Challenge to Federal-State Court Coordination Overture Prompts Response

One of the challenges of our system of federalism, and dual jurisdiction between state and federal courts, is the coordination of related cases pending in the two systems.  Perhaps nowhere does this happen more regularly than in the realm of mass torts.  Federal cases may be coordinated in an MDL, and several states, such as New Jersey, have a procedure to centralize mass tort filings in their state court system. See Hermann, et al. Statewide Coordinated Proceedings (2d ed. West 2004). But coordination between the state and federal level has been more difficult, more informal, more experimental. That is, state and federal judges, faced with the lack of a comprehensive statutory scheme, have undertaken innovative efforts to coordinate parallel or related litigation so as to try to reduce the costs, delays, and duplication of effort that can stem from such dispersed litigation. State judges, for example, can bring additional resources that might enable an MDL transferee court to implement a nationwide discovery plan or a coordinated national calendar

Recently, plaintiffs in state court cases in the Actos litigation sent the Actos federal MDL court a letter complaining that the judge improperly "intervened" by discussing the litigation "ex parte" with the state court judge.  The plaintiffs asserted that the federal court persuaded the state court judge to rule in a certain fashion on scheduling issues, including the time for discovery and trial dates. Plaintiffs complained that such "intervention" would prevent them from properly litigating their cases; violated the important policy of comity (citing the Anti-Injunction Act); and raised "objectivity" concerns.  Plaintiffs requested the federal court refrain from such communications in the future with any state court judges handling Actos cases, citing the Canons of Judicial Ethics.  Finally, the letter asked that plaintiffs further be heard on this issue at an upcoming MDL hearing.

At first blush, this seemed like an over-reaction by plaintiffs, and perhaps an attempt to intimidate the court into not doing what seems like a perfectly acceptable thing, informally coordinating litigation which raises similar issues, involves many of the same counsel, and likely will implicate many of the same discovery requests, fact and expert witnesses. We leave it to the loyal readers of MassTortDefense to decide for themselves about the tone of this letter.

So how did the federal court react? Judge Doherty is overseeing the federal multidistrict litigation, In re: Actos (Pioglitazone) Products Liability Litigation (MDL-2299). Her reaction came in the form of a "Memorandum Response." The court read the original letter as possibly alleging improper and unethical conduct by both the federal and state court judges, and doing so by making "completely specious" arguments. On the merits, the court began by noting that the Manual for Complex Litigation recommends cooperation and coordination among federal and state court judges in these mass tort contexts.  So does the state court-focused manual, Managing Mass Tort Cases: A Resource for State Court Judges, published by the Conference of Chief Justices. The important notion of comity was respected because the communication from the MDL court was merely an invitation asking whether state courts might see any benefit in talking about the litigation posture. An invitation to chat is not an "intervention." And any communications were in that same spirit.

The court's memorandum turned to the MDL schedule, its internal logic and consistency, and the ample opportunity all parties had to comment on and object to any of its provisions. The court then points out, logically, that an improper ex parte conversation involves a communication between the court and one , but not all parties -- not a conversation between two independent judges.

The court than labeled a "cautionary tale" those cases that warn attorneys against unsubstantiated allegations that bring the judiciary into disrepute. Finally, the court noted that the letter inaccurately cites the Code of Judicial Conduct. The canons clearly do not prohibit a judge from consulting with other judges to aid the judge in carrying out his or her responsibilities.

The court gave the authors the benefit of the doubt, deciding ultimately to view the letter as over-zealous, ill-advised, poorly thought out, regrettable hyperbole, and empty rhetoric, as opposed to something more troubling.   An interesting read for all our readers, especially those with MDL practices.

 

ALI Annual Meeting This Week

Your humble blogger is a member of the American Law Institute, attending the annual ALI meeting in San Francisco this week.  Readers likely know that ALI is the leading independent organization in the United States producing scholarly work to clarify, modernize, and otherwise improve the law.  It publishes the Restatements and other works, including, notably for our readers, the Principles of the Law of Aggregate Litigation.

Highlights of Day 1 included an address by Steve Zack, President of the ABA.  We have been privileged to know and work with this excellent lawyer for about 15 years.  His tenure as head of the ABA has been marked by a number of important initiatives, and at ALI he spoke of assaults on the important principle of equal justice under law.  The down economy, falling tax revenues, etc. have severely impacted access to justice, including to the degree that civil jury trials are indefinitely postponed or excessively delayed in some jurisdictions. Courts are closed, judicial staff let go.  Steve closed with a moving story about his grandparents fleeing from the communists in Cuba, heartened by the freedoms and rule of law in the U.S., and noting that they would never be refugees again because if the U.S. legal system collapsed, there would really be no place else to go.

Mush of the afternoon was devoted to the final chapter of the Restatement Third of Torts. Volume 1 of the Restatement was published in 2009, and covers the most basic topics of the law of torts: liability for intentional physical harm and for negligence causing physical harm, duty, strict liability, factual cause, and scope of liability (traditionally called proximate cause).  A second volume, dealing with affirmative duties, emotional harm, landowner liability, and liability of actors who retain independent contractors, will complete this work and is expected to be published in 2011.  Yesterday's session dealt with the final chapter, the liability of actors who retain independent contractors.

Professor Pryor of SMU was the leader for this final chapter, which deals both with direct liability of those who hire, and vicarious liability for the contractor's tortious conduct.  Students of the Restatements may recall that Dean Prosser himself once said that this topic was "the worst mess of any chapter" in the Restatement.  But Prof. Pryor has done great work to improve that situation.

A number of tweaks were suggested by the membership, including by my colleague Jim Beck, who noted that an illustration regarding the asbestos context would be helpful, given the search for new defendants that is a constant feature of that mass tort, and a clarification of the Reporter's sense that the references to public nuisance in the section referred to traditionally land-based public nuisance claims, and were not expressing any opinion on the recent attempts to apply the doctrine to non-traditional settings, such as climate change.

Federal Inter-agency Task Force Releases Preliminary Test Results On Chinese Drywall

The federal inter-agency task force investigating alleged problems with Chinese-made drywall released initial results of three studies last week, which may impact the MDL litigation. The CPSC, the EPA, HUD, the CDC, and the Agency for Toxic Substance and Disease Registry are members of the task force. Health departments in Florida, Louisiana, and Virginia have also participated in the task force. An executive summary of the studies, and the draft studies themselves are available here.


To date, close to 2000 consumers have contacted the CPSC to report alleged problems in their homes. The primary issues reported are: 1) corrosion, or blackening, of indoor metals, such as electrical components and central air conditioning system evaporator coils; and 2) various health symptoms, including persistent cough, bloody and runny noses, headaches, difficulty in breathing and irritated and itchy eyes and skin. Imported drywall from China came into more widespread use after hurricanes in 2004 and 2005 led to a surge in home reconstruction and caused shortages of North American-made drywall.

In sum, the three studies involved:
(1) Elemental and Chemical Testing: The study of the elemental and chemical composition of drywall samples showed higher concentrations of elemental sulfur and strontium in Chinese drywall than in non-Chinese drywall. The elemental and chemical testing of Chinese and non-Chinese drywall samples was undertaken to characterize the specific chemical composition of the drywall. The results were expected to identify differences between the two sets of drywall that might account for the reported corrosion and health issues. While the studies have discovered certain differences between Chinese and non-Chinese drywall, further studies must be completed, said the report, to determine any nexus between the drywall and the reported health and corrosion issues. The analysis was conducted on 17 samples of drywall collected from warehouses, suppliers and manufacturers. These samples were unpainted and uninstalled.

(2) Chamber Studies: Preliminary results of ongoing testing to detect gases emitted from drywall in laboratory chambers showed higher emissions of total volatile sulfur gases from Chinese than from non-Chinese drywall. The chamber studies, conducted by Lawrence Berkeley National Laboratory, were intended to isolate the chemicals emitted from drywall. From these chamber studies, said the task force, it was possible to isolate the drywall emissions from the interferences of other materials or furnishings in a house that might emit or absorb such emissions. No comprehensive exposure and risk assessment has yet been carried out.

(3) Indoor Air Studies: Indoor air testing of 10 homes in Florida and Louisiana was conducted to identify and measure contaminants and to inform a drywall home indoor air testing protocol. The tests did not detect the presence or found only very limited or occasional indications of sulfur compounds of particular interest to the task force – hydrogen sulfide, carbon disulfide, and carbonyl sulfide. Concentrations of two known irritant compounds, acetaldehyde and
formaldehyde, were detected at concentrations that could exacerbate conditions such as asthma in sensitive populations, but were found in both homes with and without Chinese drywall. The levels of formaldehyde were not unusual for new homes, however, said the report. The results of the air testing in this very small sample of homes was being reported to offer a very preliminary indication of what compounds may be present in the indoor environments of homes in Florida and Louisiana with and without Chinese drywall.


The agencies expect the results of an air-sampling study of 50 homes in late November. An engineering analysis of electrical and fire safety issues is also forthcoming. .A study of long-term corrosion issues, that seeks to simulate decades of exposure and corrosion, will not be completed until June of 2010.

The study follows in the wake of the four-day U.S.-China summit that aimed to reinforce the notion that the United States—specifically the CPSC—will hold accountable importers of products into the United States if their products pose hazards or violate safety standards. The CPSC delegation reportedly discussed drywall safety concerns with Chinese government officials.

The CPSC stressed that this report was preliminary; the findings of each report released today must be considered within the limitations of each study and viewed in the context of the overall drywall investigation, which is still ongoing. While the studies have discovered certain differences between Chinese and non-Chinese drywall, further studies must be completed to determine any nexus between the drywall and the reported health and corrosion issues.
 

State Supreme Court Postpones Third Restatement Issue

The Pennsylvania Supreme Court reversed field and recently dismissed the appeal of a closely watched failure-to-warn case alleging harmful asbestos exposure.  Bugosh v. I.U. North America, et al., No. 7 WAP 2008 (S.Ct. Pa. June 16, 2009).

One of the key issues presented by the case was whether Pennsylvania product liability law would change from its current unique form of somewhat extreme strict liability to the more mainstream Third Restatement approach to the issue of liability for  product sellers.

The divided ruling  by the Court involved the claim of a deceased mesothelioma patient, Edward Bugosh, whose widow had been awarded $1.4 million in damages by a jury in the trial court.  I.U.  North America was a non-manufacturer distributor named in the wrongful death suit, based solely on its predecessor’s sale of a small amount of asbestos-containing products.

Traditional products liability law in the state is based on Section 402A of the Restatement (Second) of Torts, and finds that every party in the distribution chain is strictly liable for any product defect in the product they sold. The Third Restatement treats intermediate sellers differently than manufacturers. Specifically, while under current law, liability can be imposed on manufacturers, retailers and distributors for injuries caused by products with manufacturing, design, or informational defects, regardless of whether a defendant acted reasonably in the preparation and sale of the product at issue, the appeal sought to persuade the state Supreme Court to adopt the approach of Section 2 of the new Restatement, which would require plaintiffs to prove that a defendant acted unreasonably. 

The dismissal order finds review was improvidently granted, but gives no further reason.  Speculation centers on this status of the defendant as an intermediate seller, rather than as an actual manufacturer.  The Court may have felt that this was not the best context to consider a major change in the law.

The case drew tremendous interest, with amici on the appellant’s side to include the Pennsylvania Defense Institute, the Product Liability Advisory Council, Inc., Pennsylvania Chamber of Business and Industry, Coalition for Litigation Justice, Inc., Chamber of Commerce of the United States of
America, National Association of Manufacturers, NFIB Small Business Legal Center, National Association of Wholesaler-Distributors, American Tort Reform Association, American Insurance Association, Property and Casualty Insurers Association of America, National Association of Mutual Insurance Companies, American Chemistry Council, and the Washington Legal Foundation.

This result arguably leaves Pennsylvania law very much muddled, as recently the Third Circuit predicted that Pennsylvania would adopt the Third Restatement. See Berrier v. Simplicity Manufacturing, Inc., 563 F.3d 38 (3d Cir. 2009).  In state court, the traditional Pennsylvania version (based on Azzarello v. Black Brothers Co., 391 A.2d 1020 (Pa. 1978)) of strict liability prevails, while the federal courts may be following Berrier to apply the Third Restatement in diversity cases based upon Pennsylvania law.

Plaintiff had argued that a return to a fault-based system would unfairly increase the plaintiffs’ burden of proof, and adoption of the Third Restatement would reduce the incentive to product manufacturers and suppliers to distribute safer products. 

In a sharply worded dissent to the dismissal, two justices called the current law severely
deficient, particularly when measured against developed understanding and experience, and argued that necessary adjustments are long overdue. The current distinctions that Pennsylvania law makes between negligence and strict liability have no place in any scheme purporting to recognize that manufacturers and distributors are not outright insurers for all harm involving their products.

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.