Another Federal Court Weighs In On Meaning of Nicastro

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.

Court of Appeals Rejects Medical Monitoring Class Action

The Third Circuit last week affirmed a lower court decision denying class certification in a medical monitoring case alleging vinyl chloride exposures. Gates v. Rohm & Haas Co., No. 10-2108 (3d Cir.,  8/25/11).

Readers may recall we posted on this case at the trial court level last year.  Plaintiffs alleged that vinyl chloride released from Rohm & Haas’s specialty chemicals manufacturing facility in Ringwood, Illinois contaminated the groundwater in and around McCollum Lake Village, as well as the air in the Village. Plaintiffs alleged that between 1968 and 2002, the vinyl chloride evaporating from the shallow plume blew over the Village, contaminating the air in the Village and causing some Village residents to breathe varying amounts of it. Plaintiffs claimed that the levels of vinyl chloride in the Village air were higher than the background level.

Plaintiffs sought certification of two classes: (1) a class seeking medical monitoring for Village residents exposed to the airborne vinyl chloride between 1968 and 2002, and (2) a liability-only issue class seeking compensation for property damage from the exposure. (We will focus on medical monitoring.)

The district court denied certification; it found the medical monitoring class lacked the cohesiveness needed to maintain a class under Rule 23(b)(2), and that common issues of law and fact did not predominate as required under Rule 23(b)(3). Both failed for the same reason—the “common” evidence proposed for trial did not adequately typify the specific individuals that composed the two classes. In particular, the court found plaintiffs failed to present common proof of three issues critical to recovering on the medical monitoring claim—(1) that plaintiffs suffered from exposure greater than normal background levels, (2) the proximate result of which is significantly increased risk of developing a serious disease, and (3) whether the proposed medical monitoring regime is reasonably medically necessary.  The court also found the remaining individual issues would require individual trial proceedings, undoing any efficiencies of class treatment and possibly leading a second jury to reconsider evidence presented to the jury in the class proceeding.

Plaintiffs took an interlocutory appeal under Fed. R. Civ. P. 23(f) from the denial of class certification. The court of appeals affirmed.

The Third Circuit offered a number of important points for readers that may be confronting putative medical monitoring class actions:

1) what is a medical monitoring class?

A medical monitoring cause of action allows those exposed to toxic substances to recover the costs of periodic medical appointments and the costs of tests to detect the early signs of diseases associated with exposure. The few states that recognize medical monitoring as a remedy recognize it as a cause of action, like Pennsylvania, Redland Soccer Club, Inc. v. Dep’t of the Army, 696 A.2d 137, 142 (Pa. 1997), or treat it as a type of relief granted in connection with a traditional tort cause of action, see, e.g., Bourgeois v. A.P. Green Indus., Inc., 716 So.2d 355, 359 (La. 1998).

The remedy of medical monitoring has divided courts on whether plaintiffs should proceed under Rule 23(b)(2) or Rule 23(b)(3), said the court. The Pennsylvania Supreme Court has talked about awarding medical monitoring damages as a trust fund which “compensates the plaintiff for only the monitoring costs actually incurred.” Redland Soccer Club, 696 A.2d at 142 n.6. But it has not yet clearly decided whether or when medical monitoring awards can be in the form of a lump-sum verdict.

The appeals court noted, however, that some guidance may have come from the fact that the Supreme Court recently clarified that Rule 23(b)(2) applies only when a single injunction or declaratory judgment would provide relief to each member of the class. Wal-Mart Stores, Inc., v. Dukes, 131 S. Ct. 2541, 2557 (2011). In light of the Supreme Court's recent decision, the Third Circuit would "question whether the kind of medical monitoring sought here can be certified under Rule 23(b)(2)."  If the plaintiffs here prevailed, class members' regimes of medical screenings and the corresponding cost would vary individual by individual. A single injunction or declaratory judgment would seem to not be able to provide relief to each member of the class proposed here. Rule 23(b)(2) “does not authorize class certification when each class member would be entitled to an individualized award of monetary damages.” Wal-Mart, 131 S. Ct. at 2557. But it did not need to reach the issue, because certification was improper under either category of Rule 23 for reasons apart from the monetary nature of plaintiffs' claims.

2) Cohesion and (b)(2) Certification

Although Rule 23(b)(2) classes need not meet the predominance and superiority requirements of Rule 23(b)(3), it is well established that the class claims must be cohesive. A key to the (b)(2) class is the indivisible nature of the injunctive or declaratory remedy warranted—the notion that the conduct is such that it can be enjoined or declared unlawful only as to all of the class members or as to none of them. Wal-Mart Stores, Inc, 131 S. Ct. at 2557 (quoting Richard A. Nagareda, Class Certification in the Age of Aggregate Proof, 84 N.Y.U. L. Rev. 97, 132 (2009)). Indeed, a (b)(2) class may require more cohesiveness than a (b)(3) class. As all class members will be bound by a single judgment, members of a proposed Rule 23(b)(2) injunctive or declaratory class must have strong commonality of interests. The Supreme Court in Wal-Mart recently highlighted the importance of cohesiveness in light of the limited protections for absent class members under subsections (b)(1) and (b)(2) of the class rule. 

3) Individual Issues in Medical Monitoring Class

Because causation and medical necessity often require individual proof, medical monitoring classes may founder for lack of cohesion. See In re St. Jude Med. Inc., 425 F.3d 1116, 1122 (8th Cir. 2005); Ball v. Union Carbide Corp., 385 F.3d 713, 727-28 (6th Cir. 2004); Zinser v. Accufix Research Inst., Inc., 253 F.3d 1180, 1195-96, amended, 273 F.3d 1266 (9th Cir. 2001); Barnes, 161 F.3d at 143-46; Boughton v. Cotter Corp., 65 F.3d 823, 827 (10th Cir. 1995). Frequently the rigorous analysis of common and individual issues  will entail some overlap with the merits of the plaintiff‟s underlying claim.  Wal-Mart Stores, Inc, 131 S. Ct. at 2551.  The trial court may consider the substantive elements of the plaintiffs' case in order to envision the form that a trial on those issues would take.  The District Court here did so and found individual issues were significant to certain elements of the medical monitoring claims here.

Readers will recall that to prevail on a medical monitoring claim under Pennsylvania law, plaintiffs must prove:
(a) exposure greater than normal background levels;
(b) to a proven hazardous substance;
(c) caused by the defendant‟s negligence;
(d) as a proximate result of the exposure, plaintiff has a significantly increased risk of contracting a serious latent disease;
(e) a monitoring procedure exists that makes the early detection of the disease possible;
(f) the prescribed monitoring regime is different from that normally recommended in the absence of the exposure; and
(g) the prescribed monitoring regime is reasonably necessary according to contemporary scientific principles.
Redland Soccer Club, 696 A.2d at 145-46.  “Expert testimony is required to prove these elements.” Sheridan v. NGK Metals Corp., 609 F.3d 239, 251 (3d Cir. 2010).

Here, the District Court identified individual issues that would eclipse common issues in at least three of the required elements, noting several potential variations in proving exposure above background, a significantly increased risk of a serious latent disease, and the reasonable necessity of the monitoring regime.

4) Exposure

Plaintiffs proposed to show the exposure of class members through expert opinions on air dispersion modeling that mapped concentrations of vinyl chloride exposure (isopleths) that allegedly could provide average exposure per person. But in fact those isopleths only showed average daily exposure, not minimum exposure, used average exposure over very long periods of time when exposure likely varied, and thus could not show that every class member was exposed above background.  Instead of showing the exposure of the class member with the least amount of exposure, plaintiffs proof would show only the amount that hypothetical residents of the village would have been exposed to under a uniform set of assumptions without accounting for differences in exposure year-by-year or based upon an individual's characteristics. At most, the isopleths showed the exposure only of persons who lived in the village for the entire period the isopleth represents and who behaved according to all assumptions that the experts made in creating the isopleth.

5) Composite Proof
Plaintiffs cannot, said the court,  substitute for evidence of exposure of actual class members evidence of hypothetical, composite persons in order to gain class certification. The evidence here was not  truly common because it was not shared by all (possibly even most) individuals in the class. Averages or community-wide estimations would not be probative of any individual's claim because any one class member may have an exposure level well above or below the average.
Attempts to meet the burden of proof using modeling and assumptions that do not reflect the individual characteristics of class members have been met with skepticism, noted the court of appeals. See In re Fibreboard Corp., 893 F.2d 706, 712 (5th Cir. 1990); In re “Agent Orange” Prod. Liab. Litig. MDL No. 381, 818 F.2d 145, 165 (2d Cir. 1987); see also 2 Joseph M. McLaughlin, McLaughlin on Class Actions: Law and Practice § 8:9, at 8-55 to -57 (3d ed. 2006).

Plaintiffs have traditionally loved medical monitoring in part because they think that class certification may come more readily given their alleged ability to use epidemiological or group or aggregate proof to establish some the elements of the medical monitoring claim.  That is why it is significant that the Third Circuit recognized that plaintiffs' aggregate proof in the form of exposure isopleths did not reflect that different persons may have different levels of exposure based on biological factors or individual activities over the class period. Factors which affect a person's exposure to toxins can include activity level, age, sex, and genetic make-up. See Federal Judicial Center, Reference Manual on Scientific Evidence 430 (2d ed. 2000).  For example, some people will have higher breathing rates per body weight which would create a disparity between the concentrations of vinyl chloride (based on estimated exposure as opposed to actual exposure).
Each person's work, travel, and recreational habits may have affected their level of exposure to vinyl chloride. Differences in the amount of time spent outside the village would create different average concentrations to which the class members were exposed. A person who worked outside the village would have been exposed less than a stay-at-home parent, or retiree. The isopleths approach simply assumed exposure to the same concentration for class members who may have spent very different amounts of time in the village.

6) Significant Increased Risk

Plaintiffs were unable to prove a concentration of vinyl chloride that would create a significant risk of contracting a serious latent disease for all class members. Nor was there common proof that could establish the danger point for all class members. The court rejected plaintiffs' attempted use of a regulatory threshold by the EPA -- for mixed populations of adults and children—as a proper standard for determining liability under tort law. Even if the regulatory standard were a correct measurement of the aggregate threshold, it would not be the threshold for each class member who may be more or less susceptible to diseases from exposure to vinyl chloride.  Although the positions of regulatory policymakers are relevant in litigation, their risk assessments are not necessarily conclusive in determining what risk an exposure presents to specified individuals. See Federal Judicial Center, Reference Manual on Scientific Evidence 413 (2d ed. 2000) (“While risk assessment information about a chemical can be somewhat useful in a toxic tort case, at least in terms of setting reasonable boundaries as to the likelihood of causation, the impetus for the development of risk assessment has been the regulatory process, which has different goals.”); id. at 423 (“Particularly problematic are generalizations made in personal injury litigation from regulatory positions. . . . [I]f regulatory standards are discussed in toxic tort cases to provide a reference point for assessing exposure levels, it must be recognized that there is a great deal of variability in the extent of evidence required to support different regulations.”).  Plaintiffs proposed a single concentration without accounting for the age of the class member being exposed, the length of exposure, other individual factors such as medical history, or showing the exposure was so toxic that such individual factors are irrelevant. The Third Circuit concluded that the trial court did not abuse its discretion in concluding individual issues on this point make trial as a class unfeasible, defeating cohesion.

7) Necessity of Monitoring

Nor did the lower court abuse its discretion in determining individual issues defeat cohesion with respect to whether the proposed monitoring regime is reasonably medically necessary. Many courts have been skeptical that the necessity for individuals' medical monitoring regimes can be proven on a class basis. See Barnes, 161 F.3d at 146; see Principles of the Law of Aggregate Litigation § 2.04 reporter‟s notes cmt. b, at 126 (2010). Plaintiffs' experts had no compelling answer to the point that the negative health effects of screening may outweigh any potential benefits. For example, the proposed regime of serial MRIs would be contraindicated and potentially risky because the contrast agent used for MRIs poses dangers to those with kidney disease.

8) Certification under (b)(3)

Courts have generally denied certification of medical monitoring classes when individual questions involving causation and damages predominate over (and are more complex than) common issues such as whether defendants released the offending chemical into the environment. See In re St. Jude Med., Inc., 522 F.3d 836, 840 (8th Cir. 2008).  Here, the same the inquiries into whether class members were exposed above background levels, whether class members faced a significantly increased risk of developing a serious latent disease, and whether a medical monitoring regime was reasonably medically necessary all required considering individual proof of class members' specific circumstances.  Common issues did not predominate.

 

 
 

Chinese Drywall Update

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.

 

 

Chamber of Commerce Requests Open Debate on Science of Global Warming

The U.S. Chamber of Commerce last week filed a supplemental request for an “on-the-record” hearing to debate the evidence behind the Environmental Protection Agency’s expected finding that greenhouse gases endanger the public health and welfare.

Readers of MassTortDefense may recall that in 2007, in Massachusetts v. EPA, 549 U.S. 497 (2007), the Supreme Court found that greenhouse gases could be regarded as air pollutants, and held that EPA must determine whether or not emissions of greenhouse gases from motor vehicles cause or contribute to air pollution which may reasonably be anticipated to endanger public health or welfare, or whether the science is too uncertain to make a reasoned decision. In making these decisions, the agency is required to follow the language of section 202(a) of the Clean Air Act. The Supreme Court decision resulted from a petition for rulemaking under section 202(a) filed by more than a dozen environmental, renewable energy, and other organizations.

The EPA is proposing to find that the current and projected concentrations of the mix of six key greenhouse gases — carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), and sulfur hexafluoride (SF6) — in the atmosphere threaten the public health and welfare of current and future generations. This is typically referred to as an "endangerment finding."  EPA is further proposing to find that the combined emissions of CO2, CH4, N2O, and HFCs from new motor vehicles and motor vehicle engines contribute to the atmospheric concentrations of these key greenhouse gases and hence to the threat of climate change.  While an endangerment finding under the Clean Air Act would not by itself automatically trigger extensive regulation under the entire Act, many observers expect such regulations.  Moreover, the finding could prod the Congress to pass controversial climate legislation.  Finally, it may impact the pace and weight of climate change litigation.

The Chamber argues that the informal notice-and-comment process employed here has not worked to air the issues, and the only real solution is an on-the-record hearing for a transparent review of all the evidence.  Having reviewed the evidence in EPA’s endangerment docket, the Chamber observes flaws and omissions in the reasoning underlying the proposed endangerment finding. The Chamber is thus asking for more transparency in this process, as the ruling could ultimately cause a "regulatory train wreck" with inescapable economic consequences, as well as an impact on mass tort litigation. The agency has apparently ignored evidence contradicting its preliminary conclusions on a wide range of issues, such as the alleged effect higher temperatures will have on net mortality and on the levels of other pollutants.  Media reports have surfaced that EPA ignored a study by two members of its staff concluding that the agency had relied on outdated studies and that the current state of climate science refutes the proposed endangerment finding.