No Duty on Manufacturer to Design A Product that Cannot be Misused

Duty, foreseeability, and causation.  A recent decision by the Fourth Circuit involves these important tort concepts. See Durkee v. Geologic Solutions Inc., No. 12-1360 (4th Cir., 1/3/13).  Plaintiffs injured in a motor vehicle accident sued, trying to hold the maker of an in-vehicle texting system liable for their harm.

The product liability claims arose from a motor vehicle accident in North Carolina in which a fully loaded tractor-trailer ran into vehicles that were slowed or stopped in front. Appellants alleged that the truck driver became distracted by the presence of a texting system located in the cab of his truck. The texting system had been manufactured by defendant and appellants contended that the defendant owed them a legal duty of care because injuries to the traveling public were reasonably foreseeable based on the texting system’s design.  Specifically they pointed to the facts that the system (1) required the driver to divert his eyes from the road to view an incoming text from the dispatcher, and (2) permitted the receipt of texts while the vehicle was moving.

The district court granted the motions to dismiss, concluding that the accident was caused by the driver’s inattention, not the texting device itself, and that manufacturers are not required to design a product incapable of distracting a driver.

On appeal, appellants challenge the district court’s conclusion that defendant owed them no duty of care. The court of appeals concluded that the district court properly dismissed appellants’ claims, relying on the state tort law, see Kientz v. Carlton, 96 S.E.2d 14, 18 (N.C. 1957), holding that the duty owed by product manufacturer does not require him to guard against hazards apparent to the casual observer or to protect against injuries resulting from the user’s own patently careless and improvident conduct.

The district court correctly concluded that the accident was caused by the driver's inattention, not the texting device itself. "Misuse” in the sense of improper or careless use of the system by the driver, rather than a use that was unintended by the manufacturer. The fact that injuries to the traveling public were reasonably foreseeable based on the system's design does not create a duty.

Score one for personal responsibility.  

Successor Liability Rejected in Aircraft Case

One of the interesting types of projects your humble blogger gets to work on from time to time concerns product liability and mass tort issues that arise from the M&A context, including due diligence going into a deal and successor liability issues coming out of a deal.  Recently a federal court held that the successor to the assets of an aircraft manufacturer was not liable for injuries arsing from the crash of an airplane built before the acquisition. See Thornton v. M7 Aerospace LP, No. 12 C 329, (N.D. Ill., 10/23/12).

The aircraft was a Fairchild Aircraft SA227-DC Metro 23, with tail number VH-TFU.  On approach to Lockhart River Airport, Australia, the aircraft crashed, resulting in the deaths of the passengers and crew. The incident was one of the worst civil aviation accidents in Australian history.  The plane was designed, manufactured, assembled, tested, and sold by Fairchild Aircraft, Inc. Fairchild went bankrupt in 2002 and as a result, Fairchild and defendant executed an Asset Purchase Agreement.  The agreement stated that the buyer/defendant assumed no ”liability for personal injury or property damage arising at any time out of or in connection with goods manufactured, produced, distributed or sold by the Sellers prior to the Closing Date, including but not limited to any Product Liability claims." 

In 2007, plaintiffs commenced this negligence and strict products liability action against numerous defendants including defendant M7. In the Second Amended Complaint, plaintiffs asserted claims against M7 in two categories: direct claims and indirect claims. First, plaintiffs’ indirect claims sought to impose vicarious liability on defendant as successor-in-interest to Fairchild. Plaintiffs alleged that defendant “is indirectly liable in strict product liability and negligence for the actions of its predecessor, Fairchild, in its defective and negligent design of the [Subject Aircraft], its failure to warn of the defects and its failure to advise operators to fit the aircraft with an "Enhanced Ground Proximity Warning System.” Second, plaintiffs’ direct claims sought to impose liability on defendant for its independent conduct in allegedly breaching of its own duty to so warn and advise.

The EGPWS claims argued M7 was negligent in failing to advise the owner and operator of the aircraft to install a new system that system was an improvement on the conventional ground proximity warning system because, among other reasons, it allegedly was capable of providing increased warning time to pilots about potential terrain conflicts by incorporating additional functions into the conventional ground proximity warning system.

Defendant moved for summary judgment.  On plaintiff’s claims of successor liability, it argued that
M& had as a matter of law “no liability as the successor corporation to Fairchild.” The Court agreed.
Under applicable Illinois law, a corporation which purchases the assets of another corporation is not generally liable for the debts and liabilities of the transferor in the absence of an agreement providing otherwise. The court explained that this traditional rule of successor corporate non-liability developed as a response to the need to protect bona fide purchasers from unassumed liability and was designed to maximize the fluidity of corporate assets. See Diguilio v. Goss Int’l Corp., 389 Ill. App. 3d 1052, 1059-60, 329 Ill. Dec. 657, 906 N.E.3d 1268 (Ill. App. Ct. 2009).

 A successor corporation can face liability, if one of the following four exceptions applies: (1) if there is an express or implied agreement of assumption; (2) if the transaction between the purchaser and the seller corporation is a consolidation or merger; (3) if the purchaser is a continuation of the seller; or (4) if the transaction is an attempt to escape liability for the seller’s obligations.  Illinois does not recognize the so-called product line exception.

Here, the undisputed evidence showed that the Bankruptcy Court approved the transfer of
Fairchild’s assets “free and clear of any and all liens, claims and encumbrances”, and to a purchaser that was not an insider, affiliate or owner of Fairchild. Plaintiffs argued that defendant ought to have successor liability because it “impliedly assumed Fairchild’s continuing duty to warn.”  But, the court noted, the question is not whether M7 impliedly assumed a duty to warn, but rather whether M7 had an implied agreement with Fairchild whereby M7 agreed to assume Fairchild’s liabilities.  And it did not.

On the direct claim, plaintiffs alleged that defendant owed – and breached – an independent duty to advise owners and operators of the accident aircraft to fit that aircraft with an Enhanced Ground Proximity Warning System. To prevail on their claims of direct (i.e. non-successor) liability, plaintiffs needed to establish that defendant owed an independent duty to warn of the alleged defects in the plane.  Illinois courts have recognized a limited cause of action against the purchaser of a
product line for failing to warn of defects in its predecessor’s products. See Kaleta v. Whittaker Corp., 221 Ill. App. 3d 705, 715, 164 Ill. Dec. 651, 583 N.E.2d 567 (1991).  The critical element required for the imposition of this duty is a continuing relationship between the successor and the
predecessor’s customers benefitting the successor. To determine the presence of a nexus or
relationship effective to create a duty to warn, the following factors are considered: (1) succession to a predecessor’s service contracts; (2) coverage of the particular machine under a service contract; (3) service of that machine by the purchaser corporation; and (4) a purchaser corporation’s knowledge of defects and of the location or owner of that machine.

Here, viewing the evidence in the light most favorable to plaintiffs, there was an insufficient nexus or relationship between defendant and the operator of the aircraft to impose an independent duty to warn upon defendant. Plaintiffs focused their argument on the relationship between defendant and the product line generally, but that is not the legal standard: Illinois law focuses on the relationship between the successor (here, defendant) and the operator of the allegedly defective unit (here, Transair).  It was undisputed that M7 did not assume any of Fairchild’s serve contracts relating
to the plane, and that M7 never serviced, maintained, or repaired the plane. There was no evidence that it worked on or had any contact with the subject aircraft.

Finally, under a voluntary undertaking theory of liability, the duty of care to be imposed upon a defendant is limited to the extent of the undertaking.” Bell v. Hutsell, 2011 IL 110724, 353 Ill. Dec. 288, 293-95, 955 N.E.2d 1099 (2011) (stating that Illinois courts look to the Restatement (Second) of Torts to define the theory). Here, defendant argued that plaintiffs’ voluntarily undertaking theory fails because even if it undertook a duty (which it disputed) regarding warnings and advice to owners and operators, plaintiffs failed to proffer sufficient evidence of reliance. Again, the Court agreed. Illinois law requires proof of reliance; that is, proof that the operator (here, Transair) relied on the defendant’s voluntary undertaking of a duty to warn. See, e.g., Chisolm v. Stephens, 47 Ill. App. 3d 999, 7 Ill. Dec. 795, 365 N.E.2d 80, 86 (Ill. App. Ct. 1977). Plaintiffs offered no such proof.

Summary judgment granted.

Panel Rejects MDL Status for Brass Plumbing Claims

We have posted before about the MDL process and the importance of the initial decision by the Panel on ordering coordination. Last week the Judicial Panel on Multidistrict Litigation declined to consolidate the suits by plaintiffs alleging injuries over brass plumbing fittings.See In re Uponor Inc., F1960 Plumbing Fittings Products Liability Litigation, MDL No. 2393 (JPML 9/27/12).

We like to flag for readers, for any insights they may offer, the less common decisions rejecting MDL status, see also here and here.

The plaintiffs alleged in this litigation that high-zinc-content brass components on the plumbing fittings failed, due to corrosion that caused the loss of zinc. This resulted, they said, in various forms of property damage, including the loss of integrity of the components, leaks, loss of water pressure, and other problems.This litigation currently consists of nineteen actions pending in
seven districts, but the Panel was notified of four additional, potentially related actions.

All involved homeowners supported plaintiff’s motion. The Uponor/Wirsbo defendants also supported the motion but  other responding defendants, which are various plumbing and supply defendants,  builders, or installers, opposed the motion and, alternatively, suggested a different transferee forum.

The Panel rejected the motion, noting that "several practical considerations" make the request to centralize unworkable. Most fundamentally, this request rested on a factual assumption – that F1960 fittings are involved in every action – that required the Panel to make a determination not apparent on the face of most complaints. Very few complaints actually mentioned the F1960
standard. Instead, plaintiffs typically framed their complaints as broadly involving high zinc yellow brass fittings and other attendant components. The exceedingly general language that the homeowners employed in most actions to describe the defective components at issue
made it impossible in most cases to transfer “F1960 claims” and then separate and remand, other product claims.

But even assuming that the court could separate and remand the non-F1960 claims, the proposed transfer would still double the forums in which numerous local defendants would have to litigate, or [in an important practical observation]  at a minimum, monitor. Centralization might thus force many local defendants – builders, plumbers, suppliers – to prosecute their indemnity claims against the manufacturer in the MDL, while still having to defend claims that they supplied, built homes with, or installed defective plumbing components elsewhere.

Fragmentation of this litigation, said the Panel, also would increase the risk that the involved
courts will rule inconsistently on identical issues of state law, such as issues of compliance with Nevada’s unique state pre-litigation statute regarding construction defects. The potential inefficiencies and inconvenience associated with centralizing this litigation, separating out F1960 claims etc.,  outweigh any possible benefits of, or added efficiencies to, resolving common claims regarding the F1960 fittings.

"Centralization is not a cure-all for every group of complicated cases."  The actions here were in
distinct procedural postures, and most of the advanced actions seem to be progressing well in the District of Nevada.

Thus, moving parties failed to convince the Panel that Section 1407 transfer of F1960 claims will benefit the parties and witnesses, or that centralization will produce sufficient clarity or efficiency in this already complicated litigation to outweigh the added inconvenience, confusion and cost that would be imposed on numerous parties.
 

 

New Product Liability Case Book

Although my teaching days are in the past (10 years as an adjunct at the University of Pennsylvania Law School), I still like to keep one eye on the literature. Interested readers may want to check out a new case book from Carolina Academic Press.  It is entitled  Products Liability Law: Cases, Commentary, and Conundra by Tim Kaye, a professor of law at Stetson University College of Law, a British lawyer bu original training.

The publisher notes: Products liability law is often confusing because it is in a state of constant flux as it confronts a number of challenges. Some such challenges are well known, such as the battle over the comparative merits of the Second and Third Restatements of Torts. Other equally important challenges may have, however, been somewhat overlooked by other texts, such as the growing use of bankruptcy protection laws to limit the consequences of supplying defective products, "and this book sets out to rectify such omissions."

While some other books leave the reader to sink or swim in a swamp of apparently contradictory doctrine, Products Liability Law promises to lay out from the beginning the elements common to all products liability claims. It then builds on this foundation by tackling each new area of the law in a lucid and reader-friendly manner, while explaining how each doctrine relates to the politico-economic and historical context in which the law operates, promises the publisher.

It was nice to see some old nuggets I used, like Boatland of Houston, Inc. v. Valerie Bailey on state of the art, and Borel v. Fibreboard Paper Products Corp. as an introduction to toxic tort product cases, side by side with newer cases, like Conte v. Wyeth, used here on the concept of reliance.
 

Supplementing the text with numerous original flowcharts, tables, and other diagrams—as well as asking thoughtful questions along the way—this book charts a careful and comprehensible course through the often tempestuous battleground of products liability law, says the publisher.  See if you agree.

 

Fifth Circuit Given Opportunity to Clarify Impact of Nicastro

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.

 


 

Two Summary Judgments for Ladder Defendants Affirmed

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.

 

"Infected" Tissue Claim Not A Consumer Fraud Claim

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.


 

Expert May Be Needed on Design Defect, Even Under Consumer Expectations Test

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.

 

CHPA Comments on Draft FDA Guidance on Nanotechnology

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.  

Case Defines "Product"

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.


 

State Court Upholds Questionable Bystander Liability Claim

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.
 


 

Court of Appeals Explores Obvious Danger Doctrine

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.

 

Inside Counsel Explores California Green Chemistry Regs

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.

 

DRI Annual Meeting Held

Your humble blogger spent part of last week at the DRI Annual Meeting in SanDiego, CA.  (I serve as Chair of the Mass Tort and Class Action Subcommittee of the Product Liability Committee.)

DRI is the international organization of attorneys defending the interests of business and individuals in civil litigation. DRI provides numerous educational and informational resources to DRI members and offers many opportunities for liaison among defense trial lawyers. DRI's goals include: To teach and educate and to improve the skills of the defense law practitioner; to strive for improvement in the civil justice system; to be a counterpoint to the plaintiff's bar and seek balance in the justice system in the minds of potential jurors and on all fields where disputes are resolved; and to assist members in dealing with the economic realities of the defense law practice, including the competitive legal marketplace.

The first day keynote speaker was former Navy SEAL Marcus Luttrell.

He received his Basic Underwater Demolition/SEAL (BUD/S) training in Coronado, California, just down the road from the site of the DRI conference.  He participated in multiple missions in Iraq and Afghanistan.  In 2005, Luttrell and his SEAL Team 10 were assigned to a mission to kill or capture Ahmad Shah, a high-ranking Taliban terrorist leader responsible for multiple killings and atrocities.

Luttrell shared with the defense bar lawyers his harrowing mission, beginning with when his team was accidentally stumbled upon by local goat herders.  They let the herders go as non-combatants, but apparently the herders immediately  told the local Taliban about the team. Within a short time, the four SEALs were engaged in a vicious fire-fight against a force of 100-150 enemy fighters. The SEAL team engaged the Taliban for several hours in a running fire-fight through the hills and valleys of Afghanistan, killing more than half of them.  All of the SEALs continued to fight after being wounded multiple times. Eventually, all of the other team members were killed. Luttrell barely survived after being blown out of a gap in the boulders by an RPG, and rolling down the mountain away from the bulk of the forces.

A helicopter trying to rescue the SEALs was also shot down when it reached the hill on which the battle was raging.

Badly wounded in multiple places, Luttrell managed to crawl seven miles to evade capture, during which he killed several more Taliban.  Eventually, he was  given shelter in a village, whose elders follow the belief that an injured stranger needing shelter must be given it.

Luttrell recounts his ordeal in the New York Times bestseller Lone Survivor: The Eyewitness Account of Operation Redwing and the Lost Heroes of SEAL Team 10.

He told DRI that he doesn't view his appearances as being about "motivational speeches."  But it was clear that the dominant theme was applicable to anyone facing bad odds or tough times or difficult  challenges: don't give up, don't give in; you don't know what you are capable of until you try.

Supreme Court Grants Cert in Important Personal Jurisdiction Cases

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.

Proposed CFA Class Action on Bath Products Is Dismissed

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.

 

Window Closing on Time to Comment on CPSC Draft Strategic Plan

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.
 

Consumer Product Safety Commission Issues Draft Guidance on Definition of "Children's Products"

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.

Product Liability Seminar Offers Topical Mass Tort Session

We have posted before about the 2010 DRI Product Liability Conference in Las Vegas in April, as an event worth checking out.

Let me add that one of the attractive feature of the conference is that, in addition to the exceptional program put together for the main stage, there are many great Specialized Litigation Group (subcommittee) programs planned, including the highly-relevant-to-readers Mass Torts & Class Actions SLG.

At the Mass Torts & Class Actions SLG breakout session on Thursday, April 8th (likely to be more daring than Criss Angel, more talented than Terry Fator, more energetic than a Blue Man Group) includes:

Legislative and Regulatory Update: Impact of New Administration and New Statutes, Rollback on Preemption and Effort to Rollback Twombley
Jeffrey A. Holmstrand, McDermott & Bonenberger PLLC, Wheeling, West Virginia
Anthony Sammons, Dinsmore & Shohl LLP, Lexington, Kentucky

Emerging Class Action Issues: Impact of the ALI Project on Aggregation and Update on Problematic Causes of Action (Public Nuisance, Consumer Fraud Act and Medical Monitoring)
Richard A. Oetheimer, Goodwin Procter LLP, Boston, Massachusetts
John Parker Sweeney, Womble Carlyle Sandridge & Rice PLLC, Baltimore, Maryland

Emerging Mass Tort Issues: Examination of Daubert/ Frye Issues, Update on Green-Product Issues and Use of Risk Assessment Concepts
Robert C. James, TERRA Inc., Tallahassee, Florida
David C. Uitti, Dechert LLP, Princeton, New Jersey

Best Practices on Managing Mass Torts: Exploring the Virtual Law Firm, Cost Controls, Alternative Fee Arrangements and Early Case Dispositions
Moderator Kip T. Bollin, Thompson Hine LLP, Cleveland, Ohio
 

You can still register.

Companion Bill Introduced To Ease Suits Against Foreign Manufacturers

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.


 

 

State Supreme Court Issues Noteworthy Personal Jurisdiction Opinion

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).

Products Liability Seminar Worth Checking Out

Early notice of a seminar that should be of great interest to many readers. 

DRI's Product Liability Conference will be held on April 7-9, 2010 at the Venetian, in Las Vegas, Nevada.

The "Masters of Products" is the theme for the 2010 DRI Product Liability Conference. Product liability superstars will light up the main stage, while rising stars lead breakout sessions in 18 separate disciplines to span timely product liability topics from big-picture issues to the finer points of products practice.

Specialized Litigation Group (SLG) breakout sessions are spread over the three days, offering detailed analysis directly relevant to your product liability practice areas and interests. [Your humble blogger is Chair of the Mass Torts & Class Actions SL group.]

The brochure is here.

And you can register here.


 

Use of Company Conduct Evidence to Prove Liability or Punitive Damages

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.

State Supreme Court Decision Turns On Absence Of Causation Proof

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. 

 

Can Jury Ignore Uncontroverted Expert Opinion On Causation?

Here at MassTortDefense we often talk about the sufficiency of expert opinions, including on causation, from a legal Daubert or Frye standpoint.  A recent state court case from Texas reminds us about the rules on jury consideration of opinions that survive such legal challenges.

In Rentech Steel LLC v. Teel, No. 11-07-00318-CV (Tex. App., 11th Dist., 8/13/09), the plaintiff, who was working as a summer employee at Rentech's steel fabrication plant, suffered severe bilateral hand injuries while cleaning a power roller machine, a device that draws in steel plates and rolls them into cylinders. Rentech acknowledged some degree of fault but argued that some responsibility also rested with the settled manufacturer of the machine and the supplier.  The jury found Rentech negligent, but found no liability on the part of the other companies. Rentech appealed the finding of sole liability.

Expert William W.R. Purcell, a certified safety professional with degrees in civil and safety engineering and 40 years of experience, was retained by the plaintiff, but actually called by Rentech as an expert at trial.  He blamed the other defendants for inadequate warnings and instruction, and marketing defects, as well as agreeing there was negligence on the part of Rentech. Despite this uncontroverted expert testimony, the jury assigned liability only to Rentech.

The court of appeals noted that in Texas the jury is the sole judge of the witnesses’ credibility and the weight to give to their testimony.  Jurors may choose to believe one witness and disbelieve another and may disregard even uncontradicted and unimpeached testimony from disinterested witnesses.  Furthermore, even uncontroverted expert testimony does not bind the jury unless the subject matter is one for experts alone – one for which jurors “cannot properly be assumed to have or be able to form correct opinions of their own based upon evidence as a whole and aided by their own experience and knowledge of the subject of inquiry.”  Uniroyal Goodrich Tire Co. v. Martinez, 977 S.W.2d 328, 338 (Tex. 1998).

In this case, causation was not a matter for experts alone and did not require a technical or
scientific explanation, said the court;  it was within the jury’s ability to determine on its own what caused the accident and resulting injuries. See K-Mart Corp. v. Honeycutt, 24 S.W.3d 357, 361 (Tex. 2000)(holding that it was within jury’s ability to determine on its own whether lack of a railing caused the accident). Because causation was not an issue for experts alone, the jury could have disregarded Purcell’s conclusion as to causation.  The jury was free to conclude based upon the evidence presented at trial that Rentech failed to provide by a preponderance of the evidence (1) that the negligence of the other sellers was a cause of the accident and (2) that a marketing or design defect was a cause of the accident.

Other evidence before the jury included pictures of the actual roller machine and the warnings already located on the machine; testimony from a Rentech employee who operated the machine that a manual containing operating instructions had previously been supplied to Rentech; and testimony indicating that the Rentech employee operating the machine was knowingly violating the safety warnings and company policy at the time of the incident. Furthermore, the jury could have found that evidence proving a safer alternative design was lacking.

Third Circuit Predicts Pennsylvania Would Adopt 3rd Restatement

The Third Circuit has predicted that the Pennsylvania Supreme Court would abandon Pennsylvania’s peculiar rule of strict liability and join several other states in adopting the form of product liability espoused in the Third Restatement of Torts. Berrier v. Simplicity Manufacturing, Inc., 2009 WL 1054684 (3d Cir. April 21, 2009). My colleague Jim Beck was on the amicus brief for the defense side, and a law school classmate argued for the plaintiffs. But our interest at MassTortDefense was far more than personal: Pennsylvania product liability law has been regarded as including an antiquated and somewhat unnaturally strict version of strict liability, which, in its attempt to distinguish between negligence and 402A strict liability, seemingly precludes any reference to “foreseeability” or “reasonableness” or other negligence-sounding notions. See Lewis v. Coffing Hoist Division, Duff-Norton Co., 528 A.2d 590 (Pa. 1987); Azzarello v. Black Brothers Co., 391 A.2d 1020 (Pa. 1978).


That notion impacted mass tort and products defendants adversely in a number of ways. There is typically no balancing of risks and utility of alternative designs permitted; there is no consideration of comparative fault in strict liability that would reduce a verdict where the plaintiff’s conduct is clearly relevant; only when the plaintiff’s conduct is the “sole cause” of his or her injuries does it become relevant. Similarly, evidence of industry standards was arguably inadmissible in Pennsylvania on strict liability claims as it goes to a defendant’s reasonable care. Some state courts have held that compliance with mandatory government regulations would likewise be inadmissible in strict liability. Accordingly, plaintiffs in cases where Pennsylvania law would apply were not bashful about dismissing their negligence count before trial and relying on this version of strict liability.

In Berrier, the primary issue on appeal was whether Pennsylvania’s strict products liability law extends to a child who was injured when her grandfather backed over her foot while using a riding mower that lacked “back-over” protection. The Pennsylvania Supreme Court has never expressly determined if one who is merely a bystander and not a user of a product can bring a products liability claim against a manufacturer to recover for injuries that occur while an intended user is using the manufacturer’s product. So here was a case in which the exclusion of any notion of forseeability (because it smacks of negligence) hits the plaintiff: not being a user and being a “foreseeable plaintiff” or being injured by “foreseeable misuse” shouldn’t be enough under traditional Pennsylvania strict liability law. And that’s what the district court held. Berrier v. Simplicity Corp., 413 F. Supp.2d 431, 442 (E.D. Pa. 2005).

Originally, when faced with the issue, the Third Circuit certified the Third Restatement question to the Pennsylvania Supreme Court. Berrier v. Simplicity Manufacturing, Inc., 2008 WL 538912 (3d Cir. Jan. 17, 2008). The Pennsylvania Supreme Court, however, declined to accept the certified question. Berrier v. Simplicity Manufacturing, Inc., 959 A.2d 900 (Pa. 2008).

Faced with having to decide, the Third Circuit predicted that the Pennsylvania Supreme Court would overturn the 1977 Azzarello case in which it adopted its version of strict liability, and instead adopt the negligence-based standard of the Third Restatement of Torts. If an accurate prediction (and there is a products case before the state Supreme Court at this time, Bugosh v. I.U. North America, Inc., 942 A.2d 897 (Pa. 2008) (question is whether "this Court should apply § 2 of the Restatement (Third) of Torts in place of § 402A of the Restatement (Second) of Torts.”)), this would seem to afford certain bystanders a cause of action in strict liability under the circumstances here; but it arguably would create a much more balanced version of strict liability, as well.

The Restatement (Third) of Torts: Products Liability, § 2, recognizes a design defect claim when 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 seller or other distributor, or a predecessor in the commercial chain of distribution, and the omission of the alternative design renders the product not reasonably safe. It recognizes a claim for inadequate instructions or warnings when the foreseeable risks of harm posed by the product could have been reduced or avoided by the provision of reasonable instructions or warnings by the seller or other distributor, or a predecessor in the commercial chain of distribution, and the omission of the instructions or warnings renders the product not reasonably safe.

The court recognized that the Third Restatement therefore eliminates much of the confusion that has resulted from attempting to quarantine negligence concepts and insulate them from strict liability claims. Slip opin. at 40. The Third Circuit relied heavily on the analysis of Justice Saylor in his concurring opinion in Phillips v. Cricket Lighters, 841 A.2d 1000 (Pa. 2003). “We therefore conclude, as Justice Saylor proclaimed in Phillips, that ‘the time has come for this Court . . . to expressly recognize the essential role of risk-utility balancing, a concept derived from negligence doctrine, in design defect litigation.’ 841 A.2d at 1015-16 (Saylor, J., concurring).”  And the federal court relied on the conclusion that the Third Restatement is more consistent with the modern trend of law, as well as the evolving policy considerations that led to the adoption in Pennsylvania of Section 402A in the first place.

 

Latest Federal Court Statistical Report Offers Snapshot of Mass Torts

An interesting snapshot of mass torts and product liability actions in the federal courts is found in the annual report, "Judicial Business of the United States Courts: 2008 Annual Report of the Director."  This report is produced by the Statistics Division, Office of Judges Programs, Administrative Office of the U.S. Courts The latest report shows that a surge in asbestos cases drove a significant rise in new federal personal injury and product liability litigation.

Overall, civil filings increased 4 percent in 2008 to 267,257, and the national pending civil caseload climbed 12 percent to 298,129, the report said.  The rise in diversity of citizenship filings resulted chiefly from personal injury cases related to asbestos, especially in the Eastern District of Pennsylvania, and diet drugs in the Eastern District of Arkansas. According to court officials, asbestos filings under MDL 875 and diet drug filings under MDL 1203 caused filings to swell by more than 19,500 cases. About 99,000 asbestos-related cases containing at least 3.3 million claims are pending in the MDL in the Eastern District of Pennsylvania. (In the Arkansas Prempro MDL, which consists of thousands of cases, the judge has ordered the plaintiffs to complete discovery involving defendants Pfizer Inc. and Wyeth Pharmaceuticals Inc. by Sept. 1 , 2009) .

In the 2007 reporting period, a total of 29,291 product liability cases were commenced in federal courts, and in the same period ending in 2008, that number jumped to 53,102, based largely on the surge in asbestos-related filings .

The United States Judicial Panel on Multidistrict Litigation acted upon 35,987 civil actions pursuant to 28 U.S.C. §1407 during the 12-month period ending September 30, 2008. The Panel transferred 8,156 cases originally filed in 92 district courts to 52 transferee districts for inclusion in coordinated or consolidated pretrial proceedings with 27,831 actions initiated in the transferee districts. Product liability cases involving the hormone therapy drug Prempro and the Kugel Mesh Hernia Patch were among the more significant of the Panel's transfer determinations during the report period. The Panel did not order transfer in 25 newly docketed litigations involving 150 actions.


Since the creation of the Panel in 1968, it has centralized 301,255 civil actions for pretrial proceedings. As of September 30, 2008, a total of 11,665 actions had been remanded for trial, 395 actions had been reassigned within the transferee district, and 186,747 actions had been terminated in the transferee court. At the end of this fiscal year, 102,448 actions were pending throughout 60 transferee district courts.

The federal judiciary calls the report the most comprehensive set of detailed statistical tables published on its work.


 

New Article: Platitudes From Plaintiffs About Product Stewardship

A recent academic paper may be worth a look. Noah, Lars, “Platitudes about 'Product Stewardship' in Torts: Continuing Drug Research and Education,” 15 Michigan Telecommunications and Technology Law Review 2009.

This paper focuses on one emerging aspect of tort litigation against pharmaceutical manufacturers that, if it gained traction, might portend a dramatic (and potentially counterproductive, in the author’s view) expansion in the prescription drug industry's exposure to liability. A growing number of liberal commentators would seek to impose on pharmaceutical manufacturers a broader duty to test and educate (aspects of what they call an obligation of "product stewardship"). This paper explains some of  the serious flaws in such proposals.

The article is thus part of the overall debate about what role tort law may have to play in drug research and development. Does the threat of liability create important safety incentives (and make up for perceived, alleged failings in regulatory oversight), or, instead, does it unduly interfere with innovation and patient access to life-saving therapies? These and related questions have
inspired an active debate among commentators, the author notes;  courts and legislators have also made occasional forays into the area by constricting the scope of potential tort liability in particular circumstances. The Restatement (Third) of Torts: Products Liability, which ALI published a decade ago, included special provisions governing prescription drug cases, and the pitched battle over using implied preemption as a defense, which the United States Supreme Court may address in 2009, represents only the latest manifestation of these sharp disagreements.

Worth a read.