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

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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The New Jersey Supreme Court has recently ruled that a New Jersey court can exercise jurisdiction in a product liability action over a foreign manufacturer based on the manufacturer's relationship with a nationwide distributor and on its presence at national trade shows. Nicastro v. McIntyre Machinery America Ltd.,  No. A-29-08 (N.J. 2/2/10).

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. The rules governing personal jurisdiction are well described in numerous reference works. 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.

In 2001, plaintiff was injured while operating the McIntyre Model 640 Shear, a recycling machine used to cut metal. The Model 640 Shear was manufactured by J. McIntyre Machinery, Ltd., a company incorporated in the United Kingdom, and then sold, through its exclusive United States distributor, McIntyre Machinery America, to the employer.  Plaintiff sued, alleging that the shear machine was defective in that it did not have a safety guard that allegedly would have prevented the accident. The trial court granted the foreign defendant's motion to dismiss the action, finding that the English manufacturer did not have sufficient minimum contacts with New Jersey to justify the state’s exercise of personal jurisdiction. The Appellate Division reversed, concluding that the exercise of jurisdiction by New Jersey “would not offend traditional notions of fair play and substantial justice” and was justified “under the ‘stream-of-commerce plus’ rationale."  Under that test, the actions of a defendant must be “purposefully directed toward the forum State” for a court of that state to exercise personal jurisdiction. Acknowledging that the English company had no presence in, or minimum contacts with, New Jersey, the state Supreme Court said plaintiff's argument for jurisdiction “must sink or swim with the stream-of-commerce theory of jurisdiction.”
 

New Jersey has a long-arm rule that permits service of process on a non-resident defendant “consistent with due process of law.”  Therefore, its courts may exercise jurisdiction over a non-resident defendant “to the uttermost limits permitted by the United States Constitution.” The Supreme Court seemed influenced by the view  that we live in a global marketplace. It also noted that a state has a strong interest in protecting its citizens from defective products as well as a paramount interest in ensuring a forum for its injured citizens who have suffered catastrophic
injuries due to allegedly defective products in the workplace. While its conception of jurisdiction must surely comport with traditional notions of fair play and substantial justice, the court noted it must also reflect modern truths – the radical transformation of the international economy.

Accordingly, the court held that a foreign manufacturer will be subject to this state’s jurisdiction if it knows or reasonably should know that through its distribution scheme its products are being sold in New Jersey. 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 New Jersey consumer, causing injury. 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 through which it is receiving economic benefits in each state where its products are sold. A manufacturer cannot shield itself merely by employing an independent distributor – a middleman – knowing the predictable route the product will take to market. If a manufacturer does not want to subject itself to the jurisdiction of a New Jersey 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 permitted by due process, has reflected those historical developments.

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. Within the confines of due process, jurisdictional doctrines must reflect the economic and social realities of the day. 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 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.

A lengthy dissent 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.  It also criticized an apparent shift in focus from the defendant to the plaintiff, including the severity of injuries.

The majority's test may come to have implications for manufacturers selling to other states as well, outside New Jersey. Many foreign and out-of-state manufacturers reasonably should know that their products are distributed through a nationwide system that might result in sales in any given state. It is quite possible the U.S. Supreme Court will want to clarify the reach of the so-called stream of commerce test, which was mentioned in Justice O’Connor’s plurality opinion in
Asahi Metal Industry Co. v. Superior Court of California, 480 U.S. 102 (1987).

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Our readers know a crucial early decision for defendants in cases brought in state court is whether to seek to remove the case to federal court.   In a decision that will impact when corporations can remove litigation to federal court based on diversity, the Supreme Court this week adopted a new test of corporate citizenship. Hertz Corp. v. Melinda Friend, et al., No. 08-1107 (S.Ct. 2/23/10).

Plaintiffs, California citizens, sued Hertz Corporation in a California state court.  Hertz sought removal to the federal district court, claiming that because it and plaintiffs were citizens of different states, the federal court had diversity jurisdiction. Plaintiffs, however, claimed that Hertz was a California citizen, like themselves, and that, hence, diversity jurisdiction was lacking under §1332(c)(1), which provides that “a corporation shall be deemed to be a citizen of any State by which it has been incorporated and of the State where it has its principal place of business.”

To show that its “principal place of business” was in New Jersey, not California, Hertz submitted a declaration stating, among other things, that it operated facilities in 44 States, that California accounted for only a portion of its business activity, that its leadership is at its corporate headquarters in New Jersey, and that its core executive and administrative functions are primarily carried out there. The district court concluded that it lacked diversity jurisdiction because Hertz was a California citizen under Ninth Circuit precedent, which asked, instead, whether the amount of the corporation’s business activity is “significantly larger” or “substantially predominates” in one state.

The Supreme Court acknowledged that the phrase “principal place of business” has proven difficult to apply.  Lower courts were at times uncertain as to where to look to determine a corporation’s “principal place of business” for diversity purposes. If a corporation’s headquarters and executive offices were in the same state in which it did most of its business, the test seemed straightforward. But if those corporate headquarters, including executive offices, were in one state, while the corporation’s plants or other centers of business activity were located in other states, the answer was less obvious. In particular, courts have had difficulty when a corporation’s operations are not far-flung but rather limited to only a few states. When faced with this question, various federal courts have focused more heavily on where a corporation’s actual business activities are located, adopting divergent and increasingly complex tests to interpret the statute.

In an effort to find a single, more uniform interpretation of the statutory phrase, the Supreme Court returned to the “nerve center” approach under which a “principal place of business” is best read as referring to the place where a corporation’s officers direct, control, and coordinate the corporation’s activities. In practice it should normally be the place where the corporation maintains its headquarters — provided that the headquarters is the actual center of direction, control, and coordination, i.e., the “nerve center,” and not simply an office where the corporation holds its board meetings.

Among the considerations that convinced the Court that the “nerve center” approach, while admittedly imperfect, was superior to other possibilities:  first was the statutory language which uses the word “place” in the singular, not plural, and refers to a place within a state, not the state itself.  This rules out those lower court tests that look not at a particular place within a state, but incorrectly at the state itself, measuring the total amount of business activities that the corporation conducts there and determining whether they are significantly larger than in the next-ranking state.

Second, administrative simplicity is a major virtue in a jurisdictional statute. A “nerve center” approach is simple to apply, comparatively speaking. MassTortDefense agrees that a clear rule -- predictability -- is something the business community has been looking for.  Greater predictability may assist businesses in making investment and other financial decisions.  The new rule may also reduce the need for extensive and expensive jurisdictional discovery.

The Court admitted that while there may be no perfect test that satisfies all administrative and policy criteria, this test is relatively easier to apply. The Court warned that if the record reveals attempts at jurisdictional manipulation -- for example, that the alleged “nerve center” is nothing more than a mail drop box, a bare office with a computer, or the location of an annual executive retreat -- the courts should instead take as the “nerve center” the place of actual direction, control, and coordination, in the absence of such manipulation.

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The Seventh Circuit recently issued a decision clarifying an issue under the Class Action Fairness Act:  when the federal court denies class certification in a case in federal court because of CAFA, does that divest the court of jurisdiction?  The court of appeals reversed an Illinois district court ruling that a failed class action lost jurisdiction, ruling that the lower court misinterpreted CAFA. Cunningham Charter Corp., et al. v. LearJet Inc., No 09-8042 (7th Cir., Jan. 22, 2010).

Cunningham sued Learjet in an Illinois state court asserting claims for breach of warranty and products liability on behalf of itself and all other buyers of Learjets who had received the same warranty from the manufacturer that Cunningham had received. The defendant removed the
case to federal district court under CAFA. Eventually, the district judge denied the motion on the ground that neither proposed class satisfied the criteria for certification set forth in Rule 23 of the Federal Rules of Civil Procedure. The judge then ruled that the denial of class certification
eliminated subject-matter jurisdiction under the Act, and so he remanded the case to the state court.

The 7th Circuit, per Judge Posner, disagreed.  the court offered some context, a textual explanation, and policy reasons. The general principle that jurisdiction once properly invoked is not lost by developments after a suit is filed, such as a change in the state of which a party is a citizen that destroys diversity. E.g., St. Paul Mercury Indemnity Co. v. Red Cab Co., 303 U.S. 283, 293-95 (1938). That general principle was applicable to this case because no one suggests that a class action must be certified before it can be removed to federal court under the Act.  Cases should not be shunted between court systems; "itigation is not ping-pong."

Text: The Act defines class action as “any civil action filed under rule 23 of the Federal Rules of Civil
Procedure or similar State statute or rule of judicial procedure authorizing an action to be brought by 1 or more representative persons as a class action.” § 1332(d)(1)(B). No requirement of certification.

Policy: If a state happened to have different criteria for certifying a class from those of Rule 23, the result of a remand because of the federal court’s refusal to certify the class could be that the case would continue as a class action in state court. That result would be contrary to the Act’s purpose of relaxing the requirement of complete diversity of citizenship so that class actions involving
incomplete diversity can be litigated in federal court.

In finding that federal jurisdiction under the Class Action Fairness Act does not depend on certification, the court joined Vega v. T-Mobile USA, Inc., 564 F.3d 1256, 1268 n. 12 (11th Cir. 2009).

Judge Posner concluded, that  is the better interpretation." See Richardson, “Class Dismissed, Now What? Exploring the Exercise of CAFA Jurisdiction After the Denial of Class Certification,” 39
New Mex. L. Rev. 121, 135 (2009); Clermont, “Jurisdictional Fact,” 91 Cornell L. Rev. 973, 1015-17
(2006).

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Readers of MassTortDefense know how important the choice of forum can be for significant product liability and mass tort matters.  The differences between federal and state court -- perhaps right down the street from each other -- can be huge, with differing juror pools, differing procedural rules, differing views on class actions, different methods of selecting the judiciary, etc.

Thus, it is worth making sure a subtle amendment to Rule 15 of the Federal Rules of Civil Procedure, which took effect Dec. 1, 2009, does not miss your attention, because of the potential impact it has on removal to federal court.

Prior to the amendments to Rule 15 — which governs amended and supplemental pleadings —  a plaintiff could amend the complaint once as a matter of course before any responsive pleading was filed.  Responsive pleading came to mean the defendant’s answer, and not a motion to dismiss.  E.g., Foster v. DeLuca, 545 F.3d 582 (7th Cir. 2008).  Thus, a defendant could eliminate the plaintiff’s right to amend as a matter of course by serving an answer.  That is, under the old version of Rule 15, a defendant could prevent amendments designed to eliminate the basis for removal by serving an answer just prior to or along with the filing of the notice of removal. When a plaintiff wanted to amend after the defendant had removed and answered, the plaintiff had to obtain consent or leave of court. So what about the removal, then? Any proposed amendment to the complaint affecting the court’s jurisdiction would trigger a heightened scrutiny of the amendment.  E.g., Hensgens v. Deere & Co., 833 F.2d 1179 (5th Cir. 1987). Defendants could argue that the  proposed amendment should be rejected on this basis. 

The new Rule 15 permits a plaintiff to amend “as a matter of course” even after the defendant has served “a responsive pleading.”  A party may file an amended pleading without leave of court within 21 days after service of a responsive pleading or 21 days after service of a Rule 12 motion, whichever is earlier. After that, a party may file an amended pleading only with leave of court. 

That raises the issue for your consideration whether the new ability of the plaintiff to amend “as a matter of course,” even after the defendant has served an answer, permits the plaintiff to make one of those jurisdiction-destroying amendments.  One possibility is that courts will look at "matter of course" amendments under the new rule the same way they were analyzed by many courts under the old rule.  That is, courts were guided by 28 U.S.C. § 1447(e), which states that if after removal the plaintiff seeks to join additional defendants whose joinder would destroy subject matter jurisdiction, the court may deny joinder, or permit joinder and remand the action to the state court. Schur v. L.A. Weight Loss Centers, Inc., 577 F.3d 752, 759 (7th Cir. 2009); Whitworth v. TNT Bestway Transp. Inc., 914 F.Supp. 1434 (E.D.Tex.,1996).  Courts, in the motion for leave context and sometimes in the "as of course" context as well, to decide between those two choices, would scrutinize the amendments closely, and due consideration is given to the original defendant’s interest in the choice of forum. Courts examine whether the purpose of the amendment is to defeat federal jurisdiction; how timely/prompt the plaintiff has been in seeking the amendment; whether the plaintiff will be prejudiced if amendment is not allowed; and any other equities. Bailey v. Bayer CropScience L.P., 563 F.3d 302 (8th Cir. 2009).

If this heightened scrutiny is applied to "matter of course" amendments made under the new version of Rule 15, removals may be in less jeopardy when when a plaintiff attempts to amend the complaint post-removal, post-answer  “as a matter of course.”

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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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We have posted at MassTortDefense about a number of significant product liability issues arising from products made outside the US and imported into this country.  Senators Sheldon Whitehouse, D-R.I.,  Jeff Sessions, R-Ala., and Richard Durbin, D-Ill., have introduced a bill that would make it easier for foreign manufacturers to be sued when their products allegedly injure U.S. consumers.

The Foreign Manufacturers Legal Accountability Act of 2009 was introduced in the U.S. Senate last week.  The bill, S. 1606,  follows up on hearings last Spring during which witnesses testified about the perceived delays and difficulties with serving foreign manufacturers with process and establishing jurisdiction.
 

In comments on the Senate floor, sponsors cited recent examples in which Americans had been injured by allegedly defective foreign products. They claimed that the current rules put American manufacturers at a competitive disadvantage because they supposedly allow foreign companies to offer cheaper products that do not comply with U.S. safety requirements. The bill would apply to drugs, medical devices, and cosmetics, biological products, consumer products, as such term is used in the Consumer Product Safety Act, chemicals under the Toxic Substances Control Act, and pesticides.

The bill attacks the issues of service of process and jurisdiction. Service abroad involves the Hague Convention on the Service Abroad of Judicial and Extra Judicial Documents in Civil and Commercial Matters, to which the U.S. is a signatory. A complaint must be translated into the foreign language, transmitted to the central authority in the foreign country, and then delivered according to the rules of service in the home country of the defendant. This can be a lengthy and expensive process. The proposed legislation would require foreign manufacturers and producers of covered products distributed in commerce (or component parts that will be used in the United States to manufacture such products) to establish a registered agent in the United States who is authorized to accept service of process.  It similarly states that a person may not 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 component part) 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.

 The second major hurdle is the inability to establish personal jurisdiction over foreign
manufacturers. Under the new bill, 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.

Not surprisingly the bill is supported by the "American Association for Justice"  plaintiffs lawyers.

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Sen. Sheldon Whitehouse (D-R.I.) announced last week his plan to introduce legislation that would increase the ability of U.S. plaintiffs to sue foreign manufacturers of allegedly defective products. This development should be monitored by all foreign manufacturers selling into the United States.

Whitehouse announced the proposed legislation at a hearing by the Senate Judiciary Committee's Subcommittee on Administrative Oversight and the Courts. The hearing was entitled, “Leveling the Playing Field and Protecting Americans: Holding Foreign Manufacturers Accountable.” A variety of witnesses testified about the impact of the issue on both American consumers and American business, and whether there was a need for Congress to put foreign companies on a more equal footing with domestic companies in terms of litigation risks, and to reduce a possible “competitive disadvantage” suffered by U.S. manufacturers.

There are three main procedural hurdles faced by plaintiffs seeking to sue foreign parties: (1) obtaining personal jurisdiction; (2) serving process; and (3) enforcing U.S. judgments abroad. That is, a party suing must first be able to find a court that has Constitutional power/authority over the defendant, personal jurisdiction. Asahi Metal Industry Co. v. Superior Court of California, Solano County, 480 U.S. 102 (1987). Then after filing, the party must inform the defendant of the lawsuit and its contents.  And at the end of the lawsuit, the party must be able to collect any money awarded, especially when the defendant's assets are outside of the U.S.  If the defendant is judgment proof, the suit is a waste of time for plaintiffs.

One speaker, Prof. Teitz of the Roger Williams University School of Law, described that as a result of different approaches in other legal systems, U.S. consumers face difficulties recovering in U.S. courts and enforcing U.S. judgments abroad, in fact more difficulty than many foreign consumers face in the reverse situation. In addition, there is an obvious competitive impact on U.S.  manufacturers who are sued more easily and cheaply here for obvious reasons and against whom judgments can be enforced throughout the country under the Full Faith and Credit Clause. Service of process may be governed by international conventions and treaties, or may involve the use of diplomatic channels, the Professor said. Legislation to require domestic agents for service of process would reduce the cost and difficulty of service.

A plaintiff attorney testified that the transition of the U.S. economy away from manufacturing has resulted in a dramatic increase in foreign-made goods entering the country. The volume of imports has tripled over the last decade and is expected to triple again by 2015. He recommended legislation allowing jurisdiction based on aggregate national contacts and import licenses that require liability insurance as well as agents for service of process and consent to jurisdiction.

Another attorney noted a competitive disadvantage for U.S. companies that are subject to what he called the “tort tax.” But he cautioned that legislation should not burden U.S. business by expanding federal jurisdiction and changing choice-of-law rules. He also warned of possible problems with the constitutionality of the discussed legislation. For example, legislation might authorize jurisdiction over foreign entities by virtue of their national contacts in both federal and state courts. That may run afoul of the rule that state courts may only assert personal jurisdiction over defendants who purposefully establish minimum contacts with that forum state. See, e.g., International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945).
 

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