on their current “high-profile” nature. EPA should prioritize chemicals for the CAP program based on scientific criteria that reflect available hazard, use, and exposure information.  Despite the new Administration's campaign promises, there has been little transparency, and in fact great uncertainty, over the scientific basis for the selection of these chemicals.  Unfortunately, the CAP process to date provides no evidence of a systematic, science-based approach to chemicals management.

A large body of scientific data already exists about phthalates, and these products have been subject to numerous government safety assessments.  Bio-monitoring data shows that exposure to phthalates in the general public are below safety limits established by the EPA and the European Union. In assessing potential future restrictions on certain phthalates, EPA plans to weigh the relative toxicity and feasibility of phthalate substitutes. Identification of safer and affordable non-phthalate substitutes will be an important consideration in any action that would restrict the use
of these chemicals.  EPA intends to conduct a Design for the Environment and Green Chemistry alternatives assessment by 2012. The information developed could be used to encourage industry to move away from phthalates in a non-regulatory setting to expand risk management effects beyond whatever regulatory action might be taken under TSCA, or could be used as input to a regulatory action. 

EPA also intends to lay the groundwork to consider initiating in 2012 rulemaking under TSCA section 6(a) to further regulate phthalates. Readers know how regulatory events can spawn and impact toxic tort litigation.  It should be noted  that an Action Plan is intended to describe the courses of action the Agency plans to pursue in the near term to address its concerns. The Action Plan does not constitute a final Agency determination or other final Agency action.

 

 

 

 

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A federal court has dismissed a case against Ford Motor Co. brought on behalf of a minor who was severely hurt when she was struck by a Ford pickup truck while riding her bike.  The court concluded that plaintiff offered insufficient evidence that the alleged defect in the truck (absence of front-wheel anti-lock brakes) caused the accident and thus the ensuing injuries. BancFirst v. Ford Motor Co., 2009 WL 5168342 (W.D.Okla. 12/21/09). 

A seven-year-old rode her bicycle into the path of an oncoming Ford F150 pickup truck driven by Brandon Moore. Although he took evasive action, Moore was unable to avoid hitting the child, who was severely injured as a result of the impact. Plaintiff alleged that the truck wheels locked and the truck began to rotate in a counter-clockwise direction. The truck slid on wet pavement through the intersection, and the child was hit by the right rear corner of the truck as it passed through the inside lane.  Plaintiff brought an action against the manufacturer of the truck, Ford Motor Company, alleging that the truck was unreasonably dangerous because it lacked front-wheel anti-lock brakes (“ABS”).  Ford moved for summary judgment.

Under either a strict liability or negligence theory, plaintiff must show that the lack of front-wheel anti-lock brakes on the F-150 truck caused the accident. In support of its contention that the failure to equip Moore’s truck with ABS on all four wheels caused the accident, plaintiff offered the opinion of William Medcalf, a registered professional engineer. During his deposition, plaintiff’s expert conceded that he could not testify to a reasonable degree of engineering certainty that the alleged defect – lack of all-wheel ABS – caused the accident in this case. Expert testimony in this regard was crucial to plaintiff’s case as the efficacy and functionality of anti-lock braking systems are not within the understanding of ordinary jurors.

So far, so good. A basic failure of an expert to perform at deposition the way the plaintiff probably hoped he would.  But its what happened next that makes the case more useful.

The plaintiff offered a later affidavit from the same expert, but it was ignored because it was based on the same data he had when he gave his first opinion.  Readers of MassTortDefense may be interested in the discussion of another tactic, as the expert attempted to change his previous testimony to avoid summary judgment, through an errata sheet to his deposition, the court said. While Rule 30(e) of the Federal Rules of Civil Procedure permits "corrections" to deposition transcripts, it does not permit wholesale changes to sworn testimony. Coleman v. Southern Pac. Transp. Co., 997 F.Supp. 1197, 1205 (D. Ariz.1998) (discrediting deposition testimony directly contradicted by errata sheet); S.E.C. v. Parkersburg Wireless, L.L. C., 156 F.R.D. 529, 535 (D.D.C. 1994) (noting trend in which courts do not allow a party “to make any substantive change she so desires” in deposition testimony); Rios v. Bigler, 847 F.Supp. 1538, 1546-47 (D. Kan.1994) (court will consider only those changes which clarify the deposition, and not those which materially alter it); Greenway v. International Paper Co., 144 F.R.D. 322, 325 (W.D. La. 1992) (suppressing deponent's attempt to rewrite material answers given in deposition); Barlow v.. Esselte Pendaflex Corp., 111 F.R.D. 404, 406 (M.D.N.C. 1986) (refusing to consider changes to deposition that were made in bad faith).

The changes here were not a clarification; they were substantive changes diametrically opposed to the answers given during the deposition, said the court. Moreover, although Medcalf stated that his new answers were just clarifications to the record, there was no indication that he was confused during the deposition. That the expert treated the deposition like a "take home examination" was clear to the court not only from his proposed changes, but also from the timing of the errata sheet, which appeared only after Ford moved for summary judgment.

Plaintiff had no competent evidence that the accident would not have occurred had Moore’s truck been equipped with four-wheel ABS. It thus had no evidence that the alleged defect caused the accident and the subsequent injuries to plaintiff.  And the last minute attempts to fix that problem were of no avail. Defendant was therefore entitled to summary judgment in its favor. 

 

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A quick update on the Chinese Drywall MDL.  With the recent filing of an omnibus complaint, approximately 3,000 plaintiffs are now involved in the product liability litigation over Chinese-made drywall, against approximately 600 defendants. In re: Chinese-Manufactured Drywall Products Liability Litigation, MDL No, 2047 (E.D. La.).  Plaintiffs allege generally that sulfur levels in the Chinese-made products are abnormally high, causing problems with air conditioning systems, appliances, internal wiring and other electrical systems, as well as personal injuries.  

The drywall imported from China could have been used throughout the United States in as many as an estimated 300,000 recently built or renovated homes. The U.S. Consumer Product Safety Commission reported on studies linking Chinese drywall installed in homes to elevated levels of hydrogen sulfide and the potential corrosion of metals.

Recently, the MDL court appointed Michael K. Rozen of Feinberg Rozen, LLP as a Special Master in this proceeding under Federal Rule of Civil Procedure 53. Pursuant to the order of the Court, Special Master Rozen shall carry out those tasks he deems appropriate to fully explore opportunities for an ultimate resolution between the various parties. 

At the December status conference, the court explored issues relating to the various profile forms: Plaintiff Profile Form, a Defendant Manufacturers’ Profile Form, a Contractor/Installer Profile Form, a Builder Defendant Profile Form and a Defendant Distributor Profile Form, and the Importer/Exporter/Broker Profile Form. And how to handle a party's failure to complete the required form. Another agenda item was prioritizing the many pending motions. The parties addressed some discovery disputes, including ESI.

An important issue also discussed was the the Court's general plan to establish initial  “bellwether” trials. The Court has further advised the parties that any such trials will be limited to property damage only. The parties have been discussing the protocol and procedure for selecting bellwether trial candidates. The Plaintiff Steering Committee has suggested a sufficient representative sample of cases be selected with regard to geography, concentration of properties, distinctive facts and certain legal issues. The defendants suggest that the selection of bellwether plaintiffs must be limited to the plaintiffs that have submitted profile forms where personal injuries are not claimed. A list of these plaintiff properties has been made available to the PSC and the Court. The parties were directed to continue to discuss the selection of bellwether trials.

It is already clear that the drywall litigation will be complicated. Homeowners are suing builders, installers, distributors and manufacturers. There are multiple levels of insurance litigation, as in some states plaintiffs may also bring direct actions against the insurers for any of those categories of defendants; some homeowners are also in dispute with their carriers as to coverage. Several defendants have sued their carriers. In some cases, insurance companies have already filed declaratory judgment actions on these issues. Moreover, there are cross-claims among categories of defendants, as builders are suing distributors, manufacturers, and their insurers.

As noted here before , a major issue is product identification, i.e., the identification of the maker and seller of the drywall in each plaintiff's building. Plaintiffs in the MDL have already identified 28 foreign labels that they allege may be involved.  Class action motions remain pending, among the difficult case management issues.  Indeed, some of the cases may end up being resolved as part of bankruptcy proceedings.

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Readers of MassTortDefense recognize that one feature of the asbestos litigation is the co-called family or household exposure case, a form of by-stander liability in which the plaintiff alleges he or she contracted asbestos disease not from exposures at work but through contact with a family member who brings the fibers home from a job.

A recent case explores this situation in a non-asbestos context.  In  Oddone v. The Superior Court of Los Angeles County, 2009 WL 4044429 (Cal. Ct. App.,  11/24/09), James Oddone worked for Technicolor, Inc., from 1973 until 2006; he died from a brain tumor (glioblastoma multiforme) in January 2007. His wife, inter alia, asserted on her own behalf the theory that her husband brought home toxic vapors and chemicals on his clothing and person and that she was injured by exposure to these materials; this cause of action was predicated on Technicolor's alleged negligence in exposing her husband to toxic chemicals.

Most claims of this type are analyzed, at first, with a duty analysis.  Here, the defendant argued, and the lower court agreed, there was no duty to the wife, using the traditional duty factors, including whether transaction was intended to affect the plaintiff; the foreseeability of harm to the plaintiff; the degree of certainty that the plaintiff suffered injury; the closeness of the connection between the defendant's conduct and the injury suffered; the moral blame attached to the defendant's conduct; and the policy of preventing future harm.

The court of appeals did agree with the proposition that this was the exact analytical framework for the case. Rather, the major factors ought to be ones are the foreseeability of harm to the plaintiff, the degree of certainty that the plaintiff suffered injury, the closeness of the connection between the defendant's conduct and the injury suffered, the moral blame attached to the defendant's conduct, the policy of preventing future harm, the extent of the burden to the defendant and consequences to the community of imposing a duty to exercise care with resulting liability for breach, and the availability, cost, and prevalence of insurance for the risk involved.

In order to apply those factors, however, a plaintiff claiming to have been injured by an exposure to chemicals must specify the chemical that caused the injury and in the course of doing so must of course also specify the injury. Importantly, he must also allege that as a result of the exposure the specified toxin entered his body.  The court said it does not make a difference that the plaintiff is claiming injury as a result of secondary exposure. If anything, the exposure requirements are even more apropos in such a case because the connection between the defendant's acts and the claimed injury is more attenuated than in a primary exposure context.

"It cannot be denied that a case predicated on secondary exposure to chemicals potentially cuts a very wide swath," said the court of appeals.  It is therefore only appropriate to pay close attention to the factor that there must be a close connection between the defendant's conduct and the injury suffered. That connection is only shown by setting forth specifically which chemicals cause which specified injuries. In a secondary exposure case, the allegation that as a result of the exposure the specified chemical entered the plaintiff's body is of particular importance. Central issues in such a case are whether secondary exposure to a specified chemical is even possible and, if it is, whether the exposure will result in the ingestion of the chemical into the plaintiff's body.

Turning to policy issues, the court did not hold that a plaintiff cannot ever state a cause of action for secondary exposure to toxic chemicals.  But, as part of the analysis, including “all family members” into the category of those owed a duty would be too broad, as not all family members will be in constant and personal contact with the employee. Limiting the class to spouses would be at once too narrow and too broad, as others may be in contact with the employee and spouses may not invariably be in contact with the employee. Limiting the class to those persons who have frequent and personal contact with employees leaves at large the question what “frequent” and “personal” really means.  The gist of the matter is that imposing a duty toward non-employee persons saddles the defendant employer with a burden of uncertain but potentially very large scope. One of the consequences to the community of such an extension is the cost of insuring against liability of unknown but potentially massive dimension. Ultimately, such costs are borne by the consumer.

Here, the court of appeals could not say that the trial court abused its discretion in sustaining the demurrer to the first amended complaint without leave to amend.

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We have posted about nanotechnology issues before. Readers following nano-issues will want to note that the Council of the European Union last week approved an updated set of regulations on cosmetic products, and they include a requirement that cosmetics containing nanoscale ingredients have that information on their labels. [In the European Union, regulations automatically apply to all  member states, while directives are implemented through national legislation. The regulation thus represents a common European code on cosmetic products, designed to reduce the uncertainties arising from a differentiated implementation of the previous directives in the 27 member states.]

Specifically, the regulation states that, “All ingredients present in the form of nanomaterials shall be clearly indicated in the list of ingredients. The names of such ingredients shall be followed by the word ‘nano’ in brackets.”  see p. 61.  Some observers have questioned whether the mention of the term "nano" in labels will offer consumers much meaningful guidance. The FDA's 2007 Nanotechnology Task Force Report did not recommend labeling because current science did not support a finding that products with nanoscale materials necessarily present greater safety concerns than those without nanoscale materials.

The document indicates that the use of nanomaterials in cosmetic products may increase with the further development of technology. In addition, the EU Council suggest that in order to ensure a high level of consumer protection, free movement of goods, and legal certainty for manufacturers, it is necessary to develop a uniform definition for nanomaterials at the international level.  In the interim, "nanomaterial" for regulatory purposes means an insoluble or biopersistant and intentionally manufactured material with one or more external dimensions, or an internal structure, on the scale from 1 to 100 nm.

The Council states that, at present, there is inadequate information on the risks associated with nanomaterials. In order to better assess their safety, the Council calls for cooperation with relevant bodies on test methodologies which take into account specific characteristics of nanomaterials.

The new rule also will require manufacturers of new cosmetic products containing nanomaterials to notify the European Commission and to provide certain toxicological information before the products are placed on the market. Published reports suggest that manufacturers may have up to 3 years to comply with the new label regulations.

 

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To date, CPSC has received more than 2000 reports from 32 states, the District of Columbia and Puerto Rico, from consumers and homeowners concerned about alleged problem drywall from China in their homes. The majority of consumer complaints on allegedly defective drywall have come from Florida and Louisiana.

The CPSC last week released a study of Hydrogen Sulfide Gas in connection with its Chinese drywall investigation.  Specifically, CPSC released results from a major indoor air study of 51 homes, and initial reports from two studies of alleged corrosion in homes with Chinese drywall. The 51 home study was actually contracted by CPSC and done by Environmental Health & Engineering (EH&E). The  two preliminary reports on corrosion safety issues are from the Sandia National Laboratories’ (SNL) Materials and Engineering Center concerning the long-term electrical safety hazards of conductor metal components, and the National Institute of Standards and Technology (NIST), studying the corrosion effects on fire safety components taken from complaint homes.

EH&E compared 41 “complaint” homes in five states selected from CPSC’s consumer
incident report database, with 10 non-complaint homes built around the same time in the
same areas as the complaint homes. Homes were sampled between July and September
2009. The EH&E findings were that hydrogen sulfide gas appears to be the essential component that causes copper and silver sulfide corrosion found in the complaint homes. Other factors,
including air exchange rates, formaldehyde and other air contaminants appear to contribute to the
reported problems.  The reports do not explain how the hydrogen sulfide gas is being created in homes built with Chinese drywall. (Earlier studies found varying amounts of elemental sulfur in the Chinese drywall.)

In terms of method, EH&E exposed copper and silver test strips, known as coupons, in homes for a period of about two weeks. The coupons showed significantly higher rates of corrosion in complaint homes than in the control homes. The dominant species of corrosion on the coupons were copper sulfide and silver sulfide, as determined by additional laboratory tests. Visual inspection and evaluation of ground wire corrosion also revealed statistically significant greater ground wire corrosion in complaint homes compared to non-complaint homes. The EH&E study also found that by using hand-held x-ray fluorescence and Fourier Transform Infrared instruments, they were able to detect markers that could identify Chinese-made dry wall at a sheet-by-sheet level.

The study did not link the corrosion with any long term safety effects, which are still under investigation. The levels reported, however, are well below the amount associated with long term health effects in the literature.

Like the EH&E study, initial reports from SNL and NIST show copper and silver sulfide corrosion on samples of metal taken from homes with problem drywall.

In terms of next steps, CPSC continues to search for homes exhibiting the alleged corrosion and health effects under study. Second, the federal Interagency Task Force has established an Identification and Remediation Protocol Team of scientists and engineers. This Team will try to use the results of the EH&E study and other information to design a screening protocol to identify homes with this problem.  Because professional air sample testing, and destructive testing of drywall both are costly, the Protocol Team is trying to develop quick, cost-efficient evaluation methods to identify homes with these problems. The Protocol Team will also look at remediation protocols, to see what cost-efficiency improvements to current remediation practices, if any, may be available, and what guidance should be issued on doing the work safely.

CPSC believes it has secured the cooperation of the Chinese Government to help identify the sources and causes of this problem. The agency believes that no new Chinese drywall has entered the United States in 2009. CPSC is also working with an ASTM committee that has just initiated discussions on the formulation of a proposed new standard on inspection of drywall for air quality issues.

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A federal court last week denied class certification in a case arising from alleged damage to boats allegedly caused by ethanol blended gasoline. Kelecseny v. Chevron U.S.A., Inc., et al., No. 08-61294-CIV-ALTONAGA/Brown (S.D. Fla. Nov. 25 2009).

Recent federal and state legislation requires that ethanol usage be expanded and that gasoline contain 9 to10% ethanol by December 31, 2010. Plaintiff sued several defendant gasoline manufacturers who have produced and/or marketed the ethanol blended gasoline (E10) used by the proposed class members for use in boats and watercraft in Florida allegedly without adequate warnings to consumers. The plaintiff asserted that E10 can cause difficulty starting the engine or rough engine operation, engine overheating, engine fires,  corrosion of aluminum tanks, degradation of fiberglass tanks and resins, and other damages.

The court noted the evidence that some defendants have, in other countries, posted warning signs that E10 may not be suitable for use in boats. Numerous articles have appeared in boating magazines, some boat manufacturers provide E10 warnings in their owners’ manuals, and many marine mechanics are aware that E10 may cause problems in certain types of boats.

 

The class sought relief against all defendants under a “market share” theory of negligence, based on Conley v. Boyle Drug Co., 570 So. 2d 275, 286 (Fla. 1990), alleging that because of the general methods for the use and distribution of gasoline used to fuel boats, plaintiffs did not know the identity of each of the named defendants that sold the ethanol blended gasoline that they purchased for use in their boats.

 

Our review focuses on the damages class, defined as owners of boats in the state of Florida whose fuel tanks are composed of polyester of vinyl ester resin fiberglass fuel tanks. The court noted first that even to determine whether certain individuals may be in the class, a detailed individual inquiry would be required. Because it would be impossible to definitively identify class members prior to individualized fact-finding and litigation, the proposed class fails to satisfy the most basic requirements for a class action under Rule 23, ascertainability.

 

Turning to the Rule 23(a) factors, while it is possible that the proposed class could satisfy the numerosity requirement, plaintiff had not made a clear showing that the number of actual class members will be so high that joinder of all members is impracticable. Plaintiff argued that his starting number (680) was so large that defense attempts to carve certain boats out of the total number would never work to defeat numerosity. However, courts have made it abundantly clear that the burden to satisfy numerosity is on the plaintiff seeking to certify a class, and a plaintiff is not permitted to make a purely speculative showing that numerosity has been met.

 

Next, although typicality “does not require identical claims or defenses,” a factual difference in the representative’s claims will render those claims atypical if the factual position of the class representative “markedly differs from that of other members of the class.” Named plaintiff’s damages claims and the defenses to those claims differed markedly from those of other potential class members, said the court. The uncontroverted expert testimony at the certification stage established that the type of fiberglass tanks at issue are found in relatively large boats that are not suitable to be transported or carried by trailer.  Owners whose boats are equipped with fiberglass fuel tanks, therefore, are most likely to purchase their fuel at marinas, where their boats are kept or to which they travel on water for fueling. In contrast, plaintiff purchased fuel for his boat at numerous gas stations by use of a fuel caddy that he carried in his pick-up truck. Expert witnesses and the parties agree that this behavior was atypical. This difference in behavior between named plaintiff and other potential class members “jeopardizes Plaintiff’s ability to sue Defendants collectively under a market share theory.”

 

Importantly, the court noted that plaintiff cited no case in which market share liability has been applied in a class action, “and there appears to be good reason why no such case exists.” It is simply untenable to apply market share liability [in those few states that recognize it], with its requirement of the narrowest possible geographic market, to a class action consisting of members whose activities cover an entire state.  The requirement of a narrowly tailored geographic market is particularly important in market share liability cases because only with a narrow geographic market may a defendant avail itself of the defenses afforded by the market share theory.

 

On the Rule 23(b) factors, plaintiff’s argument disregarded the many individualized inquiries that would be required in the proposed class action and which clearly outweighed the asserted common issues. As to each individual plaintiff, a fact finder would have to determine where that particular plaintiff purchased fuel, and what, if any, warnings were in place at that station at that time or at different times. Also, plaintiffs had to show that defendants’ failure to warn of the dangers of E10 was the proximate cause of the damage to the boats. This requisite showing raised two issues of individualized inquiry. First, each proposed class member must demonstrate that had warnings of the danger of E10 existed, he or she would have heeded those warnings and not used E10 in his or her boat. Non-ethanol blended fuel is more difficult to find than E10 and is generally more expensive than E10. It is conceivable that some boat owners, even if warned that E10 might damage their fuel tanks, would opt for the convenience and lower cost of E10, and assume the risk of damage. Indeed, plaintiff himself apparently continued to use E10 in his boat despite his knowledge of the risks.

 

The proximate cause requirement also mandates an individualized inquiry into whether each proposed class member had personal knowledge that E10 could damage fiberglass fuel tanks. As noted above, some information was available from other sources that E10 may not be appropriate.

Finally, the court noted something that is extremely important to readers of MassTortDefense, and which some courts ignore: fact issues can be created by defenses and by a defendant’s response to plaintiff’s claims. If those fact issues are individual, that is every bit as important to the class certification decision as individual issues raised by plaintiff’s own affirmative proof. While plaintiff’s experts asserted that no individual examination of fiberglass fuel tanks was necessary, defendants’ experts disagreed. Thus, inspection of the fuel tank of each proposed class member was a reasonable request to determine whether any existing damage was actually caused by E10.

Similarly, defendants have the right to assert the comparative fault defense, and its assertion would involve individual inquiries concerning each proposed class member’s knowledge and behavior. Inquiry would be necessary as to whether each boat owner received an owner’s manual that warned against the use of E10; whether any had ever been told by a mechanic not to use E10; whether any had ever seen a warning sign at a marina or researched E10 on the internet; and whether, despite personal knowledge, the boat owner nonetheless chose to fuel the boat with E10 based on convenience and cost savings.

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Readers interested in nanotechnology issues may be interested in the Second NanoImpactNet Conference on the future with nanotechnology.  It is to be held in Lausanne, Switzerland, March 9-12, 2010.

Information on the preliminary program is available here.

And information on abstract submission and registration for the conference is available here.

The conference is organized by NanoImpactNet, a European network on the health and environmental impact of nanomaterials, including academic and government laboratories
working on nano-toxicology and nano-ecotoxicology. 

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Yesterday, we posted about events in the MDL.  Today, the science, and it probably shouldn’t surprise readers of MassTortDefense that studies suggesting a product bears some risk get far more media attention than studies showing a product is safe, even when the latter are more rigorous. Similarly, studies funded by industry are dismissed by the media as hopelessly biased, as if product sellers have no interest in exploring their products, but studies from a pro-plaintiff, pro-litigation, anti-business, pro-regulation, big government biased interest group are deemed “neutral.”

Such continues to be the case with BPA. Consumer Union came out with a report of BPA levels detectable in 19 canned foods. They admitted that the study was limited and that the tests only “convey a snapshot of the marketplace and do not provide a general conclusion about the levels of BPA in any particular brand or type of product tested.”  Levels in the same product purchased at different types or places or in other brands of similar foods might differ from CU test results, they acknowledged. Published reports have noted that the group refuses to release the names of the external laboratories they used for testing; and the "study" would not have been published in a peer-reviewed scientific journal without a detailed description of the analytical methods used. The CU also apparently relies on animal studies in which the animals were injected with BPA, instead of ingesting it. Basic toxicology would indicate that the route of administration is important.

However, BPA has been confirmed as safe for use in food contact materials by the world’s major regulatory agencies. The food contact materials in your supermarket, including epoxy can linings, meet current regulatory standards, and as importantly, actually enhance food safety and extend product shelf life. Thus, BPA-based epoxy coatings in metal packaging provide important and measurable health benefits by reducing the potential for the serious and often deadly effects from food-borne illnesses. This packaging enables the high-temperature sterilization of food products when initially packaged and continuously protects against microbial contaminants. The head-long rush by a few zealots to ban BPA overlooks the need to balance this factor.

The levels CU says it detected are substantially below the advisory level of 600 parts per billion established by the European Union as a level of safe consumption for all ages, and below current U.S. guidelines that establish the daily upper limit of safe exposure as 50 micrograms per kilogram of body weight. They thus do not pose a health risk to consumers, of all ages.

The media gave far less attention to a study released that is a significant development in better understanding the safety of BPA. See Ryan, et al., In Utero and Lactational Exposure to Bisphenol A, in contrast to Ethinyl Estradiol, Does not Alter Sexually Dimorphic Behavior, Puberty, Fertility and Anatomy of Female LE Rats (Toxicological Sciences 2009). The study was sponsored by the Environmental Protection Agency. The study conclusion states: “The lack of effect of BPA on female and male rat offspring after oral exposure to low doses in our studies is consistent with the lack of adverse effects on growth, vaginal opening, fertility and fecundity of low doses of BPA in several other robust, well designed, properly analyzed multigenerational studies (Cagen, et al.,1999; Ema, et al., 2001; Tinwell, et al., 2002; Tyl, et al., 2002).”  This new rodent study thus finds that low-dose exposures to BPA showed no effects on the broad range of reproductive functions and behavioral activities measured. Well-conducted, peer-reviewed studies such as this should provide the basis for reasoned government assessments and regulatory decisions -- not the murky at best, results driven CU report.

 

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In the BPA MDL, Judge Ortrie D. Smith granted in part and denied in part defendants’ motions to dismiss various claims. In re: Bispehnol-A Polycarbonate Plastic Products Liability Litigation, MDL No. 1967 (W.D. Mo.).

Readers of MassTortDefense will recall that last year the Judicial Panel on Multidistrict Litigation centralized fourteen cases; since then, the Panel has continued to transfer cases from around the country, so now about thirty-eight cases have been transferred. In addition, approximately ten cases have been filed in the MDL District and have become part of the consolidation. Defendants roughly fall into two categories: the Bottle Defendants and the Formula Defendants. Generally, the Bottle Defendants make baby bottles, sippy cups and similar products for infants and toddlers, and/or sport bottles. The Formula Defendants sell infant formula packaged in metal cans.

Most of the complaints assert, on behalf of consumers, various causes of action including: (1) violation of state consumer protection laws, (2) breach of express warranty, (3) breach of the implied warranties of merchantability and fitness for a particular purpose, (4) intentional misrepresentation, (5) negligent misrepresentation, and (6) unjust enrichment.

In one Order the court began by addressing the motions to dismiss claims for fraud, misrepresentation and breach of express warranties. The MDL court had previously, mindful of Rule 9, required plaintiffs to identify defendants’ alleged statements that form the basis for their claims of fraud, misrepresentation, and breach of express warranties. Plaintiffs’ continued failure to do so was, said the court, now fatal to these claims. Likely because they were unable to comply, and perhaps because they recognized what compliance would do to their already slim chances for class certification (because of the individual issues that a response would highlight), plaintiffs responded to the aforementioned requirement by saying that they had not identified any advertisements or other media because the allegations are not based on any particular representations. A misrepresentation claim not based on any misrepresentation. Rather, plaintiffs’ allegations are based on defendants’ supposed “overall course of conduct” in marketing and selling the products at issue. Taken as a whole, defendants’ alleged “overall course of conduct” somehow deceptively conveyed the impression or message that the products at issue are safe and healthy for use by infants and children.

By disclaiming reference to any particular fraudulent act, plaintiffs had disclaimed one of the essential elements of a fraud or misrepresentation claim. All states require proof of reliance and causation. For a statement to be relied upon and thus cause a purchaser’s injury, the statement must have been heard by the purchaser. Plaintiffs’ theory – that the placement of a product in a stream of commerce alone somehow conveys a sufficient representation about the product’s safety that can serve as grounds for fraud liability – is a rule that has not been demonstrated to exist in any of the fifty states.

Allowing the mere sale of products to convey an affirmative representation regarding safety would eviscerate the law of warranty and be contrary to the rationale supporting the limited circumstances in which actions constitute representations, noted the court.  Plaintiffs’ failure to identify any expressions made by defendants to them about their products precludes any claim that an express warranty was made, let alone violated. Given the absence of any “affirmation of fact or promise,” (see UCC Article 2-313), plaintiffs cannot allege an express warranty was made. The Supreme Court’s decision in Iqbal requires a plaintiff to identify the basis for, if not the content of, the alleged warranty. And, in a related issue, plaintiffs’ were thus unable to allege how the supposed, non-existent, warranties became “part of the basis of the bargain.”  A representation cannot be part of the “bargain” if the other party to the bargain did not know the representation was made! Merely alleging a representation became part of the bargain does not satisfy Iqbal. If one party (here, the buyer) is not aware of the statement, that party cannot claim the statement became a part of the parties’ bargain.

The court declined to dismiss the claims for fraudulent omissions, based on what it called a “common-sense” view of Rule 9 under which it was unnecessary to require plaintiffs to specifically identify who failed to disclose information and each occasion upon which they failed to disclose it. Rule 9 is satisfied, said the court, with respect to a claim of fraudulent omissions if the omitted information is identified and “how or when” the concealment occurred.

The claim for breach of implied warranty of fitness for a particular purpose was dismissed because while the ordinary purpose for baby bottles can be described as to allow babies and toddlers to drink liquids, a plaintiff cannot rely on this ordinary purpose to support a claim that there was a warranty of fitness for a particular purpose; they must point to some other purpose that is not “ordinary” in order to support their claim.

The court put off ruling on the claims for breach of the implied warranty of merchantability because defendants’ arguments (including lack of privity, untimeliness, and failure to provide notice), seemed premised on the unique characteristics of various states’ laws. Thus, they seemed more amenable to analysis at the time of any class certification decision, which will inevitably raise choice of law issues. A similar deferral was applied to dismissal of all unjust enrichment claims. Many of defendants’ arguments seemed to depend on unique aspects of various states’ laws, found the court.

Defendants also made a strong argument that the claims, at bottom, were improper “no injury” claims. The court agreed as to the category of plaintiffs who disposed of or used up the products before learning about BPA. They received all the benefits they desired and were unaffected by defendants’ alleged concealment. Importantly, the court recognized that while they may contend they would not have purchased the goods had they known more about BPA, these plaintiffs received 100% use (and benefit) from the products and have no quantifiable damages. In this instance, plaintiffs’ position “leads to absurd results.”  These buyers obtained the full anticipated benefit of the bargain. While they may not have paid the asking price, had they allegedly known, offset against this is the fact that they received the full benefits paid for – leaving them with no damages. Plaintiffs here may allege they would not have purchased those products had they supposedly known the true facts, but, again, they obtained full use of those products before learning the truth: the formula was consumed or the children grew to an age where they did not use bottles and sippy cups, so they were discarded. These consumers thus obtained full value from their purchase and have not suffered any damage. These plaintiffs are relegated to the unjust enrichment claim.

The court distinguished, however, those plaintiffs who learned about BPA’s presence and potential effects and either still have the goods or subsequently replaced or disposed of them. Defendants’ argument does not apply to this category, found the court.

That left before the court only plaintiffs’ claims that defendants made fraudulent omissions, violated various state consumer protection statutes, breached the implied warranty of merchantability, and that defendants were unjustly enriched. With these remaining claims pending, the court, in a second order, granted in part defendants’ motion to dismiss on the basis of preemption and denied their motion to dismiss on the ground of primary jurisdiction.

Defendants’ preemption and primary jurisdiction arguments were generally alike in that they both contend their use of BPA should only be subject to regulation by the FDA. Indeed, FDA has issued regulations prescribing the conditions for “safe” use of resinous and polymeric coatings, allowing the coatings to be formulated from “optional substances” that may include “[e]poxy resins” containing BPA. Thus, BPA’s presence in some resinous and polymeric coatings and in polycarbonate resins is subject to regulation by the FDA. It is also a fair reading of FDA’s regulations authorizing BPA’s use that the FDA thinks that food additives containing BPA could be used safely without labeling requirements.

The doctrine of primary jurisdiction applies when enforcement of a claim that is originally cognizable in the courts requires the resolution of issues which, under a regulatory scheme, have been placed within the special competence of an administrative body. The FDA clearly has specialized expertise and experience to determine whether BPA is “safe.” However, said the court, the ultimate issues in these cases, as alleged by plaintiffs, are whether defendants failed to disclose material facts to plaintiffs and thus, for example, whether defendants breached the implied warranty of merchantability through the sale of products containing BPA. FDA’s decision that BPA is “safe” is not determinative of any of those issues, said the court. This conclusion seemed to give insufficient attention, in our view, to the argument that plaintiffs have predicated their claims on proof that BPA is allegedly unsafe: the undisclosed facts are not material unless BPA is not safe. The products are not unmerchantable unless BPA is unsafe, Since plaintiffs base their claims on such evidence, the claims seemed to fall within the primary jurisdiction of the FDA.  The MDL court did not agree.

Turning to the preemption issue, the court first rejected the claim of implied preemption. While noting that FDA has approved BPA use in food additives and noting the agency’s decision not to require labeling, the court concluded that the FDA’s approval of BPA as safe without labeling requirements establishes only a regulatory minimum; nothing in these regulations either required or prohibited defendants from providing the disclosures sought. The court cited Wyeth v. Levine for the proposition that that there is no preemption when federal law did not prevent the drug manufacturer from strengthening its drug label as necessary to comply with the standard to be imposed by state law.

However, the Formula Defendants also raised express preemption; they asserted that the FDA regulations exempt Formula Defendants from having to disclose the presence of BPA in their products. Express preemption exists when a federal law explicitly prohibits state regulation in a particular field. With respect to food labeling, federal law generally prohibits states from establishing any differing requirements for the labeling of food. Thus, plaintiffs’ claims are expressly preempted because they would impose disclosure requirements concerning BPA, the exact opposite of the exemption. Now, here is the interesting twist: plaintiffs asserted that Congress also provided an exception to express preemption under the law for “any requirement respecting a statement in the labeling of food that provides for a warning concerning the safety of the food or component of the food.”  But, the court noted, plaintiffs cannot have it both ways.  If their claims are based on warnings about the safety of food, then their claims would have been subject to dismissal under the primary jurisdiction doctrine because the determination whether BPA is “safe” is solely the province of the FDA, and the FDA has concluded that the use of BPA in epoxy liners is “safe” so long as the manufacturer abides by the FDA’s prescribed conditions. See 21 C.F.R. § 175.300 (2009).  If the claims against the Formula Defendants are not subject to primary jurisdiction, as plaintiffs argued, then they are subject to express preemption analysis.

It may seem clear to readers of MassTortDefense that even with respect to those claims the court concluded should not be dismissed on the pleadings, the court's analysis highlights several issues that may make it difficult for the plaintiffs to proceed as a viable class action. 

 

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A federal court has granted a software maker summary judgment in a case arising from the use of "spyware."  The plaintiff failed to convince the court that product liability claims were proper against the company who made the software the plaintiff's former wife allegedly targeted him with.  Hayes v. SpectorSoft Corp., 2009 WL 3713284 (E.D.Tenn. 11/3/09).

Plaintiff alleged that his former wife purchased software, including one called the “Spector Professional Edition for Windows," and installed it on his computer.  Plaintiff contends that following the installation of these software programs, the software recorded all his chat conversations, instant messages, e-mails sent and received, and the websites visited by plaintiff whenever he used his laptop computer, and re-transmitted such electronic communication to her (or a sister). SpectorSoft's software is apparently primarily used by parents and employers to monitor Internet use by children and employees.

The parties disputed whether SpectorSoft knew of the illegal use of the SpectorSoft software to gain access to plaintiff's private laptop communications. Plaintiff alleged that SpectorSoft knew or should have known about such usage. He thus asserted several causes of action (including negligence) against SpectorSoft for its alleged role in allowing his personal computer usage to be captured--  and that defendant  “aided and abetted” in the violation of his rights.

The court concluded first that plaintiff had not created a genuine issue of material fact regarding whether SpectorSoft aided and abetted the alleged invasion of his privacy. There was no evidence that SpectorSoft took an affirmative act that encouraged the women to violate plaintiff's rights. In fact, SpectorSoft attempted to protect the rights of persons like plaintiff by requiring purchasers to accept its licensing terms prior to being allowed to install its software (which prohibited this kind of use). There was similarly no evidence that SpectorSoft knew anything about how the women were using its software. While some retailers marketed SpectorSoft's products to spouses concerned about adultery, SpectorSoft itself did not market its product for such uses, and it provided its users with a licensing agreement that it had reason to believe was valid. Furthermore, said  the court, even a broad-based marketing campaign does not provide the requisite affirmative act of specific encouragement or assistance to the individuals at issue in this case.

Turning to the claim under the state Products Liability Act , a seller of a consumer product may be liable for “injury to a person or property caused by the product” if “the product is determined to be in a defective condition or unreasonably dangerous at the time it left the control of the manufacturer or seller.”  The court did not reach the issue whether software constitutes a “product” under the statute (nor the "misuse" issue which springs to mind), because the  Act defines a “product liability action” as one brought “for or on account of personal injury, death or property damage."  But plaintiff cited to no Tennessee authority suggesting that a products liability claim can be brought for emotional injuries alone, unaccompanied by some sort of physical injury or actual damage to property. Plaintiff did not allege in his Complaint that the alleged invasion of his privacy actually damaged his property, such as his computer or his business.

Similarly, plaintiff failed to provide appropriate legal support for his general negligence claim. Tennessee law does recognize a claim for general emotional distress caused by the negligent actions of another in the form of a negligent infliction of emotional distress claim. See Eskin v. Bartee, 262 S.W.3d 727, 733 (Tenn.Sup.Ct.2008). But the Tennessee Supreme Court has established that where a case is purely one for emotional injury unaccompanied by damages for physical injury or other damages, the plaintiff must present material evidence as to each of the five elements of general negligence --duty, breach of duty, injury or loss, causation in fact, and proximate or legal, cause -- and, in order to guard against trivial or fraudulent actions, the law ought to provide recovery only for “serious” or “severe” emotional injury. 

On the duty element, the general duty of care does not include an affirmative duty to act for the protection of another, unless the defendant stands in some special relationship to either the person who is the source of the danger, or to the person who is foreseeably at risk from the danger.  There is no precedent for the proposition that a manufacturer of spyware software owes a duty to avoid emotional injury to the victim of the misuse of that software in violation of the software's licensing agreement. Plaintiff fails to demonstrate legal support for the proposition that SpectorSoft had a special relationship or that SpectorSoft somehow assumed a duty of care towards plaintiff.

Finally, plaintiff failed to present evidence of his severe or serious emotional distress. Without such evidence of severe emotional distress, plaintiff's negligence claim that asserts only garden variety anxiety and mental distress as damages must be dismissed. 

 

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The  California appeals court has affirmed a trial court's decision to deny plaintiff's motion for class certification in a case involving high definition (HD) television services. See Cohen v. DIRECTV, Inc., No. B204986, 2009 WL 3069116 (Cal. Ct. App. 2d Dist. 10/28/09).

A subscriber to services delivered by a satellite television company filed a proposed class action complaint alleging the company had disseminated false advertising to induce him and other subscribers to purchase more expensive HD services.  The complaint alleged that DIRECTV switched its HDTV channels to a lower resolution, reducing the quality of the television images it transmits to its subscribers.

Importantly, the complaint did not allege that DIRECTV breached its subscribers' contracts for satellite television services by allegedly transmitting a lower resolution television image than it was contract-bound to deliver. Instead, plaintiff alleged a species of fraud in the inducement, alleging that subscribers to DIRECTV's HD services purchased those services in reliance on the company's supposedly false advertising. In that vein, Cohen alleged that he and the other putative class members subscribed to the HD service package based upon DIRECTV's national advertising and marketing.  Thus, plaintiff  asserted two causes of action: (1) violation of the Consumer Legal Remedies Act or “CLRA” (see Civ. Code, § 1750 et seq.), and (2) violation of the Unfair Competition Law or “UCL” (see Bus. & Prof. Code, § 17200).

Plaintiff requested the trial court to certify a class defined as follows:  “Residents of the United States of America who subscribed to DIRECTV's High Definition Programming Package.”  The motion to certify the class was supported in significant part with evidence seeking to show DIRECTV's print advertising and promotional materials for its HD Package; DIRECTV's opposition to the motion for class certification was supported in large part by a number of declarations from subscribers to the company's HD Package, each of whom explained that their individual decisions to buy the upgraded service had not been precipitated by any printed advertising or other promotional materials disseminated by DIRECTV.

California's Code of Civil Procedure section 382 authorizes a representative plaintiff to pursue a class action “when the question [in the action] is one of a common or general interest, of many persons, or when the parties are numerous, and it is impracticable to bring them all before the court . . . .” A plaintiff moving for class certification must establish the existence of (1) an “ascertainable” class and (2) a “commonality” of interests among the members of the class. E.g., Lockheed Martin Corp. v. Superior Court, 29 Cal.4th 1096, 1103-1104 (2003).

The appeals court, first, disagreed with trial court which had found the proffered defined class not ascertainable. The defined class of all HD Package subscribers was sufficiently precise, with objective characteristics and transactional parameters which could be determined by DIRECTV's own account records.

However, the class did fail on the issues surrounding commonality.  In this proposed national class, subscribers' legal rights would vary from one state to another state, and subscribers outside of California may well not be protected by the CLRA and UCL.

Beyond legal issues, the record supported the trial court's finding that common issues of fact do not predominate in the proposed class because the class would clearly include subscribers who never saw DIRECTV advertisements or representations of any kind before deciding to purchase the company's HD services.  The proposed class would include subscribers who only saw and/or relied upon advertisements that contained no mention of technical terms regarding bandwidth or pixels, and also subscribers who purchased DIRECTV HD primarily based on word of mouth or because they saw DIRECTV's HD in a store or at a friend's or family member's home.

Interestingly, the court of appeals distinguished the state's supreme court's recent decision in In re Tobacco II Cases,  46 Cal.4th 298 (2009).  The opinion suggests that Tobacco II held that, for purposes of standing in context of the class certification issue in a “false advertising” case involving the UCL, the absent class members need not be assessed for the element of reliance. Or, in other words, class certification may not automatically be defeated on the ground of lack of standing upon a showing that class members did not all rely on common false advertising. The court of appeals found that Tobacco II essentially ruled that, for purposes of standing, as long as a named plaintiff is able to establish that he or she relied on a defendant's false advertising, a absent class members may also be deemed to have standing, regardless of whether any of those class members have in any way relied upon the defendant's allegedly improper conduct.

MassTortDefense readers will likely find that notion ridiculous, particularly when the courts typically do not enforce the ostensible requirement that named plaintiffs should be typical and adequate class representatives.  In the contextual setting presented by the present case, however, Tobacco II was seen to be irrelevant because the issue of “standing” simply is not the same thing as the issue of “commonality.” Standing, generally speaking, is a matter addressed to the trial court's jurisdiction because a plaintiff who lacks standing cannot state a valid cause of action. Commonality, on the other hand, in the context of the class certification issue, is a matter addressed to the practicalities and utilities of litigating a class action in the trial court. The court saw nothing in the language in Tobacco II which suggests that the state supreme court intended California trial courts to dispatch with an examination of commonality when addressing a motion for class certification.

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In the Chinese Drywall  MDL, certain plaintiffs recently moved for leave to amend their Class Action Complaint to expand the class definition as to defendant Taishan Gypsum, from a Virginia state-wide class to a national class of all persons allegedly impacted by defective drywall made by that defendant. Plaintiffs assert that there will be no undue delay nor prejudice to defendants from the change; the amendment does not alter the proposed sub-classes as to other defendants who are the builders and installation contractors who allegedly installed the product. The amendment would also include new assertion of a violation of the consumer fraud acts of the various states. In re: Chinese-Manufactured Drywall Products Liability Litigation, No. 09-md-02047 (E.D. La.).

An Omnibus [Proposed] Class Action Complaint is to be filed in the MDL on or before December 9, 2009 by the plaintiffs against another defendant, Knauf Plasterboard (Tianjin) Co., Ltd (“KPT”) and other defendants who were involved in the manufacture, sale, importation, brokerage, distribution, construction and installation of homes containing KPT drywall, and any others who were involved in the stream of commerce for the KPT drywall. In order to assist in the consolidation and efficient handling of claims by affected homeowners, defendant KPT has apparently agreed to accept service of process for homeowner plaintiffs who are to be named in an Omnibus Amended Complaint, and waive its right to demand service of process through the Hague Convention. (We have posted about the issues related to suits against foreign defendants before.) However, to be eligible for inclusion in this Omnibus [Proposed] Class Action Complaint and the service waiver, homeowners must provide, by no later than December 2, 2009, sufficient indicia that the homes in question contain KPT drywall (e.g., photographs, samples, visual inspections or reports identifying KPT markings on drywall in the home), and must also submit by December 14, 2009, a fully completed and executed Plaintiff Profile Form, in accordance with PTO #11. The complaint will not be amended to include additional named plaintiffs after it is filed, the court has indicated.

 

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A federal court has dismissed (with prejudice) a variety of consumer fraud and unjust enrichment claims in litigation alleging issues with front-loading washers. Butler, et al. v. Sears, Roebuck and Co., No. 06 C 7023 (N.D. Ill. Nov. 4, 2009).

In their Consolidated Complaint, plaintiffs alleged that the washing machines they bought
from Sears suffered from electronic control board failure and an alleged design defect that prevented adequate water drainage and proper self-cleaning. The water drainage and
cleaning defect allegedly resulted in odors on clothes. Plaintiffs contended that the electronic control board failure is manifested by the washing machines prematurely and repeatedly failing mechanically. 

Defendant was alleged to have known about the defects because of allegedly similar problems with other washing machines, and customer complaints of mold problems. As a result, plaintiffs contended that Sears violated their respective home states’ consumer fraud statutes.

The case has a bit of a history, as prior versions of these allegations had been the subject of three motions to dismiss. Although the court did allow plaintiffs to file this consolidated amended complaint (these cases were consolidated for purposes of discovery and pretrial proceedings on January 6, 2009), plaintiffs did not request leave to re-allege the claims that were dismissed with prejudice in the prior rulings, including consumer fraud claims under the laws of California, Illinois, Indiana, Kentucky, Michigan, Minnesota, New Jersey, New York, and Washington. See 2008 WL 4450307, at *8. Plaintiffs. however, re-alleged these claims in substantially the same form in their Consolidated Complaint.  Without leave to do so, and new details, these claims could not survive.

In order to survive a Rule 12(b)(6) motion, the complaint must not only provide the defendant with fair notice of the claim’s basis, but must also establish that the requested relief is plausible on its
face. Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949, (2009); see also Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). Allegations of fraud are subject to the heightened pleading standard of Rule 9(b), which requires a plaintiff to state with particularity the circumstances constituting fraud. Fed. R. Civ. P. 9(b). This means that the plaintiff must plead the “who, what, when, where, and how" of the alleged fraud.

The court found that the new allegations  were insufficient to meet Rule 9(b)’s pleading requirements. Plaintiffs adequately averred defendant's knowledge, but they did not adequately allege the other required elements. For example, plaintiffs had not indicated how the alleged reported failure rate compares with the failure rates of comparable machines produced by comparable manufacturers. Plaintiffs also failed to specify how often design or manufacturing defects related to self-cleaning features of washers occur. No meaningful engineering explanation had been alleged. The language reproduced in the Consolidated Complaint offered far from a meaningful engineering explanation for the defects; the allegations were vague and indeterminate.

The alleged violation of California’s Song-Beverly Consumer Warranty Act, Cal. Civil Code § 1790 et seq., survived the motion to dismiss.  But, overall, product manufacturers can appreciate the court's application of the Twombly doctrine, the fraud pleading requirements, and its reluctance to give plaintiffs many, many bites of the apple.  Federal court litigation should not be "if at first you do not succeed, try, try again," with the trial court offering plaintiff's counsel a road map how to construct a proper pleading.

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The federal inter-agency task force investigating alleged problems with Chinese-made drywall released initial results of three studies last week, which may impact the MDL litigation. The CPSC, the EPA, HUD, the CDC, and the Agency for Toxic Substance and Disease Registry are members of the task force. Health departments in Florida, Louisiana, and Virginia have also participated in the task force. An executive summary of the studies, and the draft studies themselves are available here.

To date, close to 2000 consumers have contacted the CPSC to report alleged problems in their homes. The primary issues reported are: 1) corrosion, or blackening, of indoor metals, such as electrical components and central air conditioning system evaporator coils; and 2) various health symptoms, including persistent cough, bloody and runny noses, headaches, difficulty in breathing and irritated and itchy eyes and skin. Imported drywall from China came into more widespread use after hurricanes in 2004 and 2005 led to a surge in home reconstruction and caused shortages of North American-made drywall.

In sum, the three studies involved:
(1) Elemental and Chemical Testing: The study of the elemental and chemical composition of drywall samples showed higher concentrations of elemental sulfur and strontium in Chinese drywall than in non-Chinese drywall. The elemental and chemical testing of Chinese and non-Chinese drywall samples was undertaken to characterize the specific chemical composition of the drywall. The results were expected to identify differences between the two sets of drywall that might account for the reported corrosion and health issues. While the studies have discovered certain differences between Chinese and non-Chinese drywall, further studies must be completed, said the report, to determine any nexus between the drywall and the reported health and corrosion issues. The analysis was conducted on 17 samples of drywall collected from warehouses, suppliers and manufacturers. These samples were unpainted and uninstalled.

(2) Chamber Studies: Preliminary results of ongoing testing to detect gases emitted from drywall in laboratory chambers showed higher emissions of total volatile sulfur gases from Chinese than from non-Chinese drywall. The chamber studies, conducted by Lawrence Berkeley National Laboratory, were intended to isolate the chemicals emitted from drywall. From these chamber studies, said the task force, it was possible to isolate the drywall emissions from the interferences of other materials or furnishings in a house that might emit or absorb such emissions. No comprehensive exposure and risk assessment has yet been carried out.

(3) Indoor Air Studies: Indoor air testing of 10 homes in Florida and Louisiana was conducted to identify and measure contaminants and to inform a drywall home indoor air testing protocol. The tests did not detect the presence or found only very limited or occasional indications of sulfur compounds of particular interest to the task force – hydrogen sulfide, carbon disulfide, and carbonyl sulfide. Concentrations of two known irritant compounds, acetaldehyde and
formaldehyde, were detected at concentrations that could exacerbate conditions such as asthma in sensitive populations, but were found in both homes with and without Chinese drywall. The levels of formaldehyde were not unusual for new homes, however, said the report. The results of the air testing in this very small sample of homes was being reported to offer a very preliminary indication of what compounds may be present in the indoor environments of homes in Florida and Louisiana with and without Chinese drywall.

The agencies expect the results of an air-sampling study of 50 homes in late November. An engineering analysis of electrical and fire safety issues is also forthcoming. .A study of long-term corrosion issues, that seeks to simulate decades of exposure and corrosion, will not be completed until June of 2010.

The study follows in the wake of the four-day U.S.-China summit that aimed to reinforce the notion that the United States—specifically the CPSC—will hold accountable importers of products into the United States if their products pose hazards or violate safety standards. The CPSC delegation reportedly discussed drywall safety concerns with Chinese government officials.

The CPSC stressed that this report was preliminary; the findings of each report released today must be considered within the limitations of each study and viewed in the context of the overall drywall investigation, which is still ongoing. While the studies have discovered certain differences between Chinese and non-Chinese drywall, further studies must be completed to determine any nexus between the drywall and the reported health and corrosion issues.
 

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The Iowa Supreme Court last week issued an interesting decision clarifying the subsequent remedial measure doctrine in that jurisdiction, and offering some good general notions. Scott v. Dutton-Lainson Co., 2009 WL 3415937 (Iowa 10/23/09).

A little background.  Readers of MassTort Defense know that despite the nostalgic effort of some courts to try to maintain a bright line between strict liability and negligence claims, it is pure semantics to try to confine certain product defect claims to a "strict" regime.  Specifically, failure to warn claims and design defect claims (as opposed to manufacturing defect claims) have been largely recognized as sounding, at least in part, in negligence.  In the Restatement (Third) of Torts: Products Liability, the standards for design defect and failure-to-warn claims require consideration of reasonableness and therefore incorporate negligence principles.

Beyond the articulation of the causes of action, the classification of the claims has other potential impact in a products liability claim, such as in this case. Plaintiff worked for a boat dealership and suffered an injured foot when the jack on a boat trailer collapsed.  Plaintiff offered a design defect theory, that the jack's pin should have been longer, allowing users to better see whether the pin was engaged. (A competitor allegedly made a longer pin.)  Below, plaintiff sought to introduce three bits of testimony regarding defendant's alleged subsequent changes to the pin tooling, which lengthened it and thus allowed it to reach further into the pin hole.  The first was deposition testimony from a company officer concerning changing the tooling.  Second was a deposition of a witness who reportedly heard a company official say the pin was lengthened as a result of plaintiff's accident. The third was proposed testimony that the redesign allowed the pin to move further into the hole.

As in some states, Iowa Rule of Evidence 5.407 excludes evidence of subsequent remedial measures to prove negligence or culpable conduct, but not in strict liability claims.  Plaintiff, of course, argued that the proposed testimony was for his strict liability claims.  The trial court excluded the evidence at trial, which resulted in a defense verdict.

The state supreme court held that design defect and failure-to-warn claims sound in negligence, rather than strict liability.  Thus, the lower court had been correct to exclude evidence of the subsequent measures at the trial. Evidence of subsequent remedial measures, which a party seeks to introduce in an action based on a design defect claim, a failure to warn claim, or a breach of warranty claim brought under either theory, is not categorically exempt from exclusion under rule 5.407, because these claims are not strict liability claims. Instead, trial courts must analyze the reason a party seeks to admit such evidence. According to rule 5.407, evidence of subsequent remedial measures is not admissible to show negligence or culpable conduct. Such evidence is admissible to show “ownership, control, or feasibility of precautionary measures, if controverted, or impeachment.” Iowa R. Evid. 5.407.

The court found that the exceptions in the rule adequately accommodate a plaintiff's burden to prove a reasonable alternative design.  A plaintiff has the opportunity to introduce evidence of subsequent remedial measures if the defendant disputes the feasibility of a suggested alternative design.

The court found that important policy reasons, including the need to avoid deterring individuals from making improvements or repairs after an accident, supported the exclusion. Plaintiffs, and misguided academics, often assert that manufacturers will choose to make improvements to a product even if those improvements are admissible because the producer would otherwise risk litigation and negative publicity.  But there is a substantial body of criticism of that notion, which overstates the relevance of subsequent remedial measures, appears to have an over-focus on mass product producers (when the rule applies to everyone), and invites confusion of the jury, both by diverting its attention from whether the product was defective at the relevant time to what was done later, and by facilitating, in the minds of jurors, an inappropriate equation between subsequent design modification and an admission of a prior defective design.  This plaintiff's argument premises its conclusions concerning hypothetical manufacturer conduct upon the assumption that the product at issue is in fact defective, overlooking the situation where the product is not defective but could have been, and may be later, improved.

 

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On the eve of the 3rd biennial United States--China Consumer Product Safety Summit, to be held in China, the head of the Consumer Product Safety Commission reported she will press Chinese officials on whether new regulatory standards need to be set for drywall composition. CPSC Chairwoman Inez Tenenbaum said she also would inquire whether the Chinese were willing to provide compensation for the damage from tainted drywall.

In its latest status report on the Chinese drywall issues, the CPSC noted that it had received 1192 consumer complaints, from 24 different states. The majority of the reports continue to be from Florida, Louisiana, and Virginia. The focus of the federal drywall team has remained pursuing the scientific bases of the possible problems, and tracing the chain of commerce of the drywall.

CPSC reports it has completed principal field work for a 50 home indoor air sampling program, coordinated the state and federal response to allegations of radioactive phosphogypsum in Chinese drywall, and completed 75 in-depth site investigations, with another 20 in progress. Long-term air sampling tests will be completed later this month. The evaluation of the results is expected to be complete before November. (Phosphogypsum is a gypsum that has elevated levels of naturally occurring potassium, thorium and uranium radionuclides and decay products.) The CPSC coordinated testing and reporting results for radioactive phosphogypsum contamination in drywall with the Florida Department of Health and the EPA National Air and Radiation Environmental Laboratory. The results of the technical review showed that no radiological hazard was present. EPA is conducting elemental analyses of 15 drywall samples. EPA expects to complete its analyses of drywall samples in the next few weeks.

CPSC continues to analyze the information received from consumers, builders, importers, manufacturers, and suppliers of drywall to determine how much imported drywall may be affected and where that drywall has been installed. To date, CPSC staff has confirmed that during 2006, 6,997,456 sheets of Chinese drywall were imported into the U.S.

As readers of MassTortDefense know, litigation has been filed over the drywall issues, alleging that sulfur levels in the Chinese-made products are abnormally high, causing problems with air conditioning systems, appliances, internal wiring and other electrical systems.  Approximately 200 cases are pending in the MDL. In re: Chinese-Manufactured Drywall Products Liability Litigation, No. 09-md-02047 (E.D. La.).

In the MDL , the next status conference is scheduled for Thursday, November 19, 2009. Recently, the court  issued an order regarding a "Revised Exporter, Importer, or Broker Defendant Profile Form.”  All defendant drywall exporters, importers, or brokers must complete this Profile Form.  The form, inter alia, requires information on exemplar transactions concerning the exportation/importation/brokering of Chinese Drywall for import/export to the United States between 2001 and 2009, including but not limited to purchases, sales, consignments, shipments, transfers, deliveries, receipts, or other distributions.  The form requires information to identify any markings on the Chinese Drywall product (e.g., lot number, batch number, serial number, color markings, UPC codes, etc.) involved in this transaction; a list all trademarks of the product, and any markings or means of identification employed to track or identify the Chinese Drywall.

The issue of linking the specific product that allegedly harmed a plaintiff to the defendants who made and sold that particular product -- often termed "product identification" -- is an essential aspect of the cause in fact inquiry and is often problematic in toxic tort litigation.

 

 

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The Judicial Panel on Multidistrict Litigation has decided to consolidate multiple federal cases arising from the Zicam product line.  IN RE: ZICAM COLD REMEDY MARKETING AND SALES PRACTICES LITIGATION, MDL No. 2096.  Plaintiffs moved, pursuant to 28 U.S.C. § 1407, for coordinated or consolidated pretrial proceedings of multiple proposed class actions.  By the time the Panel issued its Order, there were 40 related actions pending in 26 federal districts.

Many of the pending cases were consumer fraud class actions against Matrixx Initiatives, Inc., and its subsidiaries Zicam, LLC, and Zicam Swab, LLC.  Plaintiffs opposed centralization of any actions alleging personal injury claims. But the Panel found that both kinds of actions involved sufficient common questions of fact, and that centralization of the actions under Section 1407 would serve the convenience of the parties and witnesses and promote the just and efficient conduct of this litigation. The actions share factual questions regarding, inter alia, the marketing and sale of three Zicam nasal cold remedy products, and alleged injuries sustained by the use and/or purchase of those products, particularly whether the products cause anosmia (the loss of sense of smell). Centralization under Section 1407, the court found, would eliminate duplicative discovery, prevent inconsistent pretrial rulings (particularly with respect to class certification), and conserve the resources of the parties, their counsel and the judiciary.

The Panel declined to separate purported consumer class actions from other actions alleging personal injury. Centralization of all actions in this docket would, said the court, allow a single judge to structure pretrial proceedings to accommodate all parties’ discovery needs while ensuring that the common parties and witnesses are not subjected to discovery demands that duplicate activity that will or has occurred in other actions.

The court chose the District of Arizona as the appropriate transferee forum. The defendants are based within the District of Arizona, and relevant documents and witnesses are likely found there, observed the Panel. In addition, centralization in the District of Arizona will allow for coordination of the federal actions with related litigation pending in Arizona state court.

 

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A federal court has dismissed a putative class action alleging that Sears Roebuck & Co. and Whirlpool Corp. engaged in unfair business practices and misleadingly marketed thousands of supposedly defective washing machines. Tietsworth et al. v. Sears, Roebuck & Co. et al., No. 09-cv-288 (N.D. Calif.)(dismissal without prejudice).

Plaintiffs alleged that  Whirlpool manufactured top-loading Kenmore Elite Oasis automatic washing machines, and Sears marketed, advertised, distributed, warranted, and offered repair services for the machines. Plaintiffs alleged that thousands of the machines contained a defect that causes them to stop in mid-cycle and display a variety of error codes.  Plaintiffs claimed that these electrical control system problems began within the first year after they purchased their washers. Plaintiffs alleged that virtually everything the defendants said about the machines in marketing was false because all such statements related directly to the functioning and performance of the Machine’s Electronic Control Board and, in turn, the Electronic Control Board controls the laundry cycles, the water levels and spin speed.

Defendants moved to dismiss. A complaint may be dismissed for failure to state a claim upon which relief may be granted if a plaintiff fails to proffer enough facts to state a claim to relief that is plausible on its face. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). Allegations of material fact must be taken as true and construed in the light most favorable to the non-moving party, but the court need not accept as true allegations that are conclusory, unwarranted deductions of fact, or unreasonable inferences. Here, although their claims arose under state law, plaintiffs' allegations were subject to the pleading requirements of the Federal Rules. Accordingly, the claims alleging fraud were subject to the heightened pleading requirements of Fed. R. Civ. P. 9(b). See Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1103-04 (9th Cir. 2003) (if “the claim is said to be “grounded in fraud” or to “sound in fraud,” [then] the pleading of that claim as a whole must satisfy the particularity requirement of Rule 9(b).”)

The principal element of fraudulent concealment at issue here was whether plaintiffs pled with sufficient particularity that defendants had a duty of disclosure with respect to the allegedly defective Electronic Control Boards. Plaintiffs argue that defendants had such a duty because they allegedly made "partial disclosures" about the Machines,and  were in a “superior
position" to know the truth.  These arguments were not persuasive to the court. There was no allegation at all, let alone an allegation with Rule 9 specificity, that defendants made any representations directly about the allegedly defective Electronic Control Boards. Nor could plaintiffs establish a duty by pleading, in purely conclusory fashion, that defendants were in a “superior position to know the truth;"  plaintiffs’ general allegations of “exclusive knowledge as the
manufacturer” and active concealment of a defect, if accepted, would mean that any unsatisfied customer could make a similar claim every time any product malfunctioned.

The district court then confirmed that Rule 9(b)’s heightened pleading standards apply to claims for violations of this state consumer act (CLRA ) and unfair competition act (UCL),  where such claims are based on a fraudulent course of conduct.  It was clear that the claims were entirely dependent upon allegations that defendants made misrepresentations, failed to disclose material facts, and concealed known information regarding the allegedly defective Electronic Control Boards.  So such claims failed for the same reasons.

Next, plaintiffs claimed that defendants  violated California’s Business and Professions Code by making misleading representations in informational placards on the floor models of the machines and in owners’ manuals. However, the court held that statements that the machines are “designed and manufactured for years of dependable operation” and that the machines “save you time by allowing you to do fewer, larger loads” are not statements about specific or absolute characteristics of a product, and properly are considered non-actionable puffery. See Anunziato v. eMachines Inc., 402 F. Supp. 2d 1133, 1139 (C.D. Cal. 2005) (holding that the representations concerning the “outstanding quality, reliability, and performance” of a product were non-actionable puffery”).

Regarding the unfair business act claim, an act or practice is unfair if the consumer injury is substantial, is not outweighed by any countervailing benefit to consumers or to competition, and is not an injury the consumers themselves could reasonably have avoided. Plaintiffs failed to plead adequately the second and third elements of their claim.  Plaintiffs failed to allege that they could not reasonably have avoided their claimed injuries, for example by purchasing an extended warranty. To the extent that plaintiffs based their claim on defendants’ alleged failure to disclose a
known defect in the machines, a mere failure to disclose a latent defect does not constitute a
fraudulent business practice.

One other highlight.  Plaintiffs contended that defendants’ warranties were procedurally and substantively unconscionable because defendants limited the warranties and allegedly actively concealed a known defect. However, any such claim of oppression may be defeated if the
complaining party had reasonably available alternative sources of supply from which to obtain
the desired goods or services free of the terms claimed to be unconscionable.  Here, plaintiffs failed to allege facts demonstrating that there were no alternative manufacturers of washers, and thus failed to allege the absence of an “available alternative source of supply from which to obtain the desired goods or services free of the terms claimed to be unconscionable.”  Dean Witter Reynolds, Inc. v. Superior Court, 211 Cal. App.3d 758, 768 (1989). Plaintiffs' emphasis that  any material alternative product or choice was curtailed or eliminated by the suggestions of Sears’ sales representatives that defendants’ machines were “the best” and superior to other washers, far from showing the absence of alternatives, merely highlighted the fact that alternatives apparently existed. 

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The judge overseeing the federal MDL involving genetically modified rice has granted partial summary judgment to the defendants, dismissing several claims, including a public nuisance allegation. In re: Genetically Modified Rice Litigation, No.4-md-1811 (E.D. Mo. 10/9/2009). 

This multi-district litigation relates to the claims of U.S. long-grain rice producers, and others in the rice business, who allege that certain defendants contaminated the U.S. rice supply with non-approved genetically modified strains of rice. The first of a series of bellwether trials will begin in November; this first trial involves Missouri farmer plaintiffs, and the court's Order rules on only the portions of the motions directed to the claims of the Missouri plaintiffs.

The Missouri plaintiffs are seeking damages under a variety of theories, including negligence,  public and private nuisance, negligence per se, and the North Carolina Unfair Trade Practices Act. The plaintiffs are suing to recover allegedly lost income they claim resulted from the drop in market price for rice; following the announcement of the contamination in 2006, some rice companies around the world banned the importation of U.S. rice, which allegedly caused a dramatic drop in the U.S. market price for rice.

Judge Catherine Perry of the U.S. District Court for the Eastern District of Missouri issued an opinion on a host of summary judgment  issues, most notably granting defendants’ motion for summary judgment on plaintiffs’ claims under the North Carolina Unfair Trade Practices Act and on plaintiffs’ claims for public nuisance and negligence per se.

Defendants asserted first that the economic loss doctrine bars all the common-law claims.  The economic loss doctrine bars recovery of purely pecuniary losses in certain tort cases if there is no personal injury or physical damage to property other than the property at issue in the case – usually an allegedly defective product in a products liability case. A plaintiff suing over damage to a product he contracted for is limited to his contract remedies. Many states have adopted the economic loss doctrine for products liability cases, and some states have applied the doctrine to other torts
as well. Here, however, the court found that the alleged damages were not to any property that was the subject of a contract, and the plaintiffs were not claiming damage to any property that is alleged to be defective. Rather, they claim market losses and damage to other property, including equipment, land, and rice. Because they alleged damage to other property, the doctrine does not
apply, concluded the MDL court.

Defendants fared better with plaintiffs' attempt to rely on the more pro-plaintiff North Carolina statute.  The court noted that plaintiffs are not suing based on contracts with Bayer, and although some of Bayer’s decision-making occurred in North Carolina, the claims of plaintiffs cannot be said to arise mainly from those North Carolina activities.  Although there was some conflicting authority, the court concluded that the better reasoned cases require an in-state injury to a plaintiff’s in-state business operations. In other words, the North Carolina Unfair and Deceptive Trade Practices Act is intended to protect the North Carolina consumer.  Plaintiffs had not shown that their claims here had a sufficient effect on North Carolina business for them to benefit from this act intended to protect North Carolina commerce.

Third, in Missouri, a public nuisance is an offense against the public order and economy of the state that violates the public’s right to life, health, and the use of property, while, at the same time annoys, injures, endangers, renders insecure, interferes with, or obstructs the rights or property of the whole community, or neighborhood, or of any considerable number of persons. Bayer was able to show that, as matter of law, plaintiffs cannot recover for public nuisance. There is no evidence in the record showing the sort of public harm or negative effect on the entire community that public nuisance law was developed to remedy.

A private nuisance, on the other hand, is the unreasonable, unusual, or unnatural use of one’s property so that it substantially impairs the right of another to peacefully enjoy his property.  Plaintiffs’ private nuisance claim survived summary judgment because factual disputes remain regarding whether contamination of plaintiffs’ crops may interfere with their enjoyment of their land. The focus of a private nuisance claim, said the MDL court,  is on defendant’s unreasonable interference with the use and enjoyment of plaintiff’s land.  A genuine issue of fact remains regarding whether plaintiffs can prove a private nuisance.

Defendants were entitled to summary judgment on plaintiffs’ negligence per se claim, to the extent it relied on a violation of federal Animal and Plant Health Inspection Service regulations. This is because they are more in the nature of performance standards that do not provide a standard of
care.  So, for example, if a building code says a stair riser must be six inches tall, that is a precise directive that a builder can follow, and if someone is injured because the riser is taller or shorter, negligence per se might apply.  A building code that says the stair riser should be of a sufficient height not to be dangerous or so that a person will not fall could not provide a basis for a negligence per se claim because the question of what is reasonable was not answered by the building code regulations.

We will keep an eye on the first bellwether case for our readers.

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Many readers of MassTortDefense have wondered about the potential future litigation risks associated with nanotechnology. The U.S. Environmental Protection Agency has just finalized its new strategy to guide its research into how nanomaterials, used in a growing number of consumer products, might be studied for potential effects on human health and the environment. The Nanomaterial Research Strategy (NRS) describes the EPA's strategy for conducting and supporting research to understand the potential human health and ecological implications from exposure to manufactured nanomaterials, and how nanotechnology can be used sustainably in environmental protection applications.

EPA has written this document with three stated purposes:
(1) to guide its own researchers and managers as they conduct EPA’s research program,

(2) to assist scientists in other organizations and agencies as they plan research programs, and

(3) to inform the public of how EPA intends to generate scientific information to guide environmental decisions related to nanomaterials.

With the use of nanotechnology in the consumer and industrial sectors expected to increase
significantly in the future, nanotechnology offers society the promise of major benefits. The challenge for environmental protection is to ensure that, as nanomaterials are developed and used, unintended consequences of exposures to humans and ecosystems are prevented or minimized. In addition, knowledge concerning how to sustainably apply nanotechnology to detect, monitor, prevent, control, and clean up pollution is needed, says the NRS.

The strategy builds on the work of the Nanotechnology Environmental and Health Implications
Working Group (NSTC, 2008), and in the EPA’s Nanotechnology White Paper (EPA, 2007).

EPA’s strategy focuses on four areas:

􀂃 Identifying sources, fate, transport, and exposure
􀂃 Understanding human health and ecological effects to inform risk assessments and test methods
􀂃 Developing risk assessment approaches
􀂃 Preventing and mitigating risks
 

The key science questions described in the strategy document are intended to help decision makers answer the following questions:
􀂃 What nanomaterials, in what forms, are most likely to result in environmental exposure?
􀂃 What particular nanomaterial properties may raise toxicity concerns?
􀂃 Are nanomaterials with these properties likely to be present in environmental media or biological
systems at concentrations of concern, and what does this mean for risk?
􀂃 If we think that the answer to the previous question is “yes,” can we change properties or mitigate
exposure?

Readers of MassTortDefense know that nanotechnology is the process of manipulating materials 1 million times smaller than a millimeter. Nanomaterials, lighter and stronger than other materials, are used in hundreds of products already on the market, including many cosmetics and skin care products.  We have posted on this topic before.  Materials can take on new properties at the nano level, becoming stronger, better conductors of heat or electricity, for example.

The EPA's own office of research development is focusing its research on seven manufactured nanomaterial types: single-walled carbon nanotubes, multiwalled carbon nanotubes, fullerenes, cerium oxide, sliver, titanium dioxide and zero-valent iron. Carbon nanotubes are used in vehicles, sports equipment and electronics, while titanium dioxide is used in paints, cosmetics and sunscreens, as reported by EPA.  The Agency is also part of the government-wide National Nanotechnology Initiative.

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Last week a federal jury in Louisiana returned a defense verdict in a plaintiffs' suit over alleged exposure to formaldehyde fumes while living for several months in a FEMA-provided trailer. In Re: FEMA Trailer Formaldehyde Products Liability Litigation, Age v. Gulf Stream Coach Inc., No. 09-02892, E.D. La.). The government had made the trailer available after Hurricane Katrina destroyed the plaintiffs' home in 2005.

Plaintiffs sued manufacturer Gulf Stream Coach Inc. and installer Fluor Enterprises Inc., alleging that elevated levels of formaldehyde aggravated family members' asthma and increased their risk for getting cancer.  (FEMA was dismissed as a defendant in the lawsuit because of the two-year statute of limitations in cases brought against the federal government.)  They argued that Gulf Stream Coach, in expediting production of the housing units following Hurricanes Katrina and Rita, used substandard materials and/or unsafe practices during the manufacturing process, which allegedly resulted in the temporary housing units containing higher than normal levels of formaldehyde. Plaintiffs alleged that Fluor's installation methods contributed to greater formaldehyde exposure.  They further charged that the FEMA trailer deviated from government safety specifications and that Gulf Stream failed to warn the government about the dangers of formaldehyde, which is found in construction materials as well as in glues and adhesives used in the manufacture of the units.

The claim is one of many hundreds of suits filed that are now part of the MDL, and one of the first five bellwether cases selected for trial. Readers of MassTortDefense will recall how Hurricane Katrina devastated much of the Gulf Coast in 2005. The total damage of Hurricane Katrina has been estimated at $75 billion, while not-much-later Hurricane Rita caused $10 billion in damage. The government, through FEMA, moved individuals whose homes were lost or deemed uninhabitable into makeshift housing provided by the agency. Plaintiffs generally allege that the trailers had components that exposed them to dangerous and excessive levels of formaldehyde.

The defense here presented alternative causation evidence on the alleged respiratory issues, and noted that formaldehyde is found in safe levels in many products, including cosmetics, foods and shampoo. The defendants sold this trailer to the most sophisticated purchaser in the world, the United States government, argued the defense, and there is no duty to warn someone about something they know about already. The defense argued that Gulf Stream wasn't obligated to build a "perfect product."

The jury of five men and three women, after 8 days of testimony, decided that the trailer made by Gulf Stream Coach Inc. was not an “unreasonably dangerous” product under Louisiana law. Judge Kurt D. Engelhardt presided over the trial.  A likely issue on appeal will be the MDL court's decision to allow certain defendants to assert the government contractor defense.

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As due process considerations have taken their more appropriate place in the law of punitive damages, see BMW of North America, Inc. v. Gore, 517 U.S. 559 (1996), trial courts have struggled with the intersection of traditional product liability law and new rules on evidence necessitated by such due process concerns. 

For example, plaintiffs frequently seek to use evidence of other allegedly similar conduct and allegedly substantially similar accidents, injuries, incidents for liability related issues such as notice and defect.  In Philip Morris USA, Inc. v. Williams, 127 S.Ct. 1057 (2008), however, the Court confirmed a significant constitutional principle limiting punitive damages awards: the Due Process Clause prohibits juries from basing punitive damages awards even in part upon the desire to punish a defendant for harm to persons that are not before the court. 

Williams arose from an Oregon trial wherein a jury awarded $821,000 in compensatory damages and $79.5 million in punitive damages against cigarette manufacturer Philip Morris. At trial, the plaintiff’s attorney had urged the jury to punish Philip Morris for alleged harm to smokers other than the plaintiff by referring to the defendant’s market share and the number of smokers not only in the state of Oregon, but nationwide, who had allegedly contracted a smoking-related illness in the last 40 years. The Supreme Court held that the Due Process Clause forbids a jury from assessing punitive damages to punish a defendant for injury that it inflicts upon non-parties or “strangers” to this litigation. While a jury may consider the actual or potential harm to non-parties in the narrow context of determining “reprehensibility” of the conduct, which in turn is one of the factors relevant to an analysis whether the punitive damages award is excessive or not, it may not punish the defendant for the impact of its alleged misconduct on other people, who may bring lawsuits of their own in which other juries can resolve their claims.

The Supreme Court cautioned state courts that they must make sure that the “jury will ask the right question, not the wrong one.”  That is, evidence regarding alleged injuries of those not before the court must be used solely to judge the reprehensibility of the conduct, not to assess damages for the harm caused to those strangers. While the Court commented on the Oregon court’s refusal to give a jury instruction clarifying this distinction, it noted generally that state courts cannot authorize any procedures that create an unreasonable and necessary risk of any such confusion occurring. When evidence is introduced or argument made that risks this confusion, the state court must take steps to protect against that risk. 

Another such conflict was seen in the recent Montana case involving the trial court's exclusion of a car seat manufacturer's evidence of regulatory compliance.  Malcolm v. Evenflo Co., 2009 WL 2917799 (Mont., September 14, 2009).  The state supreme court ruled that while the evidence should have been excluded from the jury's consideration of liability for compensatory damages, the evidence should have been admitted for purposes of assessing punitive damages.  It let stand the compensatory award, but vacated the punitive damages award.

The case arose from a motor vehicle accident during which plaintiff's decedent  rode in the back of an SUV in the OMW model 207 child seat. A northbound motorist swerved into plaintiff Malcolm's lane and forced Malcolm off the road. The vehicle rolled three times, traveled down a steep incline, and stopped in a ditch.  The left belt hook of the OMW broke off during the rollover. The seat belt slipped out from the open-ended belt hook on the opposite side of the seat. The forces of the accident ejected the OMW from the vehicle, which resulted in death, according to plaintiffs.

The theory at trial was strict liability in tort, design defect theory. The Malcolms claimed that the Evenflo OMW model 207 infant child safety seat constituted a defectively designed product that failed even though they had used the seat in a reasonably anticipated manner. The Malcolms pointed to the OMW's open-ended belt hook design that might have prevented the injury. The Malcolms contended that Evenflo could have manufactured the OMW using an allegedly  feasible superior alternative design that required the vehicle's seatbelt to be routed through an enclosed seat belt tunnel even when the seat was used without the base. The Malcolms also sought punitive damages. The Malcolms alleged that Evenflo “continued selling the defective product in conscious, deliberate and intentional disregard of the danger presented.”

Evenflo contended that the OMW model 207 was not defective in any way. Evenflo argued that the severity of the forces involved in the accident were the sole cause of the death. Evenflo argued that the “tremendous forces” that occurred during the rollover forced open the rear passenger door, which was immediately adjacent to Tyler's child seat. Evenflo posited that Tyler's car seat came into direct contact with the ground as the Suburban rolled. Evenflo argued that the contact caused the seat to detach from the seat belt system and ultimately fly out the open door.

The National Highway Traffic and Safety Administration (NHTSA) requires that all child restraint systems comply with the minimum requirements of Federal Motor Vehicle Safety Standard 213. See 49 C.F.R. § 571.213 (2009). NHTSA required Evenflo to conduct internal testing of the OMW to determine if it complied with the FMVSS 213 standards, which it did. NHTSA and Transport Canada, the Canadian testing agency, conducted random audit FMVSS 213 tests in addition to Evenflo's internal testing.

The first issue was the basic products issue: Evenflo argued that the trial court erred when it excluded any evidence that the OMW model 207 complied with FMVSS 213. Evenflo contended that the fact that the OMW model 207 passed 341 tests performed under FMVSS 213 was highly relevant to the claim that the model 207 was defective and unreasonably dangerous.

Evenflo noted that the standard would be admissible in a negligence case, and  there is no reason why such highly relevant evidence should not be used in strict products liability cases. Thus, Evenflo urged the Court to adopt the Restatement (Third) of Torts: Products Liability § 4 (1998). Section 4 provides that compliance with an applicable regulation is admissible in connection with liability for defective design. Evenflo noted that a majority of jurisdictions hold that compliance with product safety regulation is relevant and admissible on the question of defectiveness, even if it is not necessarily controlling.

The four-justice majority reiterated this court's adherence to “well-settled, decades-old principles of strict liability” that consider irrelevant a manufacturer's reasonableness and level of care. The court declined to adopt the Restatement (Third) of Torts: Products Liability, §4.  Montana thus continues to be one of those few states that cling to the now-discredited "bright line" verbal distinction between cases asserting strict liability in tort and those grounded in negligence theory. (This Court had previously distinguished strict liability from negligence when it rejected the “state of the art” defense, for example, because it raises issues of reasonableness and foreseeability --concepts fundamental to negligence law.)  It still argues that any attempt to inject so-called negligence principles into strict liability law would somehow sever Montana's strict products liability law from the core principles for which it was adopted.  The focus in design defect cases must be on “the condition of the product,” rather than “the manufacturer's conduct or knowledge."  And the way to do this, apparently, is to exclude relevant, material, probative evidence that the product passed regulatory muster.

On the punitive damages issue, Evenflo argued that the trial court's decision to exclude evidence of the OMW model 207's compliance with FMVSS 213 prevented it from introducing evidence bearing on its state of mind. A defendant's state of mind is a “key element” in assessing punitive damages, and the car seat maker should have been able to present evidence of its regulatory compliance. 

The trial court had concluded that the OMW model 207's compliance with FMVSS 213 had “absolutely no bearing at all upon the reprehensibility of the conduct of Evenflo.” But the supreme court could not sustain the verdict on punitives in light of the court's decision to exclude evidence that might show why Evenflo acted as it did, or failed to act, when the jury considered whether to award punitive damages. Evidence of Evenflo's good faith effort to comply with all government regulations, including FMVSS 213, would be evidence of conduct inconsistent with the mental state requisite for punitive damages.

Interestingly, the supreme court noted that while here a new jury here could consider evidence of the OMW model 207's compliance with FMVSS 213 for the purposes of determining whether Evenflo acted with actual fraud or actual malice, generally the Montana system provides for the presentation of evidence regarding liability for compensatory damages and punitive damages to the jury in a single proceeding. Thus, bifurcation is disfavored, and the trial courts must ordinarily trust that the jury will heed the court's instructions as to how to evaluate the evidence presented.

One dissenting justice would have also reversed the compensatory damages. He differed from the majority on how the trial was conducted and saw it as improperly biased against Evenflo. Two other dissenters agreed with the majority on the compensatory damages but would have sustained the punitive award, arguing that Evenflo's inability to present evidence of its compliance with regulations did not prejudice the company.

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Many a reader of MassTortDefense has wondered and worried about whether jurors were following a court's admonishment not to see or read anything about the issues in a case outside of the court room.  Sequestration is rare, especially in a civil case. (The O. J. Simpson jury was sequestered for eight and a half months.)  And with the advent of the Internet, jurors have potential access not only to publicity about the actual trial, but fingertip access to research tools on any issue in the case. Some of the same concerns arise with potential jurors; it may be impossible to ask enough specific questions in the voir dire process to ferret out every such issue.

A recent take on this comes in Russo v. Takata Corp., 2009 WL 2963065 (S.D. 9/16/09).  The South Dakota Supreme Court ruled that a potential juror's Google search of a defendant seat belt manufacturer, and his conversation about his findings with other jurors during deliberations, warranted a new trial.

Plaintiffs' decedent was a  sixteen year old driver of her mother's vehicle, on the way to school. The vehicle crossed the centerline, traveled back into its lane of traffic, slid sideways off of the shoulder of the road, and rolled almost three times down a steep ravine before hitting a tree. The girl was killed.  Plaintiffs alleged that the seat belt unlatched due to inertial forces acting on the buckles during the rollover. General Motors Corporation and Suzuki Motor Corporation settled their respective claims before trial.

Takata, the manufacturer of the model TK-52 seat belts installed in the vehicle, denied Plaintiffs' claims. Takata proceeded to trial under the theory that the decedent did not buckle her seat belt before the crash, and that she negligently failed to maintain control over the vehicle. Takata also denied that inertial unlatching of the model TK-52 seat belts was possible in real world accidents.
 

Takata filed a motion in limine seeking to exclude or limit evidence on alleged prior seat belt failures. The trial court determined that such evidence was “relevant solely to the issue of notice regarding the alleged defect” and irrelevant to whether a defect actually existed in the seat belt involved in this case. It then limited the evidence of prior alleged accidents, claims, and lawsuits to the issue of notice.

At trial, Plaintiffs presented evidence that other drivers or passengers had experienced seat belt failures in the past. Some of the witnesses were uncertain whether their seat belt was manufactured by Takata, or whether notification given to General Motors was passed on to Takata. Evidence was also presented to the jury that ten other lawsuits had been filed against Takata alleging seatbelt malfunctions. The jury was instructed that evidence of other lawsuits and complaints was “only for the purpose of establishing whether Takata had notice of the alleged defect.”

During deliberations, one juror asked out loud whether Takata had ever been sued. A juror (Flynn, according to the opinion) responded that he had done a Google search and had learned that Takata manufactured seat belts and airbags but did not find any lawsuits during his search. The entire exchange lasted approximately three to five minutes, and no report was made to the trial court concerning Flynn's remarks. The jury deliberated for approximately another one and one-half hours before reaching a verdict for Takata.  Plaintiffs later filed a Motion for New Trial alleging juror misconduct. Affidavits from ten jurors were filed with the motion.

The state Supreme Court noted it was announcing no hard and fast rule that all such types of Internet research by a juror prior to trial without notice to the court and counsel automatically doom a jury's verdict. Rather, the court gave deference to the trial court, which had the distinct advantage of being present throughout the nineteen-day trial. The trial court was in the best position to determine whether material was extrinsic to the issues before the jury, or whether the extraneous material prejudiced the jury. The trial court's award of a new trial was affirmed.
 

The reasoning: statutory language in many jurisdictions limits the type of information that a juror may be asked to provide via an affidavit or under oath at a hearing on a motion for new trial.  And that's the only way, typically, for a litigant to show juror conduct.  The prohibition on admitting testimony and affidavits pertains to intrinsic information, which includes statements or discussions which took place during deliberations.  Testimony and affidavits concerning extrinsic information, however, may be obtained from a juror.  Extrinsic information includes media publicity, conversations between jurors and non-jurors, and evidence not admitted by the court.  It also includes “knowledge relevant to the facts in issue not obtained through the introduction of evidence but acquired prior to trial, experiments, investigations, news media, etc.”   Secondly, the type of after-acquired information that potentially taints a jury verdict should be carefully distinguished from the general knowledge, opinions, feelings and bias that every juror carries into the jury room.

Takata argued that the information Flynn obtained during his Google searches was not extrinsic  because it was obtained before trial and was discoverable through voir dire.  As such, Takata argued it should have been explored during voir dire. The court found that Takata's argument that Plaintiffs could have asked more probing questions and possibly discovered Flynn's prior knowledge was likely valid. Takata's argument, however, missed the mark, said the court, in that Flynn obtained the information (that no lawsuits were listed on Takata's home page) after receiving his jury summons; that fact was specific to the defendant and relevant to evidence that was admitted at trial for a limited purpose under a carefully crafted order.  It pertained to the issue of knowledge of a defect with the TK-52 seat belt, an issue hotly contested between the parties, and it directly contradicted the evidence admitted at trial under the trial court's limiting order. This was not simply information that Flynn obtained in passing from media outlets prior to his awareness that a suit against defendants was pending.  The juror apparently sought out the information specifically in response to the receipt of the summons in which the names of the defendants were first made known to him, observed the court.

The burden of persuasion as to prejudice is on the party seeking a new trial. The trial court concluded as a matter of law that Flynn's extrinsic information prejudiced the jury's verdict. The information was presented to jurors at an arguably critical juncture during deliberations, and it had a tendency to influence the jury in a manner inconsistent with the evidence and the instructions of the trial court. Extrinsic information that goes beyond the mental processes of one juror and becomes known to other jurors can prejudice a jury verdict and affect the substantial rights of the party seeking a new trial. At least four jurors, including Flynn, were involved in the conversation in which Flynn revealed his Google search. While all jurors agreed that the jury did not discuss the Google search as a panel during deliberations, the state Supreme Court did not require that the entire jury be exposed to extrinsic information in order to proceed to determine whether there was prejudicial effect.

Takata argued on appeal that the verdict on the defect claims had already been put to a vote, and the jury found that her seatbelt was not defective. Plaintiffs argued in response that the jury verdict form had not been signed at the time Flynn made his remarks. Thus, they concluded the jury had yet to reach a final verdict at the time in question.

The state high court found that the trial court was in the best position to determine which claims had been dealt with and which ones remained to be discussed by the jury at the time of Flynn's comments. It concluded that the issue of whether the seat belts were defective and whether Takata had notice was "still in play" at the time Flynn revealed his Internet searches to members of the jury.

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The Indiana Supreme Court issued a decision recently, reminding us of the importance of fully developing the causation case, in addition to the response to plaintiff's defect allegations. Kovach v. Caligor Midwest, 2009 WL 2871172 (Ind. September 8, 2009).

The plaintiffs alleged their son was given a fatal overdose of pain medication by a nurse after a surgical procedure. The plaintiffs sued the manufacturers and distributors of the medicine cup used to administer the medication, alleging that defects in design of the cup made it unsuitable for the precise measurements necessary for drugs, and alleging a failure to warn that the cup was not suitable for precision measurement. The interior of the cup bore translucent markings to measure its contents, and graduations delineated both 15 and 30 mL. The nurse had used that type of cup frequently, both at this surgical center and at other hospitals, and she had no difficulty reading its markings. The nurse testified she filled the cup approximately half-way and administered 15 mL of medication to plaintiff's decedent.  According to decedent's father, however, who was present when the drug was administered, the nurse gave the son a full cup of medicine.

So, as is frequently the case, a potential malpractice claim is turned into a product liability claim against an ostensibly deeper pocket, unencumbered by med mal tort reform restrictions.

The plaintiffs presented expert evidence opining that the cup was defective in design and warnings, evidence that was challenged by the defense.  Plaintiffs also argued that if the medicine cup had been better suited as a precision measuring device or had contained a warning that it was not suitable for precision measurement, the decedent would not have received an overdose -- the alleged causal link.  The court did not have to reach the issues surrounding the alleged defects and the expert affidavit which plaintiffs had put forward to support their theory of defect, because the facts established that there was no such causal connection. The results of an autopsy revealed that the decedent had more than twice the recommended therapeutic level of codeine in his blood stream. The undisputed evidence thus demonstrated that if there was an overdose in this case, it was not caused by an imprecise measurement of medication attributable to less than readily discernible marks. (The plaintiff expert had estimated that the cup's imprecision could result in up to a 20% to 30% margin of error.) Rather, if the drug was the medical cause of the death, it was due to an erroneous, double dosage; the accident therefore cannot be attributed in a legal cause sense to any alleged defects in the cup itself.

Plaintiffs tried to then rely on the "read-and-heed" presumption -- i.e., the notion in some jurisdictions that the jury can presume that if an adequate warning had been given it would have been heeded. Such a presumption may aid a defendant when a warning was given.  Plaintiffs often try to use the presumption to attempt to clear the causation hurdle when no warning is given.  But the presumption does not completely dispose of the causation issue in a failure-to-warn case, said the court. The most the presumption does is establish that a warning would have been read and obeyed. It does not necessarily establish that the defect in fact caused the plaintiff's injury. The plaintiff invoking the presumption must still show that the danger which allegedly would have been prevented by an appropriate warning was the danger that actually materialized in the plaintiff's case.  

Plaintiffs could not show that element, given the circumstances of the drug usage. The judgment of the trial court granting summary judgment in favor of the cup defendants was affirmed. 

 

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Bayer Healthcare LLC moved last week to dismiss the master complaint in the federal MDL involving combination aspirin products. In Re: Bayer Corp. Combination Aspirin Products Marketing and Sales Practices Litigation, No. 1:09-md-02023 (E.D. N.Y.). Aspirin has been sold in the United States for more than a hundred years; a daily regimen of low-dose aspirin is widely recognized as useful in preventing heart attacks and strokes.

Plaintiffs are consumers who claim to have purchased Bayer combination aspirin and dietary supplement products. They do not claim that they were injured by these products or that the products were ineffective. Instead, plaintiffs seek damages because they say they would not have purchased these products if they had known that Bayer, instead of submitting a New Drug Application (“NDA”) for each of these combination products, relied on the preexisting separate regulatory review of aspirin and the supplements. Plaintiffs allege that Bayer misled and deceived
consumers into believing that the products had been proven to be safe and effective for their marketed purposes.
 

The Motion argues that plaintiffs’ claims fail, first, because they are, in essence, private attempts to enforce the FDCA, 21 U.S.C. §301 et seq.  MassTortDefense notes that courts have repeatedly refused to construe such private attempts to enforce the FDCA as valid state law causes of action like the plaintiffs have brought in this litigation. Under the FDCA, the United States government has the exclusive power to enforce the FDA’s regulatory requirements (which include provisions relating to the approval of new prescription and over-the-counter drugs, as well as regulation of dietary supplements and food additives). The FDCA provides that “[a]ll such proceedings for the enforcement, or to restrain violations, of this Act, shall be by and in the name of the United States.” 21 U.S.C. § 337(a) (2009).

Even if a state were to recognize it, a cause of action based on a failure to obtain FDA approval would be preempted as interfering with the FDA’s approval processes. Courts have repeatedly held that private plaintiffs fail to state a claim where they, in essence, seek redress for a violation of the FDCA. Courts have applied this doctrine to dismiss a variety of causes of action, from RICO and the Lanham Act, to state law unfair competition and consumer fraud act claims. See, e.g., Mylan Labs. v. Matkari, 7 F.3d 1130, 1139 (4th Cir. 1993) (dismissing Lanham Act claim); In re Epogen & Aranesp Off-Label Mktg. & Sales Practices Litig., 590 F. Supp. 2d 1282, 1290 (C.D. Cal. 2008) (dismissing state consumer fraud and false advertising and RICO claims); Ethex v. First
Horizon Pharm. Corp., 228 F. Supp. 2d 1048, 1055 (E.D. Mo. 2002) (dismissing deceptive trade practices claims and Lanham Act claim).

Additionally, defendant argues that plaintiffs, who do not claim harm or that their products did not work, have not alleged a cognizable injury. Accordingly, plaintiffs have not stated a claim for any of the causes of action they have brought. Under Fed. R. Civ. P. 12(b)(6), a complaint must be dismissed if it fails to articulate grounds upon which relief can be granted. Under Rule 8(a), a plaintiff’s obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do. Bell Atlantic Corp. v. Twombly, 550 US 544, 555 (2007).   The Supreme Court recently reaffirmed these principles in Ashcroft v. Iqbal, 129 S. Ct. 1937 (2009).

These standards apply to injury and loss requirements as well as to other elements of a claim. As the Second Circuit recently explained, to state a claim for relief, a plaintiff must do more than simply allege an injury or loss – that theory must be “plausible.” McLaughlin v. American Tobacco Co., 522 F.3d 215, 227 (2d Cir. 2008). Legally cognizable theories of injury must also not require a court to “engage in a series of speculative calculations to ascertain whether, or in what amount, plaintiffs suffered a loss.” Id. at 230.  Like many convoluted consumer fraud actions, plaintiffs' claims here fail to allege a plausible theory that is open to private plaintiffs.
 

 

 

 

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The U.S. Food and Drug Administration has launched two Internet-based initiatives that may be noteworthy for MassTortDefense readers involved in food safety issues.

First, the FDA has launched an Internet-based registry to track patterns in contaminated food.  The site, explained here, is a result of 2007 legislation requiring food facilities to report potentially dangerous products. Food industry officials are required to use the Reportable Food Registry to alert the FDA when they discover a risk that  their products might injure people or animals, the agency stated last week. By fostering real-time submission to the FDA of information on food safety hazards, the registry is supposed to enhance the agency’s ability to act quickly to prevent food-borne illness. The goal is to catch the problem before people get sick. 

Facilities that manufacture, process, or hold food for consumption in the U.S. must now tell the FDA within 24 hours if they find a “reasonable probability” that an article of food will cause severe health problems or death to a person or an animal. The reporting requirement, which applies to all foods and animal feed regulated by the FDA, does not reach infant formula and dietary supplements.

Any person who has to submit registration information to the FDA for a food facility that
manufactures, processes, packs, or holds food for human or animal consumption is deemed a “responsible party” and must follow the reporting requirement. A responsible party also must investigate the cause of the adulteration if the adulteration of food may have originated with the responsible party. 

The registry's proposal drew criticism from some industries, and they in fact had asked the FDA last month to extend the effective date for reporting. For example, national organizations representing the grain, feed, grain processing and pet food industries said that, at the very least, the FDA should exercise enforcement discretion in order to provide an appropriate phase-in period. FDA did not do so.

The launch of the FDA registry comes just as Congress is considering a new food safety bill that would give the FDA more funding and greater authority to order recalls of products. The House passed a food safety bill in the summer, and the Senate is expected to take up the issue later this fall.

At the same time, the administration is rolling out a new Web site designed to streamline food safety information for the public. Health and Human Services Secretary Sebelius announced the new Web site  last week. The site is a joint effort among HHS, the Department of Agriculture and the FDA.

The site will put food-related information from all federal agencies in one place.  It includes sections on how to "Keep Food Safe"; what to do in the case of suspected "Food Poisoning"; a section for industry relating to "Inspections & Compliance"; as well as food news, agency events (such as workshops, meetings, and conferences) for FDA, CDC, USDA; and educational materials on food safety.  Of particular interest to our readers may be the links to agency speeches and presentations, communications to Congress, and Congressional testimonies.

 

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Two recent consumer fraud class actions offer contrasting lessons.  First, the federal court declined to certify a class of Ford Motor Co. truck owners who alleged the vehicles are prone to a shimmying problem. Lewis v. Ford Motor Co., 2009 WL 2750352 (W.D. Pa. 8/25/09).

According to Plaintiffs, their vehicles were subject to front-end suspension defects which caused severe oscillation under ordinary driving conditions and allegedly created a safety hazard for the drivers of the vehicles as well as other motorists. Pennsylvania residents Timothy Lewis and Timothy Trapuzzano sued Ford on behalf of a statewide class of owners of 2005–2007 model year F-250 and F-350 trucks.  Plaintiffs moved seeking class certification as to Count III of their Complaint, the alleged violation of the Pennsylvania Unfair Trade Practices and Consumer Protection Law.  The court noted that the 3rd Circuit has recently re-evaluated the standard of review to be applied by a district court in considering a motion for class certification. First, the district court must consider carefully all relevant evidence and make a definitive determination that the requirements of Rule 23 have been met before certifying a class;  that is, it is no longer sufficient for a party to assure the court that it intends or plans to meet the requirements. Second, the decision to certify a class requires rigorous consideration of all the evidence and argu-ments offered by the parties.  This may require the court to resolve all factual or legal disputes relevant to class certification, even if they overlap with the merits -- including disputes touching on elements of the cause of action.  Finally, weighing conflicting expert testimony at the certification stage is not only permissible; it may be integral to the rigorous analysis Rule 23 demands. In other words, to certify a class the district court must find that the evidence more likely than not establishes each fact necessary to meet the requirements of Rule 23. In re Hydrogen Peroxide Antitrust Litig., 552 F.3d 305, 310 (3d Cir.2008.)

Originally, plaintiffs alleged the defendant failed to comply with the terms of a written guarantee or warranty given to the buyer at, prior to or after a contract for the purchase of goods or services.  But at the motion stage, instead, plaintiffs relied on the so-called “catch-all” provision, which broadl includes “unfair methods of competition” or “unfair or deceptive acts or practices” to include “engaging in any other fraudulent or deceptive conduct."   This switch may have been done to avoid the argument that plaintiffs need to prove relaince -- an indivdualized inquiry that can impede certification.  The court consluded, based on the almost universal agreement of the district courts of the 3rd Circuit, that a plaintiff must allege and show justifiable reliance even for claims brought under the catch-all provision of the state's Consumer Protection Act.

The reliance element was individual, and interestingly, the court noted that this affected the 23(a) issue of commonality as well as the 23(b) issue of predominance. Next, plaintiffs argued that while there may be some individual differences in the amount of damages, such discrepancies were not sufficient to defeat class certification. However, the court noted, they failed to recognize that the threshold questions do not concern the amount of the individual damages but whether or not the individual injury occurred. Proof of injury or fact of injury (whether or not an injury occurred at all) must be distinguished from calculation of damages (which determines the actual value of the injury. 

If proof of the essential elements of the cause of action requires individual treatment, then class certification is unsuitable. Here, each class member would have to show not only justifiable reliance but also loss as a result of that reliance, aspects subject to individual, rather than common questions of law or fact. This lack of commonality rendered this case unsuitable for class treatment.  And it logically followed that if plaintiffs failed to satisfy the criteria for showing commonality, they cannot satisfy the more strenuous demands of the predominance analysis.

Shortly thereafter, the 9th Circuit handed down a decision announcing a standard of review for legal issues related to certification orders, and overruled a district court's denial of class certification in a consumer fraud class action.  Yokoyama v. Midland Nat'l Life Ins. Co., 2009 WL 2634770
(9th Cir.  8/28/09).

Three consumer senior citizens, all residents of Hawaii, alleged that they had purchased Midland's annuities from an independent broker. Plaintiffs alleged that the the annuities were marketed through deceptive practices, in violation of Hawaii's Deceptive Practices Act. The district court held that the plaintiffs could not satisfy Federal Rule of Civil Procedure 23's requirements that common issues predominate over individual issues and that a class action is a superior method of adjudication.

The dispositive issue on appeal was whether the Hawaii Act requires a showing of individualized reliance.  But there was a debate over the standard of review.  WHile certification decisions generally were reviewed under an abuse of discretion standard, the 9th Circuit panel agreed with the Seventh Circuit's explanation of the appropriate standard of review. Andrews v. Chevy Chase Bank, 545 F.3d 570, 573 (7th Cir.2008).  That is, the underlying rulings on issues of law must be reviewed de novo even when they are made in the course of determining whether or not to certify a class. We generally review a grant of class certification for abuse of discretion, but purely legal determinations made in support of that decision are reviewed de novo. (Note that Judge Smith argued in his concurrence that Ninth Circuit precedent cannot be overturned by two judges, only en banc).

Hawaii courts have interpreted the word “deceptive” to include those acts that mislead consumers acting reasonably under the circumstances, observed the panel.   And a deceptive act or practice is  a representation, omission, or practice that is likely to mislead consumers acting reasonably under the circumstances.  The representation, omission, or practice is material if it is likely to affect a consumer's choice. Whether information is likely to affect a consumer's choice is an objective inquiry, turning on whether the act or omission is likely to mislead consumers as to information important to consumers in making a decision regarding the product or service.  Therefore, said the court, since Hawaii's consumer protection laws look to a reasonable consumer, not the particular consumer, inidivudal relaince is not an element. The fact-finder will focus on the standardized written materials given to all plaintiffs and determine whether those materials are likely to mislead consumers acting reasonably under the circumstances.

 

 

 

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The FDA is considering issuing guidelines on acrylamide content in food.  The agency has published a notice seeking comments from industry on the issue.

Acrylamide is a chemical formed primarily in baked and fried foods by a reaction between sugars and the amino acid asparagine. The reaction is partly responsible for the golden color and tasty flavor of baked, fried, and toasted foods. In 2002, some Swedish scientists reported unexpectedly high levels of acrylamide in carbohydrate-rich foods and also published a study associating the chemical to cancer in laboratory rats. Further research subsequently determined that acrylamide can form in some foods during certain types of high-temperature cooking.

FDA has not yet issued guidance for manufacturers on reducing acrylamide in food. However, it is anticipated by the agency that new information will soon be available about the toxicology of acrylamide, which may shed light on acrylamide's potential carcinogenicity in laboratory animals. Readers of MassTortDefense know how difficult it is to leap from animal studies to causation conclusions in human beings, because of the physiological and metabolism differences between species, the excessive dosages that are (and typically must be) given to experimental animals, and the varying biological defense mechanisms that species have to environmental insults.

International efforts to develop approaches to acrylamide mitigation are also beginning to prove successful. Moreover, FDA is aware that at least some manufacturers in the United States are seeking ways to reduce acrylamide in their products. In this context, FDA is considering issuing guidance for industry on reduction of acrylamide levels in food products.

Health Canada recently added acrylamide to that nation’s toxic substances list, as part of its ongoing review of over 200 chemical substances in commercial use. It stated that current consumption levels “may constitute a danger in Canada to human life or health,” but it also acknowledged that research into a possible carcinogenic link for humans has so far been inconclusive.

In fact, dietary intakes of acrylamide are not related to increased risks of brain cancer, according to a recently released study of 58,279 men and 62,573 women, published by Maastricht University in the Netherlands. J.G.F. Hogervorst, et al., “Dietary Acrylamide Intake and Brain Cancer Risk,” 18 Cancer Epidemiology, Biomarkers & Prevention (2009).  Researchers have also reported in the Journal of the National Cancer Institute that dietary acrylamide was not linked to lung cancer risk, and that the compounds may even reduce the risk in women. "Lung Cancer Risk in Relation to Dietary Acrylamide Intake," 101(9) JNCI 651-662 (2009).

 

 

In seeking comments, the FDA has asked food manufacturers to respond with details of any manufacturing changes they have made, the success and cost-effectiveness of those changes, methods for acrylamide reduction that could be appropriate for smaller manufacturers, and changes to on-pack instructions for consumers to mitigate acrylamide formation.

 

 

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