News & Developments
September 29, 2015
The Chevron Ecuadorian Judgment: Jurisdiction over Recognition in Canada
In the latest development in the long-running controversy between Chevron and Ecuadorian plaintiffs seeking compensation for environmental damages, the Canadian Supreme Court has found that the Canadian courts may exercise jurisdiction over an action brought against Chevron and Chevron Canada for recognition and enforcement of the Ecuadorian judgment.
The court rejected Chevron’s arguments that jurisdiction required a “real and substantial connection” between Ontario and either the judgment debtor (Chevron) or the dispute resulting in the judgment:
In an action to recognize and enforce a foreign judgment where the foreign court validly assumed jurisdiction, there is no need to prove that a real and substantial connection exists between the enforcing forum and either the judgment debtor or the dispute. It makes little sense to compel such a connection when, owing to the nature of the action itself, it will frequently be lacking. Nor is it necessary, in order for the action to proceed, that the foreign debtor contemporaneously possess assets in the enforcing forum. Jurisdiction to recognize and enforce a foreign judgment within Ontario exists by virtue of the debtor being served on the basis of the outstanding debt resulting from the judgment. This is the case for Chevron. Jurisdiction also exists here with respect to Chevron Canada because it was validly served at a place of business it operates in the province. On the traditional jurisdictional grounds, this is sufficient to find jurisdiction.
The court restricted its holding to finding jurisdiction, explicitly noting that it was not deciding the issue of recognition, or matters of corporate separateness under Canadian law and whether Chevron Canada’s shares or assets might be the subject of enforcement if the judgment were to be recognized. As to potential recognition of the judgment in the Canadian court, note that Chevron’s RICO claims against the plaintiffs’ attorneys that the judgment was fraudulently obtained were sustained in the Southern District of New York (appeals in the matter were argued before the Second Circuit in April 2015). Fraud would be a challenge to recognition under Canadian law as well.
Despite the court’s express limitations on its ruling, some commentators observe that the decision reflects an erosion of corporate separateness and presents a vehicle for the redress of “a range of abuses, such as ‘war crimes, torture and environmental degradation.’” The Justice and Accountability Project, filing an amicus brief, stressed, “The outcome of this appeal has the potential to have a profound impact on the ability of such communities to seek redress.”
Setting aside the viability/non-viability of actually piercing the corporate veil, the liberal recognition jurisdiction acknowledged by the Canadian Supreme Court presents two potentially troubling facets to defending recognition of a foreign country judgment. First, rather than seeking recognition in the judgment debtor’s home forum, which would seemingly be the most natural process, there is a potential for multiple recognition actions in different venues (the original Ecuadorian strategy involved dozens of actions under the code name “Invictus”). Second, allowing jurisdiction over recognition—even where enforceable assets are not present in the jurisdiction—would seem to provide judgment creditors with an opportunity to bolster the credibility/sustainability of their judgment by inviting and withstanding recognition challenges in “friendly” forums to create preclusive/precedential effects for later recognition in asset-rich jurisdictions.
Keywords: mass torts litigation, enforcement, jurisdiction, recognition
—Paul V. Majkowski, Rivkin Radler LLP, Uniondale, NY
GAO Issues Report on Mandatory GA Liability Insurance Requirements
The U.S. Government Accountability Office (GAO) recently issued a report regarding a study that was requested by the U.S. Senate Committee on Commerce, Science, and Transportation relating to a proposal for enacting a federal liability insurance requirement for general-aviation (GA) aircraft owners. The committee requested the study in response to concerns raised about inadequate insurance covering injury, death, and property-damage claims in general-aviation accidents.
The GAO interviewed various stakeholders from the aviation industry, including aviation attorneys, insurance-industry representatives, and governmental officials. The report identifies the following key factors in considering whether to enact a federal GA liability insurance requirement: (1) costs borne by GA aviation accident victims and the public; (2) the extent to which GA aircraft owners or operators do or do not have liability insurance; (3) the cost impact of a federal insurance requirement; (4) issues arising from the implementation and administration of a federal aviation insurance requirement; (5) potential public safety benefits.
In examining the issues, the GAO was unable to collect sufficient data to quantify the extent to which GA aircraft owners and operators have insufficient (or no) insurance, the frequency of accidents with third-party damages or the magnitude of such damages. While such information would be helpful to the analysis, the report concludes that various suggested methods of collecting such information (i.e., through the FAA aircraft registration process, through annual surveys to GA owners/operators, or as part of GA accident investigations), would not be cost-effective or reliable.
In all, the GAO spoke with 73 stakeholders in the GA community. The GAO's report did not make any recommendations but rather simply reported the results of its interviews with GA industry stakeholders. The GAO has sent the report to the Senate Committee on Commerce, Science, and Transportation.
Keywords: mass torts, litigation, aviation, liability insurance
—Deborah Elsasser, Clyde & Co US LLP, New York City, NY
August 31, 2015
Ninth Circuit Remands Hundreds of Claims Despite Possible Joinder
The Ninth Circuit Court of Appeals recently remanded hundreds of claims regarding the same prescription drug in Briggs v. Merck Sharp & Dohme, No. 15-55873, 2015 WL 4645605 (9th Cir. Aug. 6, 2015). In doing do, the court found that the district court had no mass-action jurisdiction under the Class Action Fairness Act (CAFA), primarily based on both the language of the statute, 28 U.S.C. § 1332(d), as well as in the individual petitions when the petitions did not “propose” any joint trial of the claims.
In Briggs, the plaintiffs filed five separate cases, each including fewer than 100 plaintiffs with at least one non-diverse plaintiff, all involving the same drug manufacturer and complaints. At one point in the proceedings, plaintiffs’ counsel represented to the district court that remand would “result in these cases joining the Judicial Council Coordinated Proceeding (JCCP),” already underway in Los Angeles. Nevertheless, the district court remanded the cases and the manufacturer removed them again, this time asserting mass-action jurisdiction under CAFA. Despite the plaintiffs expressly affirming their intention to coordinate cases with the ongoing JCCP (arguably implicating federal jurisdiction, as there were 100 or more plaintiffs proposed in other cases be tried jointly within the meaning of CAFA), the district court denied remand.
In doing so, the lower court opined that the representations made during hearings, implicitly proposing that the claims be joined with the claims of other plaintiffs and four other cases, were sufficient to implicate a proposal for a joint trial within the meaning of CAFA.
On appeal, the Ninth Circuit considered whether the plaintiffs made a “proposal” for joint trial of claims of 100 or more persons sufficient to trigger CAFA’s removal jurisdiction. Specifically, the Ninth Circuit evaluated whether the plaintiffs in Briggs had 1) made any “voluntary or affirmative acts”—and an “intentional act”—that would constitute such a proposal (and not a mere suggestion or prediction) and also 2) whether the plaintiffs had requested any joint trial “made to a court that can effect the proposed relief.” The court concluded they had not. In the Briggs decision, the appellate court reasoned that the plaintiffs’ representations regarding the ongoing JCCP were “predictions” of what would happen if the cases were remanded. Moreover, the statements regarding the JCCP were made to a court (the district court) that lacked any authority to actually join the plaintiffs’ cases with the JCCP. Accordingly, the statements were not “made to [any] court that [could] effect the proposed relief” and, therefore, the plaintiffs’ claims were insufficient to serve as a proposal for joint trials.
Finally, the Ninth Circuit indicated that the plaintiffs had not requested a joint trial because they had filed a declaration stating that they “do not see joint trials of any cases or plaintiffs, but rather, all claims shall be tried individually.” Furthermore, the JCCP’s case-management order stated that it did “not constitute a determination that these actions should be consolidated for trial.” Accordingly, because there was no "proposal" for a "joint trial," the Ninth Circuit concluded that the district court did not have jurisdiction and remanded the cases with directions to the district court to remand the five cases to state court.
Practitioners may want to review Briggs carefully, as the court stopped short of providing—but suggested—wording in complaints that plaintiffs’ counsel could use to defeat CAFA jurisdiction in the form of a declaration. Moreover, Briggs establishes that defendants cannot “propose” a joint trial for removal purposes.
Keywords: mass torts, litigation, CAFA, mass actions, removal
—Kristin L. Beckman, Barrasso Usdin Kupperman Freeman & Sarver, LLC, New Orleans, LA
August 28, 2015
Seventh Circuit Decision Creates Split over Ascertainability Requirement
On July 28, 2015, the U.S. Court of Appeals for the Seventh Circuit affirmed a district court’s order certifying a Rule 23(b)(3) consumer-fraud class action, overruling the defendant’s objection on ascertainability grounds. See Mullins v. Direct Digital, LLC, No. 15-1776, 2015 U.S. App. LEXIS 13071 (7th Cir. July 28, 2015). In so holding, the Seventh Circuit disavowed the ascertainability standard prescribed by Carrera v. Bayer Corp., 727 F.3d 300 (3d Cir. 2013), contending the Third Circuit’s “heightened standard” upset the “balance of interests” that Fed. R. Civ. P. 23 was designed to protect. The Mullins decision creates a new circuit split on the application of the ascertainability requirement, an issue now unlikely to gain nationwide consensus absent resolution by the U.S. Supreme Court.
In Mullins, the plaintiff sued defendant Direct Digital, alleging various consumer-fraud causes of action related to purported misrepresentations made in the sale of its product, Instaflex Joint Support. In class-certification briefing, ascertainability became a point of contention. Because members of the putative class were not expected to have actual written proof of purchase, Direct Digital argued that the defined class could not be ascertained in a reliable or administratively feasible way. The district court granted the plaintiff’s motion for class certification over Direct Digital’s objections, and Direct Digital appealed, relying heaving upon the Third Circuit’s decision in Carrera, 727 F.3d 300 (holding that ascertainability requires both an objective class definition and a “reliable and administratively feasible” method of identifying class members; and that class member affidavits, alone, were not “reliable and administratively feasible” because they would deprive the defendant of its due-process right to challenge class membership).
The Seventh Circuit affirmed. In reaching this result, Mullins criticized the Carrera court’s ascertainability standard, and rejected its conclusion that consumer affidavits alone are an unacceptable form of proof of class membership. While Carrera concerned itself with the due-process rights of defendants in challenging class membership claims when the only evidence that exists on the validity of the claim was the putative class members’ “say so,” this issue was of little concern to the Seventh Circuit: “Whether putative class members self-identify by affidavits simply does not matter. . . . [S]o long as the defendant is given a fair opportunity to challenge the claim to class membership and to contest the amount owed each claimant during the claims process, its due process rights have been protected.” 2015 U.S. App. LEXIS 13071 at *39.
Instead of focusing on how a putative class members will be identified, the Mullins court reasoned, the ascertainability requirement should focus “on the adequacy of the class definition itself.” Although the reliability and feasibility of the method is not completely irrelevant at the class-certification stage, the court suggested that it would be more appropriate to consider as one of many factors affecting the manageability of the class under Rule 23(b)(3). Ultimately, the court concluded that the plaintiff had satisfied the ascertainability requirement because his proposed class definition was not vague, and was not defined by subjective criteria or in terms of success on the merits. Accordingly, the court affirmed the district court’s class-certification order.
The Mullins decision is significant because it creates a new split of authority on the issue of ascertainability. Before Mullins, a significant number of courts had adopted the standard prescribed by Carrera, focusing on the class definition as well as the reliability and administrative feasibility of the plaintiff’s proposed method of identifying class members. See, e.g., Karhu v. Vital Pharms., Inc., No. 14-11648, 2015 U.S. App. LEXIS 9576 (11th Cir. June 9, 2015); Jones v. Conagra Foods, Inc., No. 12-01633, 2014 U.S. Dist. LEXIS 81292 (N.D. Cal. June 13, 2014). The Mullins decision now provides a different standard, focusing only on the proposed class definition, and creating a circuit split that may lead to U.S. Supreme Court consideration in the near future.
Keywords: mass torts litigation, class certification, ascertainability
— M. Joseph Winebrenner, Faegre Baker Daniels LLP, Minneapolis, MN
August 27, 2015
Violations of an EU Regulation Cannot Be Adjudicated in U.S. Courts
It has been just over 10 years since the member states of the European Union enacted Regulation (EC) No 261/2004 (EU 261), a consumer-protection regulation that provides passengers the right to fixed compensation (€250–€600 depending the length of the flight) in the event of denied boarding, flight cancellations, and long delays. EU 261 applies to all flights operated by EU carriers and to flights operated by non-EU carriers that depart from the EU. Several conditions must be met before a passenger is entitled to compensation. For example, the passenger must have checked in for the flight on time and purchased his or her ticket at a publicly available fare. In addition, passengers are not entitled to compensation if their flight is cancelled or delayed because of “extraordinary circumstances” beyond the operating carrier’s control. Initially, questions about the enforcement of passenger rights under EU 261 were confined to the courts of the EU member states. More recently, this EU regulation has been the subject of U.S. litigation that raises the question whether U.S. courts could enforce a foreign regulation to which the U.S. is not a party.
Beginning in 2011, a number of passengers who had traveled on various airlines to or from the EU commenced eight separate class actions seeking to enforce their right to compensation under EU 261. See Giannopoulos v. Iberia, No. 11 C 775 (N.D. Ill. 2011); Polinovsky v. British Airways, No. 11 C 779 (N.D. Ill. 2011); Polinovsky v. Lufthansa, No. 11 C 780 (N.D. Ill. 2011); Volodarskiy v. Delta, No. 11 C 782 (N.D. Ill. 2011); Gurevich v. Alitalia Airlines, No. 11 C 1890 (N.D. Ill. 2011); Lozano v. Continental, No. 11 C 8258 (N.D. Ill. 2011); Bergman v. United Airlines, No. 12 C 7040 (N.D. Ill. 2012); Harris v. British Airways, Case No. 14 C 813 (N.D. Ill. 2014). In each case, the representative plaintiffs sought to recover €600 in damages on behalf of passengers who experienced a flight delay or cancellation during their transportation to or from the EU. Initially, the passengers asserted claims for breach of contract but later amended their complaints to assert a claim for direct violation of EU 261. In response to the direct EU 261 claims, each of the defendant airlines filed a motion to dismiss on the ground that EU 261 does not afford passengers a private right of action that can be brought in the U.S.
The district-court judges tasked with determining the enforceability EU 261 in the U.S. unanimously agreed that EU 261 does not create a private cause of action that can be enforced in U.S. courts. See Lozano, 2013 WL 5408652 (N.D. Ill. Sept. 26, 2013); Volodarskiy, 2013 WL 5645776 (N.D. Ill. Oct. 16, 2013); Giannopoulos, 2014 WL 551603 (N.D. Ill. Feb. 12, 2014); Polinovsky, 2014 WL 958666 (N.D. Ill. Mar. 12, 2014); Gurevich, No. 11 C 1890, [Dkt No. 104] (N.D. Ill. Mar. 18, 2014); Bergman, No. 12 C 7040, [Dkt No. 46] (N.D. Ill. June 18, 2014). Appeals to the Seventh Circuit followed. In April 2015, the Seventh Circuit issued its controlling decision in Volodarskiy and affirmed the district court’s decision dismissing the plaintiffs’ claim for violation of EU 261on the ground that EU 261 limits enforcement to the courts of the EU member states and does not provide a private right of action outside those jurisdictions. See 784 F.3d 349 (7th Cir. 2015). The Seventh Circuit based its decision on the text of EU 261. While acknowledging that EU 261 did not expressly limit its enforcement to the United States, the court found that “it also doesn’t clearly empower tribunals in nonmember countries to enforce the compensation system. And the text and structure of the regulation indicate that passenger claims for compensation due from air carriers are limited to administrative bodies and courts in EU Member States.” Moreover, the court found that its interpretation was reinforced by the principles of “subsidiarity” and “legal certainty,” pursuant to which EU member states have authority to determine how EU regulations should be enforced in as uniform a manner as possible, with the European Court of Justice acting as the ultimate authority to resolve conflicts.
The Seventh Circuit’s decision in Volodarskiy, as well as the several district-court decisions below,are instructive on the broader issue of whether federal courts of limited jurisdiction can enforce a foreign statute.
Keywords: mass torts litigation, aviation, international choice of law, standing
July 30, 2015
Barn Doors Open Too Long for Remedy in Improper Inter-Circuit Transfer
The Fifth Circuit Court of Appeals recently denied a petition for writ of mandamus to vacate the improper transfer of a case to the Southern District of Indiana from the Middle District of Louisiana. In In re Red Barn Motors, Inc., et al., Slip Op. No. 15-30067, the court of appeals held that once a case is transferred outside the circuit, the appellate court lacks the power to vacate the transfer; the sole remedy available is a writ directing the transferor to request the return of the case from the transferee. However, the availability of the writ is contingent on a petitioner’s diligence in obtaining the requested relief.
The All Writs Act, 28 U.S.C. § 1651, which empowers courts of appeals to issue writs of mandamus, is coterminous with a court’s appellate jurisdiction: It is limited to those matters currently before or perfected in district courts embraced by the appellate court. Accordingly, at the moment of transfer from an in-circuit court to a foreign court, the court of appeals for the transferor court is deprived of the power to issue a writ directly affecting the transferred matter, even if the transfer is improper.
In In re Red Barn, the Middle District of Louisiana granted defendant NextGear’s motion to transfer the matter to the Southern District of Indiana pursuant to 28 U.S.C. § 1404(a). The transferee court had been selected by plaintiff Red Barn and NextGear in a promissory note at issue in the case. Red Barn and defendant First Choice unsuccessfully opposed the transfer, arguing that the note had been procured by fraud and that the transferee court could not exert personal jurisdiction over First Choice. In January 2015, more than three months after the transfer was granted, Red Barn and First Choice filed petitions for a writ of mandamus vacating the transfer. The petitioners rested on the same arguments asserted in their opposition to the initial transfer.
In its decision, the Fifth Circuit began by observing that after the transfer, the Louisiana district court was incapable of issuing a final decision in the case. Thus, the matter was outside the Fifth Circuit’s appellate jurisdiction and mandamus power. The only recourse available to the petitioners was for the court to direct the transferor court to ask the transferee court to reverse the transfer. However, the court of appeals warned that such a writ is only issued in “a very extreme case,” where the merits of undoing an improper transfer outweigh the inefficiency and potential for conflicts with other circuits. The court further noted that the writ would only be issued if “the case [was] transferred ‘despite the petitioner’s diligence.’” Id. at *7 (citing In re Warrick, 70 F.2d 736, 740 (2d Cir. 1995)).
It was on that final consideration that the Fifth Circuit declined to issue the extraordinary writ. While implicitly conceding that the case was improperly transferred, the court observed that the three-plus months petitioners waited before petitioning the court, without explanation for the delay, demonstrated a lack of effort. Therefore, the Fifth Circuit denied the petitioners’ request.
While the transfer in In re Red Barn was effected pursuant to 28 U.S.C. § 1404(a), the court of appeals’ analysis should be applicable to transfers pursuant to 28 U.S.C. § 1407 as well. Accordingly, litigants seeking to vacate improper consolidation of their case in a foreign circuit must be diligent in their efforts to petition for a writ of mandamus. The impropriety of the transfer, alone, is not enough to sway a court to issue the extraordinary writ, and a petitioner’s effort and timeliness are considered factors in assessing its necessity. Litigants would also do well not to rest easy when the consolidated case is at a halt; the transferee court in In re Red Barn stayed the transferred action pending the outcome of the petition, significantly reducing the risks of inefficiency and conflicting rulings, and yet the outcome remained the same. Finally, litigants should be mindful of the realities of their petition. Courts of appeals are understandably loath to issue writs directing a trial judge to admit an error of law and ask a peer to return his or her case absent a compelling rationale. Further, litigants ought to consider whether the benefits of the original forum are worth the price of admission—namely, drawing the ire of the trial judge.
Keywords: mass tort litigation, consolidation, transfer, personal jurisdiction
— Maxwell D. Herman, Law Clerk, District of New Jersey
July 27, 2015
SCOTUS to Reexamine Use of Statistical Techniques in Class-Action Litigation
The U.S. Supreme Court has agreed to review the Eighth Circuit's decision in Bouaphakeo v. Tyson Foods, Inc., 765 F.3d 794 (8th Cir. 2014), which affirmed a lower court's decision finding Tyson liable to a class of employees for Fair Labor Standards Act (FLSA) and Iowa state-law claims. The Supreme Court is expected to consider whether a Rule 23 class action or an FLSA collective action can be certified (1) when liability and damages are determined by statistical techniques that assume all class members are identical, (i.e.,the average employee) or (2) when the class contains members who were not injured and do not have a right to damages.
The Bouaphakeo plaintiffs are hourly workers at a meat-processing facility in Iowa who claim that they are owed overtime pay for the time necessary to put on and remove protective clothing and for the time it takes to walk to and from the production line. The district court certified a collective action for the FLSA claims and a class action for the state-law claims. Bouaphakeo v. Tyson Foods, Inc., 564 F. Supp.2d 870 (N.D. Iowa 2008). At trial, the district court allowed the plaintiffs to prove liability and damages using statistical evidence of average donning, doffing, and walking times for all plaintiffs, which assumed that all employees were identical "average" employees. The jury returned a verdict for plaintiffs.
On appeal, the Eighth Circuit rejected Tyson's argument that differences among the plaintiffs with respect to individual routines, duties, and equipment used precluded class certification. The court found that the plaintiffs' claims were not "dominated by individual issues" because (1) Tyson had a specific company policy that applied to all plaintiffs, (2) all plaintiffs worked at the same facility, and (3) all plaintiffs used similar equipment. Bouaphakeo, 765 F. 3d at 797.
The court also rejected Tyson's argument that class certification was improper because some class members did not work overtime and, therefore, had no FLSA damages. In particular, Tyson took issue with the district court's use of statistical evidence to prove the claim of an "average" employee, arguing that it was "trial by formula," which was rejected by the Supreme Court in Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011). The Eighth Circuit disagreed, finding that the plaintiffs used employee time records to establish individual damages. It further reasoned that, although the plaintiffs relied on an inference from the average donning, doffing, and walking times, the analysis applied to each plaintiff individually. According to the court, this was similar to a jury applying testimony of a named plaintiff to find class-wide liability, especially considering that Tyson failed to produce evidence of specific and individual donning, doffing, and walking times.
The Eighth Circuit's decision appears to be in conflict with prior decisions of the Supreme Court, as well as other circuits. As previously, noted, the Wal-Mart court rejected the use of trial by formula to determine liability. Similarly, in Comcast Corp. v. Behrend, 133 S. Ct. 1426, 1431 (2013), the Court reversed a class-certification order because the plaintiffs' statistical evidence did not establish that "damages are capable of measurement on a classwide basis." See also Epsenscheid v. DirectSat USA, LLC, 705 F. 3d 770, 774 (7th Cir. 2013) (disallowing the use of averages to "get around the problem of variance" of plaintiffs).
The Supreme Court has also held that Rule 23 "imposes stringent requirements for certification that in practice exclude most claims," Am. Express Co. v. Italian Colors Rest., 133 S. Ct. 2304, 2310 (2013), and therefore using statistical evidence of a fictitious "average" employee falls short of the "stringent requirements" of Rule 23. Further, as argued by the dissent in Tyson, using a statistical analysis allows some plaintiffs who have suffered no injury to receive a pro-rata portion of the jury's lump-sum verdict. See Tyson, 765 F.3d at 799 (Beam, J., dissenting).
Although the Eighth Circuit's decision in Bouaphakeo v. Tyson Foods, Inc. appears to conflict with established Supreme Court precedents, until the Supreme Court issues its decision, practitioners should be mindful of the analysis employed by the Eighth Circuit and its endorsement of the use of statistical evidence to overcome individual differences among class members under certain circumstances.
Keywords: mass tort litigation, class action, certification, Fair Labor Standards Act, commonality
July 24, 2015
Witness Preparation and Ascertaining the Truth During Mass-Tort Litigation
As the great dramatist Oscar Wilde observed, “The pure and simple truth is rarely pure and never simple.” In the dramas that play out on the mass tort litigation stage, getting to the truth can be a challenging assignment. The sheer size and scope of such matters can be overwhelming. When mass-tort litigation hits, millions of pages of documents must be preserved, collected, and analyzed. Events sometimes spanning decades must be reconstructed. And witnesses, often numbering in the hundreds, must be interviewed. The mayhem that ensues from this type of information overload can obstruct the defense team’s most important objective: getting to the truth of the matter so that the truth can be presented to the jury purely and simply.
So what are the best practices for discerning and presenting the truth in mass-tort litigation? Meaningful witness preparation, beginning even as early as the anticipation of litigation and continuing through the various phases of litigation, is especially critical in these high-stakes matters. Here are a few tips to bear in mind during the process:
- Differing Perspectives: When reviewing events and documents with witnesses in the midst of mass-tort litigation, expect to hear dissimilar recollections. Company personnel who work on the same projects or who are involved in the same meetings come to those experiences with different backgrounds and interests. Often, personnel working on the same project within a company represent different professional disciplines. Someone who comes from the marketing group will naturally place more emphasis on the aspects of the assignment that impact that discipline, whereas a person working on the R&D side likely has an entirely separate focus. This can be frustrating to attorneys on either side of the litigation, who often want a single document to represent a single idea so it can fit neatly within their case themes. This is why, especially from the defense viewpoint during mass-tort matters, adding context is so essential.
- Adding Context: Even where witnesses have diverging recollections, adding context to underlying events can make differing viewpoints appear aligned. In cases involving hundreds of potential witnesses, why a person acted or perceived events a particular way is part of “the truth” of the matter, and can actually paint the most accurate picture of events. Discovering and then incorporating context into the defense of the case will help witnesses diffuse and explain challenging facts to the jury. Adding context also provides a safe harbor for a witness confronted with antagonistic questions, which would make great sound bites for the opposing side if answered without adding necessary background. No incident or event occurs in a vacuum, and telling the whole truth often involves placing events in context.
- Trusting the Truth: When dealing with questions that attempt to coax a witness into adopting an idea that does not represent the whole truth, encouraging the witness to feel comfortable adding context to his or her answer is critical. But this is a distressing concept for many attorneys, who hold tightly to the long-standing notion that a witness should only answer the question asked: “If it is a yes or no question, then answer yes or no.” While it is still the case that a witness should not insert context into every question asked, questioning by plaintiffs’ counsel has evolved in recent years, so defense practices must evolve with them. The plaintiffs’ bar is adept at examining witnesses using the “reptile strategy.” These types of questions are very general and inherently tricky. Answering such questions without contextual detail can be hurtful to the defense and can actually shake a witness’s confidence. A witness needs to be empowered through careful preparation to be able to share what he or she knows to have been true during the course of events leading up to the litigation.
Defense teams working with corporate witnesses during mass-tort litigation have the important responsibility of distilling the company story in such a way that matches each particular witness’s truth. In fact, consolidating differing perspectives is likely to provide the defense and the jury with the most accurate account of the events in these sizable cases. Uncovering the context behind a witness’s beliefs and preparing the witness to respond to difficult questions in a manner that actually provides the whole truth will achieve the defense’s ultimate goal: presenting the story of the case in the most pure, simple, and credible way.
Keywords: mass torts, litigation, witnesses, jury management
— Karen Woodward, Sedgwick LLP, Los Angeles, CA
Ninth Circuit Reviews Magistrate Judge's Powers over Remand Motions
The Ninth Circuit recently confronted two layers of jurisdictional power over motions to remand. Flam v. Flam, No. 12-17285 (9th Cir. June 8, 2015). First, the court addressed the question of whether magistrate judges may grant a motion to remand a case to state court. Second, regardless of whether magistrates have such power, may the district court review the magistrate’s remand order under 28 U.S.C. § 1447(d)? The court held that magistrates cannot issue an order on a motion to remand because it is dispositive of the federal litigation, and district courts may reconsider the magistrate’s decision because the magistrate lacked jurisdiction in the first instance. In so doing, the Ninth Circuit joined its sister circuits in their conclusions finding limits on magistrates’ powers over motions to remand.
The underlying case began with a dispute over a pension account after a divorce. In 2012, Laura Flam sued her ex-husband, Dr. Marshall Flam, in Fresno County Superior Court, alleging that he had breached certain duties as a pension fiduciary. Although the Flams shared a joint pension account during their marriage, after their divorce, Ms. Flam retained a separate account with Dr. Flam as the trustee. She alleged that he failed to provide her with certain pension statements and failed to disclose that he moved the account’s assets to a different brokerage house in 2007.
Dr. Flam removed the case to federal court, arguing that Ms. Flam’s claims were completely pre-empted by the Employee Retirement Income Security Act. Ms. Flam moved to remand, and a magistrate judge granted the motion. Dr. Flam requested reconsideration with the district judge. That judge denied reconsideration, holding that he lacked power to review the remand decision under 28 U.S.C. § 1447(d), which states: “[a]n order remanding a case to the State court from which it was removed is not reviewable on appeal or otherwise.”
The Ninth Circuit had to decide two questions: (1) Did the magistrate judge have the power to remand the case to state court; and (2) did the district judge have the power to review that decision? As to the first question, the court reviewed the division of labor within the Federal Magistrates Act. Under that act, federal magistrate judges may issue orders on non-dispositive motions, but as to dispositive matters, the magistrate judge may only issue proposed findings and recommendations to the district court. To determine whether a motion is “dispositive,” the Ninth Circuit has generally used a functional approach and looks at the potential effect of the motion on the litigation. United States v. Rivera-Guerrero, 377 F.3d 1064, 1068 (9th Cir. 2004). Thus, consistent with other circuits, the court found that because remand orders terminate the litigation at the federal level, they are properly considered dispositive and may not be decided by magistrate judges alone.
But even as magistrates lack the power to issue such a decision, may a district court review that order despite the language of section 1447(d) suggesting otherwise? The short answer is yes, based on Supreme Court precedent softening the impact of those words. In Thermtron Prods. Inc. v. Hermansdorfer, 423 U.S. 336 (1976), the Court held that “only remand orders issued under section 1447(c) and invoking the grounds specified therein that removal was improvident and without jurisdiction are immune from review under § 1447(d).” The Ninth Circuit had previously held that even when remand may be based on grounds contained in section 1447(c), if the district court lacked the power to decide the question, then the proscription on judicial review in section 1447(d) is inapplicable. Kelton Arms Condo. Owners Ass'n, Inc. v. Homestead Ins. Co., 346 F.3d 1190, 1191 (9th Cir. 2003). The Flam court extended this holding and found that because the magistrate judge did not have remand authority, the district court could, and should, reconsider the remand decision. This holding also joined three other circuits that had decided the issue in the same manner.
Because district courts often refer matters for recommendation or disposition to magistrate judges, all practitioners need to know the extent and limits of magistrate authority. Some matters are not always easily classified as dispositive or non-dispositive. Remand orders do not terminate the case altogether, but they do terminate the litigation at the federal level, and all circuits that have considered the issue have found them to be outside the magistrate’s purview. The Flam case emphasizes that distinction and reminds us to keep this in mind whenever you are in federal court.
Keywords: mass torts litigation, removal, remand, magistrate judges, authority
— David L. Schwan, Concho Resources, Houston, TX
Ninth Circuit Limits Scope of CAFA'S Local Single Event Exception
In Allen v. The Boeing Co., 784 F.3d 625 (9th Cir. 2015), the plaintiffs sued Boeing and Landau Associates in Washington state court, alleging that over a 40-year period, Boeing contaminated the groundwater around its Auburn, Washington, facility and Landau was negligent in its investigation and remediation for more than a decade. Boeing removed the case to federal court based on diversity jurisdiction and the Class Action Fairness Act of 2005 (CAFA). The district court remanded the case, finding that the plaintiffs’ action fell within the local-single-event exception to federal jurisdiction under CAFA. The exception provides that a “mass action” does not include an action in which all of the claims arose from an event or occurrence in the state in which the action was filed and allegedly resulted in injuries in that state or contiguous states. Boeing sought and was granted leave to appeal, and the Ninth Circuit held that the plaintiffs’ action did not fall within the exception.
In deciding the issue, the court revisited its previous decision in Nevada v. Bank of America Corp., 672 F.3d 661 (9th Cir. 2012), which held that the exception applied only where all claims resulted from a single event or occurrence. In Nevada, the court found that the plaintiffs alleged widespread fraud over thousands of interactions; and thus, their claims did not come within the exception. Moreover, the court disagreed with the district court’s reliance on the Third Circuit’s broad definition of an “event or occurrence” as set forth in Abraham v. St. Croix Renaissance Group, LLLP, 719 F.3d 270 (3d Cir. 2013). In Abraham, the Third Circuit reasoned that an “event” is not always confined to a discrete happening that occurs over a limited time, and further explained that one could speak of the Civil War as a defining event in American history even though it took place over a four-year period. The Third Circuit articulated that where the record demonstrates that circumstances share commonality and continue over time, they can constitute an event or occurrence for purposes of the exception.
The Boeing court, relying on Nevada, reasoned that the exception applies only where all claims arise from a single event or occurrence such as a single environmental accident. The court noted that a careful reading of CAFA provided no support for a broader definition of the terms “event or occurrence,” and a broad definition would blur the lines among the number of detailed exceptions in the statute. In support of the singular nature of its interpretation, the court also referred to the Senate Committee Report, which stated that the exception only applies to a true local single event with no substantial interstate effects. The report also stated that the exception should apply to a chemical spill, but not chemical spills, and the exception draws a line between a one-time act and a continuing course of pollution. The court also considered its other previous decisions as well as Supreme Court precedent holding that CAFA should be read with a preference for hearing interstate class actions in federal court if properly removed, and the objecting party bears the burden of proof as to applicability of any exception.
Similarly, the Ninth Circuit found that even if the terms “event or occurrence” were interpreted broadly, the plaintiffs’ action still would not come within the exception. The court distinguished the Fifth Circuit’s approach in Rainbow Gun Club, Inc. v. Denbury Onshore, LLC, 760 F.3d 405 (5th Cir. 2014) by noting that the case involved a single event or occurrence (i.e. the failure of a well) even though the precise timing of the failure was not clear. However, the plaintiffs alleged that Boeing is responsible for the leaching of hazardous materials for more than 40 years, and Landau is liable for negligently failing to remediate the pollution for over a decade. Therefore, even under the Fifth Circuit’s expansive approach, the plaintiffs failed to allege a requisite singular happening. Instead, the plaintiffs asserted claims against two distinct defendants for two separate activities. Consequently, the plaintiffs’ action would not come within an expansive definition of an event or occurrence. The Ninth Circuit’s Boeing ruling certainly impacts judicial harmony on the scope of the exclusion and leaves the door open for continuing development of both state and federal court jurisprudence in these types of cases.
Keywords: mass torts litigation, CAFA, local event exception
— Matthew A. Moeller, The Moeller Firm, New Orleans, LA
June 22, 2015
Transfers of "Mass Actions" Pursuant to 28 U.S.C. § 1404
The Class Action Fairness Act (CAFA) changed the way that class actions are treated by the federal courts as well as codified what constitutes a “mass action” for purposes of federal jurisdiction. See 28 U.S.C. § 1332(d). Another federal statute, 28 U.S.C. § 1407, provides for and governs the use of another tool for handling a large volume of civil cases involving common questions of fact—multidistrict litigation (MDL).
In many instances, CAFA is used by defendants seeking to remove a case or a group of cases from state court to the federal forum. In some situations, a defendant or a group of defendants might want to transfer a removed “mass action” from the plaintiff’s chosen forum to an alternative forum. What rules govern such a request? The CAFA statute contains provisions limiting the transfer of mass actions:
Any action(s) removed to Federal court pursuant to this subsection shall not thereafter be transferred to another other court pursuant to section 1407, or the rules promulgated thereunder, unless a majority of the plaintiffs in the action request transfer pursuant to section 1407.
28 U.S.C. § 1332(d)(11)(C)(i). So, how then can a defendant (or a group of defendants) obtain a transfer of a “mass action” when an MDL has been established governing similar actions (and the plaintiffs will not agree to a transfer)? The defendant need only look to the conventional statute on change of venue—section 1404(a).
Recently, the Central District of California addressed this very question. See Judith Romo, et al. v. McKesson Corp., et al., Case No. 5:12-cv-02036-PSG-E (Doc. 107) (C.D. Cal). In Romo, a group of defendants removed a “mass action” involving a prescription drug to the Central District of California pursuant to CAFA (the “California mass action”). Other cases involving the same product were already pending in a multidistrict litigation in the Eastern District of Kentucky. The defendants sought to transfer the California mass action to the Eastern District of Kentucky under 28 U.S.C. § 1404(a).
The plaintiffs in the California mass action challenged the requested transfer of venue, arguing as a threshold matter that the transfer of a CAFA mass action pursuant to section 1404(a) is prohibited (without consent of the majority of plaintiffs, which the defendants did not have). Specifically, the plaintiffs argued that the language quoted above from section 1332(d)(11)(C)(i) barred the transfer to the Eastern District of Kentucky due to the presence of the MDL. They further argued that the MDL court’s dismissal of cases that were removed pursuant to CAFA and transferred to the MDL as being “not properly before the MDL” based on the same language they cited, supported their position.
The Central District of California, however, dismissed the plaintiffs’ arguments noting that section 1332(d)(11)(C)(i) focused exclusively on transfers under section 1407, but did not mention transfers of mass actions under section 1404(a). Because the defendants were not seeking to transfer the mass action to the MDL under section 1407, but instead were seeking to transfer the case to another district court (which just happened to be handling the MDL), section 1332(d)(11)(C)(i) was inapplicable. The court thereafter engaged in the typical analysis conducted when deciding any request for a change of venue under section 1404(a).
Thus, despite the language of section 1332(d)(11)(C)(i), transfer of venue of a “mass action” under CAFA is still available under the traditional change-of-venue statute (section 1404(a)), even if a defendant is seeking to transfer the “mass action” to the district court handling an MDL on similar facts. In fact, the existence of an MDL based on similar facts in the transferee court might actually benefit the party seeking the transfer in terms of satisfying some of the factors that federal courts use when making such determinations.
Keywords: mass torts litigation, transfer, venue, mass action, CAFA
— Donald F. Winningham III, Bressler, Amery & Ross, P.C., Birmingham, AL
June 22, 2015
Aircraft Laser Incidents: A Clear and Present Danger to Aviation Safety
Reports of aircraft targeting with handheld ground lasers have been rising sharply. In 2005, there were 300 reported incidents. By 2014, there were 3,894 reported incidents. Exposure to laser illumination may cause hazardous effects such as pain, distraction or disorientation, loss of depth perception, and aborted landings.
The increase in reports of ground-based lasers targeting flying aircraft may be due to a number of factors, including the increased availability of inexpensive laser devices on the Internet, higher-power lasers that can strike aircraft at higher altitudes, and increased reporting by flight crews. Regulatory power for laser-light products is delegated to the FDA, and its regulations are found at 21 C.F.R. § 1010.
While some jurisdictions have made interdiction efforts using helicopters and other improved tracking methods, catching laser offenders is difficult. The devices are small, and when extinguished can be easily concealed and the location of the user can be in sparsely populated areas. To respond to the increasing attacks, the FAA launched the Laser Safety Initiative, which provides education on laser hazards and events, news, law, and civil penalties, and encourages reporting.
The latest reports indicate that aircraft illuminations by handheld lasers are overwhelmingly green, as opposed to the previously common red. This is significant because they are 35 times brighter than red, and the wavelength of green lasers is close to the eye’s peak sensitivity when they are dark-adapted. FAA flight simulation studies have shown that the adverse visual effects from laser exposure are especially debilitating when the eyes are adapted to the low-light level of a cockpit at night.
Restricted airspace surrounding commercial airports, in particular, can provide federal, state and/or local criminal penalties for violation with a laser, even if the operator is not operating the laser within the space, but merely causes the beam to intersect the controlled airspace to target an aircraft. In the United States, laser-airspace guidelines can be found in FAA Order JO 7400.2 (Revision "G" as of April 2008). Although it is far beyond the scope of this note, Chapter 29 of the order provides a comprehensive overview of the FAA’s laser guidelines.
In 2011, the FAA announced plans to impose civil penalties against people who point a laser into the cockpit of an aircraft. The FAA released a legal interpretation that concluded that directing a laser bean into an aircraft cockpit could interfere with a flight crew performing its duties while operating an aircraft, a violation of FAA regulations. The legal interpretation includes an analysis of 14 C.F.R. § 91.11, which establishes that “[n]o person may assault, threaten, intimidate, or interfere with a crewmember in the performance of the crewmember’s duties aboard an aircraft being operated.”
14 C.F.R. § 91.11 had initially been adopted in response to hijackings. However, the FAA legal interpretation concluded that nothing in the regulation specified that the person interfering must be on the airplane. Previously, the FAA had taken enforcement action only against passengers on board the aircraft that interfere with crewmembers. The maximum civil penalty is $11,000. By June 2012, the FAA had initiated 28 enforcement actions.
On February 14, 2012, President Obama signed Public Law 112-95. The FAA Modernization and Reform Act of 2012, section 311, amended Title 18 of the United States Code (U.S.C) Chapter 2 § 39, by adding section 39A, which makes it a federal crime to aim a laser pointer at an aircraft.
The unprecedented escalation in the number of recent aviation laser incidents, coupled with more powerful lasers, wide and easy availability of lasers, the increasingly bold use and difficulties with interdiction, all pose problems. The undisputed evidence that lasers pose a danger to flight crews suggests that a tragic accident may only be a matter of time.
Keywords: mass torts litigation, aviation, laser regulations
— Scott Brooksby, Olson Brooksby PC, Portland, Oregon
June 8, 2015
Canadian Court Suggests New Test for Public Authority Liability in Tort
On April 8, 2015, the Federal Court of Appeal of Canada released its decision in Paradis Honey Ltd. v. Canada, 2009 FCA 89.
The decision pertains to a class action commenced by a group of commercial beekeepers. Specifically, the beekeepers alleged to have suffered damages as a result of a policy of blanket prohibition on the importation of bee “packages” since 2007. Beekeepers have two options to replace lost colonies after harsh Canadian winters: through a “package,” a cereal-box-sized container holding a small colony (including a queen), or through a “queen,” a match-box-sized container holding a queen bee and a few attendant bees. It is more efficient and less risky to replace an existing colony with a package as opposed to just a queen.
Instead of pursuing an administrative-law remedy, the beekeepers elected to sue the various public authorities involved in the importation of animals, including bees, in negligence. Following the filing of the beekeepers’ motion for certification, the defendants moved to strike the action on the basis that the beekeepers were not in such a close and direct relationship of proximity with the defendants to give rise to a private duty of care. The federal court judge appointed to manage the proposed class action agreed with the defendants that the claim failed to disclose a reasonable cause of action in negligence. In reaching this conclusion, the judge found that the relevant statutory scheme was aimed at the protection of animal health in the general public interest, excluding any private duty of care to protect the economic interests of those who may rely on imported animals in their commercial activity.
A majority of the Federal Court of Appeal allowed the beekeepers’ appeal, setting aside the federal court’s judgment and dismissing the motion to strike. In doing so, Justice Stratas was critical of the existing framework used to analyze the liability of public authorities in negligence:
At the root of the existing approach is something that makes no sense. In cases involving public authorities, we have been using an analytical framework built for private parties, not public authorities. We have been using private law tools to solve public law problems. So to speak, we have been using a screwdriver to turn a bolt.
In particular, he questions the prominence of the “proximity” requirement in the analysis and whether “it makes sense to speak of public authorities having to consider their ‘neighbours’ . . . when they regularly affect thousands, tens of thousands or even millions at a time?”
Instead, Justice Stratas proposes that a different approach, governed by public-law principles, ought to be adopted. The new framework he puts forward relies on two components: unacceptable or indefensible action in the administrative law sense, and the exercise of remedial discretion. Justice Stratas attempts to alleviate concern that monetary relief would be automatic where a public authority acts outside the scope of what is acceptable or defensible by noting that the “compensatory objective of monetary relief must be kept front of mind.” He states that in certain cases monetary relief will neither be necessary nor appropriate, for instance, “[a]mong other things, one must assess the circumstances surrounding the public authority’s conduct, its effects, and whether the granting of monetary relief would be consistent with public law values.”
This decision may have significant implications for mass-tort claims based in negligence against public authorities in Canada. The analysis put forward by Justice Stratas would arguably broaden the circumstances where public authorities may be found to owe a private-law duty of care in performing their public function. It remains to be seen whether Justice Stratas’s suggested reformulation of the framework for analysing public-authority liability in negligence will be addressed by the Supreme Court of Canada.
Keywords: mass torts litigation, duty of care, class action, public authorities
May 28, 2015
Fifth Circuit Limits Economic Damages for Maritime Torts
By now, everyone is familiar with the Deepwater Horizon incident in April 2010. After the mobile drilling unit suffered a blowout and fire off the eastern Louisiana coast, workers spent three months to cap the uncontrolled well. Soon thereafter, a multidistrict litigation (MDL) proceeding opened before Judge Carl Barbier in the Eastern District of Louisiana, consolidating the personal-injury and damage claims against BP, p.l.c. and other defendants. In one of the consolidated cases, three Mexican states filed suit to recover expenses related to cleanup of oil that allegedly entered their waters after the spill. Three years later, in September 2013, Judge Barbier dismissed the suit, finding under the Robins Dry Dock rule that the Mexican states could not recover for economic losses arising from maritime torts because they did not hold a sufficient ownership interest in the allegedly damaged property. See Robins Dry Dock & Repair Co. v. Flint, 275 U.S. 303, 307–09 (1927) (announcing the rule); State of La. ex rel. Guste v. M/V Testbank, 752 F.2d 1019 (5th Cir. 1985) (en banc) (applying Robins Dry Dock in connection with a chemical spill into the Mississippi River gulf outlet). The Fifth Circuit recently upheld this judgment, and in so doing provided helpful guidance in evaluating the scope of Robins Dry Dock for a variety of maritime torts. State of Veracruz v. BP, P.L.C., No. 13-31070 (5th Cir. May 1, 2015).
While the court ultimately held that the Mexican states did not hold a sufficient property interest in the affected areas under Mexican law, the court’s threshold finding that Robins Dry Dock applied to their claims provides great insight into the application of the rule in the modern era. The Fifth Circuit previously summarized the rule as precluding recovery “for economic loss if that loss resulted from physical damage to property in which [the plaintiff has] no proprietary interest.” In re Bertucci Contracting Co., 712 F.3d 245, 246 (5th Cir. 2013). The court has also stated that the rule’s purpose is to limit the “consequences of negligence and exclude indirect economic repercussions, which can be widespread and open-ended.” Catalyst Old River Hydroelectric Ltd. v. Ingram Barge Co., 639 F.3d 207, 210 (5th Cir. 2011).
Based on the above language, the Mexican states argued that the defendants should be liable for maritime torts arising from criminal negligence and intentional misconduct. Transocean had pled guilty to criminally negligent conduct, and BP pled guilty to criminal negligence and the intentional criminal obstruction of a congressional investigation. As to criminal negligence, the Fifth Circuit joined the First, which had previously found the Robins Dry Dock rule to apply to all negligence, with a narrow exception for “economic losses that are intentionally caused.” Ballard Shipping Co. v. Beach Shellfish, 32 F.3d 623, 625 & n.1 (1st Cir. 1994). Given the panoply of federal criminal-negligence laws and prosecutions relating to oil spills in navigable waters, the Fifth Circuit held that there was no real reason to distinguish between civil and criminal acts when the rule was aimed at focusing liability arising from maritime negligence generally. See also In re Ballard Shipping Co., 810 F. Supp. 359, 364 (D.R.I. 1993) (explaining that the rule “should [not] be distorted or cease to operate because the criminal law imposes penalties on particular negligent behavior. . . . [A]dopting the claimants’ position would transform the Robins Dry Dock rule into a meaningless assertion.”).
Lastly, with regard to BP’s conviction for criminal obstruction, the court quoted from the plea agreement that BP did “corruptly, that is, with an improper purpose, endeavor to influence, obstruct, and impede” a congressional investigation. Although the Mexican states argued that BP’s misrepresentations lulled regulators from taking appropriate action, the district court found that Robins Dry Dock still applied because BP’s misconduct toward regulators was not causally related to the Mexican states’ economic harm. The Fifth Circuit agreed, finding that the intent to obstruct was not directly connected to any intent to cause damages to the Mexican states.
Thus, because the plaintiffs’ losses arose from maritime negligence, whether civil or criminal, the court applied Robins Dry Dock to the plaintiffs’ claims. And because the court found that the Mexican national government owned the natural resources at issue, the Mexican states were barred from recovering any economic damages.
Keywords: litigation, mass torts, maritime, negligence, intentional torts
— David L. Schwan, Concho Resources, Houston, TX
May 21, 2015
Affirmative Challenge to FDA's Prohibition of Truthful and Non-Misleading Off-Label Promotion
On May 7, 2015, Amarin Pharmaceuticals and three medical doctors filed suit against the U.S. Food and Drug Administration (FDA) in the U.S. District Court for the Southern District of New York. Amarin seeks a declaratory judgment under the Federal Declaratory Judgment Act that its truthful and non-misleading promotion of the prescription medication Vascepa for an off-label use is protected by the First Amendment. Given the lack of clarity from the FDA regarding its approach to prohibiting off-label promotion under the Food Drug and Cosmetic Act (FDCA) following the Second Circuit’s decision in United States v. Caronia, 703 F.3d 149 (2d Cir. 2012) (reversing on First Amendment grounds criminal conviction based on truthful and non-misleading off-label promotion), the outcome of this proceeding may have significant implications for pharmaceutical manufacturers in the United States.
In its complaint, Amarin claims that, although the FDA approved the prescription medicine Vascepa for the treatment of very high triglyceride levels, Amarin risks criminal and civil liability if it promotes Vascepa—through truthful and non-misleading speech—for the treatment of slightly lower, but still high, triglyceride levels. Specifically, Amarin claims that it seeks to make specific statements to prescribing physicians about the double-blind, placebo-controlled clinical trial that demonstrated Vascepa’s effectiveness in lowering triglycerides in patients with triglycerides at levels below those approved for treatment by the FDA.
The Second Circuit has held that the FDCA must be construed not to “criminaliz[e] the simple promotion of a drug’s off-label use by pharmaceutical manufacturers and their representatives because such a construction . . . would run afoul of the First Amendment.” Caronia,703 F.3d at 162. However, Amarin claims that the FDA continues to apply its regulations to do exactly what the holding in Caronia forbids. The FDA has issued draft guidance documents that permit a specific and narrow category of communications about off-label uses, but according to Amarin’s complaint, those guidance documents are non-binding on the FDA and do not provide Amarin any assurances that it will not be subject to criminal prosecution. See 21 C.F.R. § 10.115(d)(1) (“[g]uidance documents do not establish legally enforceable rights or responsibilities”). A ruling in Amarin’s favor would be a significant step in demarcating clear limits on the FDA’s enforcement activities for truthful and non-misleading off-label promotion.
Keywords: litigation, mass torts, off-label promotion, free speech, regulation
— Eric Hudson, Butler Snow, Memphis, TN
April 30, 2015
Colorado Supreme Court Gives Lone Pine Orders the Axe
On April 20, 2015, the Colorado Supreme Court held that trial courts are not empowered to issue Lone Pine orders under the Colorado Rules of Civil Procedure. The 6–1 decision is the first time a state supreme court has considered the controversial case-management order.
A Lone Pine order is a case-management mechanism entered after initial disclosures but before full discovery. The order typically requires a plaintiff to provide evidence sufficient to establish a prima facie case as to injury, exposure, and causation. In the event that a plaintiff fails to satisfy that standard, courts can issue sanctions and even dismiss plaintiffs’ claims with prejudice. Authority to issue a Lone Pine order is derived from Federal Rules of Civil Procedure 1, 11, and 16 and their state counterparts, which afford trial courts broad discretion to invent procedural tools to streamline discovery and manage complex actions.
First employed by a New Jersey superior court in 1984, the Lone Pine order has subsequently been used by federal and state courts in a variety of complex tort cases, where its cold efficiency at eliminating claims in their early stages is praised for alleviating the length and cost of burdensome discovery characteristic of complex litigation. See Lore v. Lone Pine Corp., No. L-33606-85, 1986 WL 637507 (N.J. Super. Ct. Law Div. Nov. 18, 1986). Critics of the Lone Pine order, however, note that the order’s efficiency is largely attributable to the fact that it is not expressly authorized by any rule of civil procedure, and thus frequently lacks equal application and the procedural safeguards inherent to traditional dispositive mechanisms, such as Federal Rules 12(b)(6) and 56.
In Antero Resources Corp. v. Strudley, plaintiffs filed suit against a natural-gas company alleging physical and property damage due to drilling operations near their home. 2015 CO 26, ¶ 4 (Colo. Apr. 20, 2015). After the parties exchanged initial disclosures, the trial court issued a Lone Pine order pursuant to Colorado Rule of Civil Procedure 16(c). Following the plaintiffs’ submissions, the defendants filed a motion “to dismiss, or in the alternative, for summary judgment.” Without citing any rule of civil procedure, the court granted the motion, rejecting the plaintiffs’ evidence as insufficient and dismissing the action with prejudice. On appeal, the lower court was reversed. Thereafter, the matter was taken up by the Colorado Supreme Court.
On certiorari, the high court concluded that Colorado Rule of Civil Procedure (CRCP) 16(c) “does not provide a trial court with authority to fashion its own summary judgment-like filter and dismiss claims during the early stages of litigation.” In support of its conclusion, the court observed that Federal Rule 16(c) and Colorado Rule 16(c) are “markedly different,” despite the fact that the CRCP were revised in 2002 and patterned on the FRCP. Federal Rule 16(c) expressly grants courts broad discretion to adopt “special procedures” to streamline complex litigation, “eliminate frivolous claims” and facilitate “speedy, and inexpensive disposition . . . .” Id. at ¶ 22 (citing F.R.C.P. 16(c)(2)(A),(L),(P)). In contrast, Colorado Rule 16(c) does not contain any grant of authority for complex actions, but rather is primarily concerned with “basic scheduling matters.” Thus, the language of the FRCP authorizing Lone Pine orders was specifically excluded from the revisions to the CRCP and cannot support exercise of that power in Colorado. In addition, the court found no reason to strain the language of Rule 16(c) to provide for a dispositive discovery order, as the CRCP already provides a “range of tools . . . by which to actively manage cases[,]” such as sanctions for pleadings not “well grounded in fact”; dismissal for “failure to state a claim”; and, summary judgment. Therefore, the Colorado Supreme Court held that trial courts are not authorized “to condition discovery upon the plaintiff establishing a prima face case” and affirmed the judgment of the court of appeals.
The state supreme court’s decision closes the door on Lone Pine orders in Colorado, but its analysis of CRCP 16 is necessarily limited to the Centennial State. In the closing paragraphs of the decision, however, the court opined:
[A Lone Pine order] closely resembles summary judgment, albeit without the safeguards supplied by the Rules of Civil Procedure. . . . [W]e find it preferable to yield to the consistency and safeguards of the rules of civil procedure, as well as the court's own flexibility and discretion to address discovery disputes as they arise, as opposed to entering a rigid and exacting Lone Pine order. . . . Interpreting Rule 16 to allow Lone Pine orders would interfere with the rights provided to litigants and produce consequences unintended by our rules by forcing dismissal before affording plaintiffs the opportunity to establish the merits of their cases.
Id. at ¶¶ 35-36 (internal quotations and citations omitted). Thus, albeit in dicta,the first supreme court to address the controversial case-management technique tentatively endorsed critics’ view that the Lone Pine order is a wolf in sheep’s clothing: an unregulated summary-judgment motion masquerading as a highly efficient discovery order. That endorsement may be the more impactful aspect of the decision, as it fits neatly into plaintiffs’ briefs, and places a finger on the scale toward finding against Lone Pine orders in state courts yet to rule on their viability.
Keywords: litigation, Lone Pine, discovery, mass torts, evidence, Colorado
— Maxwell Herman, Law Clerk, District of New Jersey, Newark, NJ
April 27, 2015
"Off-Label" Warning Claims and MDA Preemption
In a lengthy decision, the Tenth Circuit Court of Appeals in Caplinger v. Medtronic, Inc., et al., 13-6061, addressed whether a plaintiff’s state-law-based warnings claims were preempted by the Medical Device Amendment (MDA) to the Federal Food, Drug, and Cosmetics Act (FDCA).
The facts involved the use of the defendant’s medical device, Infuse, which stimulates bone growth, on the plaintiff. The product had been approved for sale by the FDA. As such, the manufacturer was required to include a warning label instructing, among other things, that it should “be implanted via an anterior” surgical approach. The plaintiff had been operated on by use of a posterior approach, which is known as an “off-label” use. The approach was allegedly recommended by her physician. The plaintiff alleged that her doctor failed to warn about known dangers associated with the posterior approach. At the pleadings stage, the district court determined that the plaintiff’s state-law claims were preempted.
On appeal, the plaintiff advanced two main arguments, both of which were of first impression at the federal appellate level. First, the plaintiff argued that there was no preemption because certain federal statutes and regulations (e.g., 21 U.S.C. 352 and 21 C.F.R. 801.5) were violated in that they prohibited the label from being “false or misleading in any manner” and must bear “directions under which the layman can use a device safely and for the purposes it is intended.” The court rejected this argument. It determined that the regulatory scheme prohibited the manufacturer from changing the warning without the FDA’s prior approval. As stated by the court, “in the end, . . . [plaintiff] offers no answer to the conundrum how she might impose a state tort duty on [the defendant] to revise a label that federal regulation precludes it from revising.”
Next, the plaintiff argued that her claims were not preempted because the lawsuit addressed an off-label use that, by itself, was enough to survive the preemption analysis. As summarized by the court:
Her reasoning goes something like this: When weighing whether a medical device is sufficiently safe to enter the market, the FDA usually examines the use the manufacturer intends the device to be put—its ‘on-label’ use. . . . Because the agency’s studies and safety assessments generally focus on the devices intended or on-label uses, she argues, it isn’t appropriate to preempt claims concerning off-label uses.
The court also rejected this argument. Here, the court determined that the statute’s preemption provision applies to both on-label and off-label uses. Here, the court cited to case law and congressional history in finding that Congress was “aware that experiments with off-label uses often prove vital to patients.”
The court concluded by stating that “it is not for this court to revise [the statute] by beating a new path around preemption nowhere authorized in the text of the statute and nowhere recognized in any of the Supreme Court’s many forays into this field.”
Caplinger is the latest of many preemption decision interpreting section 360k(a) of the FDCA since the U.S. Supreme Court first addressed it in Medtronic, Inc. v. Lohr, 518 U.S. 470 (1996), and later in Riegel v. Medtronic, Inc., 552 U.S. 312 (2008). As Caplinger pointed out, courts have since struggled to distinguish claims that constitute non-preempted “parallel” claims from those that are expressly or impliedly preempted. See e.g., In re Medtronic, Inc., 623 F.3d 1200 (8th Cir. 2010); Hughes v. Boston Scientific Corp., 631 F.3d 762 (5th Cir. Jan. 21, 2011); Jean Macchiaroli Eggen, “Navigating Between Scylla and Charybdis: Preemption of Medical Device ‘Parallel Claims,’” 9 J. Health & Biomedical L. 159 (2013). Caplinger is the first federal court of appeal to address these issues in the context of allegations concerning off-label promotion.
Keywords: mass torts litigation, medical devices, preemption, off-label uses
— Andrew Scholz, Goldberg Segalla LLP, White Plains, NY
Practical Lessons from Sec. Nat'l Bank v. Jones Day
Recently, the Eighth Circuit heard oral arguments in an attorney’s appeal of an unusual discovery sanction. Sec. Nat’l Bank v. Jones Day, No. 14-3006 (8th Cir.). In the underlying case, U.S. District Court Judge Mark Bennett required a partner to write and produce a training video with specific steps lawyers must take to avoid improper deposition tactics. Memorandum Opinion and Order Regarding Sanctions, Sec. Nat’l Bank v. Abbott Lab., No. C 11-4017-MWB, (N.D. Iowa July 28, 2014). The court’s order decried the attorney’s repeated discovery abuses during depositions, including attempts to coach witnesses, “ubiquitous interruptions and attempts to clarify questions posed by opposing counsel,” and at least 115 objections consisting of just one word: “form.” Even if the Eighth Circuit overturns the sanctions imposed in this case, it is not the first time and likely will not be the last time that a judge goes “outside the box” in an attempt to curb discovery abuses.
In fact, Judge Bennett previously imposed a similar type of creative sanction in another case. In response to “obstructionist and frivolous” objections made in written discovery, Judge Bennett ordered plaintiffs’ counsel to write an article explaining why it is improper to assert such boilerplate objections and to submit the article to bar journals in New York and Iowa. St. Paul Reinsurance Co., Ltd. v. Commercial Fin. Corp., 198 F.R.D. 508, 516–17 (N.D. Iowa 2000).
Judge Bennett is not the only judge to issue unusual discovery sanctions. A court in Pennsylvania ordered opposing counsel to address their hostile deposition behavior by joining each other for an “informal meal in an effort to facilitate the repair of their professional relationship.” Huggins v. Coatesville Area Sch. Dist., No. 07-4917, 2009 WL 2973044 at *4 (E.D. Penn. Sept. 16, 2009).
Mass tort cases are not immune to creative sanctions that “fit the punishment with the crime”:
- A Virgin Islands District Court judge ordered the defendants, who had withheld evidence, to fund a community-service project to benefit the community affected by the defendants’ contamination of its aquifer. In re Tutu Wells Contamination Litig., 166 F.R.D. 331 (D.V.I. 1996). The Third Circuit overturned the sanctions creating the community fund, but called the district court’s intentions “admirable.” In re Tutu Wells Contamination Litig., 120 F.3d 368 (3rd Cir. 1997).
- In a mass products-liability case, a judge ordered that European employees appear for depositions in the United States as a sanction for the defendant’s failure to preserve and produce key evidence. Case Management Order, In re Pradaxa Prods. Liab. Litig., 3:12-md-02385-DRH-SCW (S.D. Ill. Dec. 9, 2013). After the Seventh Circuit overturned this portion of the court’s order, the judge instead required the defendant to pay for opposing counsel’s office space in Amsterdam for the duration of the depositions. Case Management Order, In re Pradaxa Prods. Liab. Litig., 3:12-md-02385-DRH-SCW (S.D. Ill. Mar. 12, 2014).
To avoid being subject to these, or more traditional monetary sanctions, keep in mind the following lessons:
You could be sanctioned even if opposing counsel does not complain about your behavior. In both the Jones Day and St. Paul Reinsurance Co., Ltd. cases, the sanctions were imposed by the court sua sponte. Memorandum Opinion and Order Regarding Sanctions at 7–9, Sec. Nat’l Bank v. Abbott Lab., No. C 11-4017-MWB (N.D. Iowa, July 28, 2014); St. Paul Reinsurance Co., Ltd., 198 F.R.D. at 510, 515. Nothing in Federal Rules of Civil Procedure Rule 30 specifies that sanctions may be ordered only upon motion and, in fact, Rule 26 expressly states that the court may act on its own. See Fed. R. Civ. P. 26(g)(3); Fed R. Civ. P. 30(d)(2).
Just because other attorneys do it, that doesn’t mean it’s okay. In St. Paul Reinsurance Co., Ltd., counsel was sanctioned for objecting that each discovery request was “oppressive, burdensome and harassing”, “vague, ambiguous and unintelligible”, “overbroad,” and protected from discovery by work product or an evidentiary privilege. St. Paul Reinsurance Co., Ltd., 198 F.R.D. at 512–14. The opinion cites numerous cases in multiple jurisdictions ruling that such “boilerplate” objections are insufficient. Yet, lawyers routinely assert such objections in discovery responses without any supporting explanation.
Know the rules in your jurisdiction and in your assigned judge’s court. Before you engage in any discovery, research the relevant statutes and case law, and local practices and procedures. Federal court cases are all governed by the Federal Rules of Civil Procedure, but courts interpret those rules differently. In his order, Judge Bennett noted that “many lawyers—and courts for that matter—assume that uttering the word ‘form’ is sufficient to state a valid objection.” Memorandum Opinion and Order Regarding Sanctions at 13, Sec. Nat’l Bank v. Abbott Lab., No. C 11-4017-MWB (N.D. Iowa July 28, 2014). In fact, some courts, including federal courts in Kansas, New York, Louisiana, and Texas, “explicitly require lawyers to state nothing more than unspecified “form” objections during deposition.” But as Judge Bennett’s order illustrates, proper behavior in one court may be grounds for sanctions in another!
Keywords: mass torts litigation, sanctions, discovery, preservation
Plaintiffs in Cases Against Generic Drug Manufacturers See Daylight
In March 2015, two opinions were issued denying generic pharmaceutical manufacturers’ motions to dismiss despite Bartlett/Mensing preemption.
By way of background, in 2011 (PLIVA, Inc. v. Mensing, 131 S. Ct. 2567 (2011)) and 2013 (Mut. Pharm. Co. v. Bartlett, 133 S. Ct. 2466 (2013)), the Supreme Court held that causes of action against generic drug manufacturers for failure-to-warn and drug-design defect are preempted by federal law: Federal law requires generic drugs to bear the same warnings and possess the same chemical structures as their brand-name counterparts, see 21 U.S.C. § 355 (The Hatch-Waxman Act); conversely, products-liability actions expose manufacturers to liability for failure to use additional warnings and improve drug chemistry.
On March 26, 2015, a Florida District Court held that products-liability actions alleging a defect in the design of generic drug packaging are not preempted by federal law. See Trahan v. Sandoz, Inc., No. 3-13-cv-350-J-34MCR (Mar. 26, 2015). In Trahan v. Sandoz, Inc., the plaintiff filed a lawsuit against a drug manufacturer, alleging that she was injured by glass fragments in the defendant’s generic methotrexate solution that had detached from the solution’s deteriorating glass vial. In response, the defendant filed a motion to dismiss, citing Bartlett and Mensing.
In its opinion, the court observed that while federal law requires generic manufacturers to use the same chemistry and labels as brand-name manufacturers, no statute or regulation extends that duty to packaging. Moreover, although federal law prohibits generic manufacturers from redesigning their packaging after the product is on the market, nothing restricts a manufacturer’s discretion to select appropriate packaging prior to that point. Thus, the court concluded, it was not impossible for the defendant to satisfy its duty of care under state law—by testing its vials for deterioration and making improvements in accordance—and fulfill its “duty of sameness” under federal law. On that ground, the defendant’s motion to dismiss was denied.
A day after the Trahan decision, an Illinois appellate court held that products-liability actions alleging that a generic drug is a) unreasonably dangerous, b) cannot be chemically altered to be reasonably safe, and c) cannot bear any warning sufficient to cure the danger, are not preempted. See Guvenoz v. Target Corp., Inc., No. 12-L-005162 (Mar. 27, 2015). In Guvenoz v. Target, a decedent’s estate and wife filed a lawsuit for strict liability and negligence against a drug manufacturer and distributor, alleging that the decedent’s death was caused by the defendants’ generic version of the drug propoxyphene. In response, the defendants filed a motion to dismiss the complaint, which was denied. Thereafter, the question of whether plaintiffs’ claims were preempted by federal law was certified to the Illinois appellate court.
In its opinion, the court began by analyzing the Mensing and Bartlett decisions, finding that:
Reconciling the Bartlett court’s unequivocal and unanimous endorsement of the statement that “federal law establishes no safe harbor for drug companies,” with the majority’s holding that federal law does preempt “certain remedial measures,” leads to the conclusion that, where there is no possible remedy, there is no safe harbor.
Guvenoz, slip op. at 20 (quoting Bartlett, 133 S. Ct. at 2479). Thus, when a plaintiff alleges that he or she has been injured by a drug that is irremediably unreasonably dangerous, there is no “conflict with [the] federal duty of sameness” because the manufacturer’s state duty is not to make federally proscribed changes, but to stop selling the drug altogether. Applied that to the facts, the court ruled that because the plaintiffs’ claims were supported by allegations that propoxyphene was unreasonably and irreparably dangerous, they were not preempted by federal law. The court also emphasized, in dicta, that subsequent to the decedent’s death, the FDA required all manufacturers to permanently withdraw propoxyphene from the market.
Critics of the above decisions may view the courts as ‘wearing their hearts on their robes’ when faced with drug manufacturer requests to bar plaintiffs from seeking relief because, at the lowest common denominator, they chose cheap generic versions of expensive brand-name drugs (which, ironically, was the express purpose of the Hatch-Waxman Act). See H.R. Rep. No. 98-957, Pt. 1, at 14 (June 21, 1984) (the purpose of the act is “to make available more low cost generic drugs”). But perhaps they simply took heed of Justice Thomas’s admonition in Wyeth v. Levine. 555 U.S. 555, 590 (2009) (Thomas, J., concurring in judgment). There, speaking on the narrow scope of preemption, the justice warned that where there is not an express conflict between state and federal law, courts should be hesitant “to vacate a judgment issued by another sovereign based on nothing more than assumptions and goals that were untethered from the constitutionally enacted federal law.” Either way, these cases illustrate that in the absence of expansion of Bartlett/Mensing preemption by the Supreme Court, lower courts are approaching preemption with healthy skepticism, and are willing to entertain creative causes of action at the preliminary stages of a lawsuit.
Keywords: litigation, mass torts, generics, Bartlett, Mensing, preemption
— Maxwell Herman, Law Clerk, District of New Jersey, Newark, NJ
March 31, 2015
Social Media and the Legal Profession—Where Is the Ethical Line?
With over a billion people frequenting social media every day, networking, socializing, and advertising online are the new normal. Social media allow legal professionals and businesses to reach the masses quickly—from the comfort of their own living rooms. Some use social media solely as a professional networking tool. Many, however, also maintain personal accounts, gaining many “friends” and “followers” from all over the world and sharing opinions on a variety of topics. With professional and social connections just a click away, where do lawyers draw the ethical line when their professional and personal lives intersect on the web?
At the outset, all legal professionals—attorneys, judges, and paralegals—should be cognizant of using social media responsibly because misuse could result in sanctions, and more seriously, end their legal careers. Just this year, one state’s highest court sanctioned a sitting judge for posting a Facebook comment about a child-support dispute. After viewing pictures of her children’s biological father with his girlfriend on vacation, the judge stated on Facebook that it “[m]ust be nice to take such an extensive trip but not pay your bills.” The state’s supreme court held that her actions were evidence of “injudicious behavior in [her] personal life.”
This case suggests that a judge’s conduct concerning solely personal issues can indeed result in professional sanctions, but what other social-media communications could result in consequences to legal professionals? Do Facebook “friendships” constitute improper relationships between judges, attorneys, and potential jurors? Are pictures posted by legal professionals on social media subject to the same scrutiny? A few states provide some guidance to these questions, but the fact of the matter is that there are not yet clear answers. Indeed, the findings are inconsistent at best. See, e.g., Domville v. State, 103 So.3d 184 (Fla. Dist. Ct. App. 2014) (disqualifying a judge due to his Facebook friendship with the prosecutor). But see State v. Forguson, 2014 WL 631246 (Tenn. Crim. App. Feb. 18, 2014) (Facebook friendship between judge and confidential informant was not alone a sufficient bias to disqualify judge). These inconsistencies are troubling in an age in which so many can connect so rapidly to so much. Lawyers and judges could be violating ethical boundaries in one state while simultaneously staying within the ethical boundaries in another.
While misuse of social media can result in harm to a professional’s career, if monitored properly, legal professionals can use social media strategically as both a networking and advertising tool. In fact, with access to over one billion users worldwide, not using social media to target potential clients might be imprudent. Obviously, social-media use alone will not build a lawyer’s or law firm’s reputation, but it can definitely help to promote, market, and maintain a growing practice.
Unfortunately, for lawyers and other legal professionals, there is no universally accepted answer as to what exactly exceeds ethical boundaries when networking, advertising, or merely socializing online. The good news is that some states are beginning to address the problem. On March 18, 2014, the New York State Bar Association’s litigation section released a detailed set of guidelines addressing ethical boundaries for lawyers when using social media in their practices. See Gregory K. Arson, Social Media Ethics Guidelines of the Commercial and Federal Litigation Section of the New York State Bar Association, Mar. 18, 2014. These guidelines offer specific tips for providing legal advice, gathering evidence, reviewing juror posts, and advertising as it pertains to social media. Perhaps these types of guidelines will become commonplace for legal professionals seeking to avoid the potential pitfalls of online networking.
Keywords: litigation, mass torts social media, ethics
March 23, 2015
First Circuit Decision Strengthens Preemption Defense
On February 20, 2015, the U.S. Court of Appeals for the First Circuit affirmed the dismissal of plaintiffs’ state-law consumer-protection claims against a name-brand pharmaceutical manufacturer, concluding they were impliedly preempted by the Federal Food, Drug, and Cosmetic Act (FDCA), 21 U.S.C. § 301 et seq. See Marcus v. Forest Labs., Inc., No. 14-1290, 2015 WL 727970 (1st Cir. Feb. 20, 2015). This decision represents the first time since the Supreme Court’s decision in Wyeth v. Levine, 555 U.S. 555 (2009), thata federal appellate court has dismissed claims against a name-brand drug manufacturer pursuant to the “impossibility” preemption doctrine.
In Marcus, the plaintiffs filed a putative class action against Forest Laboratories, the manufacturer of name-brand pharmaceutical Lexapro, contending that the label overstated the product’s efficacy in treating major depressive disorder in adolescents. To establish efficacy for this indication, Forest previously had submitted to the Food and Drug Administration (FDA) the results of four clinical studies, two of which found no efficacy, and two of which found “positive efficacy that was statistically significant, but only barely so.” The FDA approved the indication in March 2009, and approved the text of the Lexapro label, finding it was not “false or misleading in any particular.” The district court granted Forest’s motion to dismiss, and the plaintiffs appealed.
On appeal, the First Circuit found that the plaintiffs’ state-law claims were impliedly preempted by the FDCA pursuant to the “impossibility” preemption doctrine. This doctrine recognizes that state law is preempted when it “requires a private party to violate federal law,” thus rendering it impossible to comply with both. In reaching its conclusion, the First Circuit examined the Supreme Court’s recent decisions governing the application of the “impossibility” preemption in pharmaceutical litigation.
- In PLIVA, Inc. v. Mensing, 131 S.Ct. 2567 (2011), the Supreme Court held that state-law claims against manufacturers of generic pharmaceuticals were preempted because Food and Drug Administration (FDA) regulations require the warning labels of generic drugs and their name-brand counterparts to always be the same. Although generic manufacturers can modify the language of a warning label with FDA pre-approval, the Supreme Court held that this was not enough to avoid preemption. Mensing, 131 S.Ct. at 2581 (“[W]hen a party cannot satisfy its state duties without the Federal Government’s special permission and assistance, which is dependent on the exercise of judgment by a federal agency, that party cannot independently satisfy those state duties for pre-emption purposes.”).
- In contrast, the Supreme Court in Levine held that identical claims against a name-brand manufacturer were not preempted. Under the FDA’s Changes Being Effected (CBE) regulation, 21 C.F.R. § 314.70(c)(6)(iii), name-brand manufacturers under certain circumstances are permitted to independently modify the language of an FDA-approved label. Thus, where the CBE procedure is available, a state law penalizing name-brand manufacturers for not exercising their ability to modify their warning labels is not preempted.
Reconciling Mensing and Levine, the First Circuit held that “[t]he question for ‘impossibility’ is whether the private party could independently do under federal law what state law requires of it.” Marcus, 2015 WL 727970 at *6 (quoting Mensing, 131 S.Ct. at 2579).
In Marcus, the plaintiffs’ allegations of inadequate labeling were based on information that the FDA had already considered in its approval of Lexapro—namely, the clinical studies purportedly showing no or minimal efficacy. Because the CBE procedure is only available to make changes that, among other things, are based on “newly acquired information,” 21 C.F.R. § 314.70(c)(6)(iii), the First Circuit concluded that the procedure was not available to Forest, as the plaintiffs’ claims were not premised upon “newly acquired information.” Accordingly, Forest could not have independently done what the plaintiffs contended was required by California state law, and the plaintiffs’ claims were preempted.
The Marcus decision represents a significant victory for manufacturers because it is the first time since Levine was decided that a federal appellate court has applied “impossibility” preemption in the context of name-brand pharmaceuticals. Following Levine, district courts overwhelmingly rejected preemption arguments proffered by name-brand manufacturer defendants, even in cases where the CBE procedure was unavailable, preferring instead to limit the reasoning of Mensing to generic pharmaceuticals only. The Marcus decision parts from this line of cases, and breathes new life to the argument that implied preemption should apply—regardless of whether the product is name-brand or generic—when a manufacturer defendant cannot, without FDA approval, do what the plaintiffs contend should have been done under state law.
Keywords: litigation, mass torts, pharmaceutical, preemption, impossibility, Levine, Mensing
March 9, 2015
FAA Takes Another Step in Regulation of Unmanned Aircraft
On February 15, 2015, the Federal Aviation Administration (FAA) finally announced its Notice of Proposed Rulemaking (NPRM) for the commercial use of "Small Unmanned Aircraft Systems" (UAS).
The proposed rule would create a new part in Title 14 of the Code of Federal Regulations (CFR). The proposed Part 107 encompasses rules governing airman certification and registration of civil small UAS for operation within the United States. These proposed rules would generally replace the airworthiness provisions of Part 21, the airman certification provisions of Part 61, and the UAS operating limitations of Part 91.
The proposed rule sets forth several operational limitations, which are summarized as follows:
- must weigh less than 55 pounds;
- must remain within the visual line of sight of the operator or visual observer;
- must remain close enough to the operator to be capable of seeing the aircraft;
- may not operate over any persons not directly involved in the operation;
- must be operated during local daylight hours;
- may not be operated in class A airspace
- may be operated in class B,C, D, and E airspace with air traffic control (ATC) permission;
- may be operated in class G airspace without ATC permission;
- must yield right of way to other aircraft;
- can be operated at a maximum airspeed of 100 mph;
- can be operated at a maximum altitude of 500 feet above ground level;
- can be operated in weather conditions with minimum visibility of three miles from control station;
- may not be operated from a moving vehicle or aircraft except from a watercraft on the water;
- may not be operated in a careless or reckless manner; and
- pre-flight inspection must be done by operator.
The proposed rule would require a UAS operator to be at least 17 years old, pass an initial aeronautical knowledge test at an FAA-approved knowledge testing center (and a recurrent test every 24 months), undergo vetting by the TSA, and obtain an unmanned aircraft operator certificate with a small UAS rating. Commercial uses outside the parameters of the rule would require an exemption from the regulations.
The proposed rule would not apply to air carrier operations; external load and towing operations; international operations; foreign-owned aircraft that are ineligible to be registered in the United States; public aircraft; certain model aircraft; and moored balloons, kites, amateur rockets, and unmanned balloons.
In addition to the proposed Part 107, the FAA is considering including a "micro UAS" classification, such as exists in Canada. The micro UAS classification would apply to unmanned aircraft made out of fragile material, weighing 4.4 pounds or less, and which would operate at an air speed of 30 knots or less and a maximum altitude of 400 feet above ground level (AGL).
The FAA’s February 15 proposal was formally published in the Federal Register on February 23, 2015. The public has 60 days from that date to comment on the proposed rule, or until April 24, 2015.
Keywords: mass torts litigation, UAS, commercial aviation, rulemaking
— Deborah Elsasser, Clyde & Co, New York, NY
March 3, 2015
Ontario Lawyers Still Have Role to Play in Preparing Expert Evidence
A medical-malpractice decision delivered by the Ontario Court of Appeal on January 29, 2015, has reaffirmed that Ontario lawyers still have a role to play in the preparation of expert opinion evidence.
In Moore v. Getahun, 2015 ONCA 55 (CanLII) [Moore CA],the court of appeal overturned findings of a trial judge which were highly critical of the existing practice of lawyers reviewing and commenting on draft expert reports. The trial judge had held that such discussions between lawyers and experts were contrary to an expert’s duty to provide an independent and objective opinion to the court and, therefore, “no longer acceptable.” Moore v Getahun, 2014 ONSC 237 (CanLII) [Moore SC] at para. 50. Moreover, the trial judge held that there should be full disclosure of any changes to an expert’s final report resulting from a lawyer’s corrections, suggestions, or clarifications, to ensure transparency and that the expert witness is neutral.
The controversial trial decision arose four years after significant amendments to Ontario’s Rules of Civil Procedure that explained the role and duty of an expert and outlined the required content and format for expert reports. Given its ramifications on existing legal practices, various legal organizations intervened at the court of appeal and argued that consultation between lawyers and experts in preparing reports, with certain limits, was necessary to ensure the efficient and orderly presentation of expert evidence as well as the timely, affordable, and just resolution of claims.
The court of appeal held that banning undocumented discussions between lawyers and experts or mandating disclosure of all written communications is unsupported by, and contrary to, existing authority. Contrary to the views of the trial judge, the court stated that consultation and collaboration between lawyers and experts is essential to ensure that the expert understands the duty to be “fair, objective and non-partisan.” Moreover, the court described the role played by lawyers as “crucial,” as experts need their assistance in framing their reports in a way that is comprehensible and responsive to the pertinent legal issues in a case.
A number of important findings relating to the disclosure of communications between lawyers and experts were also made by the court of appeal. Most notably, the court confirmed that consultations between lawyers and experts are privileged and, absent a factual foundation supporting a reasonable suspicion that the expert was improperly influenced, a party is not permitted to demand production of draft reports or notes of interactions with counsel.
Although the Ontario Court of Appeal reaffirmed the role of lawyers in the preparation of expert evidence, it appears that the objectivity of expert evidence will be more closely scrutinized than in times past. Although consultation with experts is expected, lawyers should consider the content of their communications carefully as a lawyer’s role is not without limits and, in rare circumstances, a review of these communications and prior drafts may be ordered. Circumstances that generally raise a legitimate basis for lawyer comment on expert reports include:
- the presence of errors in the background facts described
- the absence of documentation from the list of materials reviewed
- the inclusion of comments on issues not pertinent to the claim
- the inclusion of comments on matters outside the scope of the expert’s expertise
- the presence of spelling and grammatical errors
- the presence of comments raising ambiguity or conveying an unintended meaning
- the misstatement of a legal test impacting the expert’s opinion
- failure to adhere to the substantive and organizational requirements stipulated in the Rules of Civil Procedure
Careful consideration of the circumstances and manner in which a lawyer communicates with an expert will help ensure that they do not unintentionally influence the substance of an opinion or raise questions as to the expert’s objectivity and independence. As a precautionary step, lawyers should also take care to maintain notes of the nature of all communications with experts and to refrain from allowing experts to destroy draft reports, in the event that a lawyer may need to demonstrate the absence of any perceived impropriety.
Keywords: litigation, mass torts, privilege, experts, impartiality
February 27, 2015
The Growing Acceptance of Privilege Between Attorney and Firm In-house Counsel
Recently, courts have begun to address an interesting wrinkle on internal legal discussions within a firm: When a firm is threatened with suit by a current client, are a lawyer’s communications with the firm’s own in-house ethics counsel protected from disclosure? Courts have reached different conclusions, but the trend is toward greater protections of such communications that ultimately benefit the client’s interests.
But first, some background is in order. According to the Restatement approach, the attorney-client privilege applies when four factors are present: (1) a communication; (2) made between privileged persons; (3) in confidence; (4) for the purpose of seeking, obtaining, or providing legal assistance to the client. Restatement (Third) of the Law Governing Lawyers § 68 (2000). As applied to corporations and governmental departments and agencies, confidential communications between in-house counsel and the entity’s employees, undertaken for the purpose of obtaining or providing legal advice, are privileged. RFF Family P’ship, LP v. Burns & Levinson, LLP, 991 N.E.2d 1066, 1071 (Mass. 2013).
However, communications within a law firm from one lawyer to in-house counsel have frequently escaped the protections of the privilege. Some courts have cited the so-called fiduciary exception, which derives from trust-law principles. Under this exception, when a trustee obtains legal advice to guide trust administration, the trust’s beneficiaries are entitled to production of documents related to that advice. Other courts have cited to the “current client” exception for disclosure, reasoning that when a law firm represents a client and seeks internal advice related to a dispute with the outside client, such representation creates an impermissible conflict of interest and the communications are discoverable. RFF, 991 N.E.2d at 1076.
The most recent decisions, though, have departed from these exceptions and toward greater acceptance of protected communications between a law firm’s attorney and internal counsel. The Massachusetts Supreme Judicial Court explained its reasoning: “[B]road protection of communications with law firm in-house counsel including communication about the representation of a current client of the firm . . . would encourage firm members to seek early advice about their duties to clients and to correct mistakes or lapses, if possible, to alleviate harm.” The Georgia Supreme Court issued an opinion in line with this analysis and also squarely rejected the “fiduciary exception” as inapplicable when a firm seeks advice related to its own protection, not that of the client. St. Simons Waterfront, LLC v. Hunter, MacLean, Exley and Dunn, PC,746 S.E.2d 98, 108 (Ga. 2013)
Interestingly, while adopting a similar view of the privilege for in-house firm counsel, the Georgia and Massachusetts analysis diverge as to the elements required for the privilege. In Massachusetts, the communication must be with an attorney designated as in-house counsel, and that attorney must not have billed time on the outside client’s matter. By contrast, Georgia provides a more flexible approach. The privilege attaches when:
(1) There is a genuine attorney-client relationship between the firm’s lawyers and in-house counsel; (2) the communications in question were intended to advance the firm’s interests in limiting exposure to liability rather than the client’s interests in obtaining sound legal representation; (3) the communications were conducted and maintained in confidence; and (4) no exception to the privilege applies.
St. Simons, 746 S.E.2d at 108. In short, whereas Massachusetts requires advance designation of in-house counsel for internal legal issues, and that designee may not have ever billed time on the outside client’s matter, Georgia permits a more informal establishment of an attorney-client relationship among internal firm members without restrictive bright-line rules.
This distinction is critical for smaller firms where a designated, and dedicated, in-house lawyer may not be feasible. A New Hampshire court recently addressed this precise scenario when a privilege assertion was challenged in a malpractice action. See Moore v. Grau, No. 2013-cv-150 (N.H. Super. Ct., Merrimack Cnty., Dec. 15, 2014). The court first acknowledged the privilege’s existence, and then, as to its contours, agreed with the Georgia factors. Georgia’s rule is flexible and better suited for smaller jurisdictions such as New Hampshire, where the court pointed out that many firms are too small to designate in-house counsel.
In short, it is becoming more likely that a lawyer, when faced with a prospective malpractice case, may confidentially consult with another firm lawyer as to the ethical implications of that situation and expect that communication to be legally privileged. The parameters and extent of that privilege as still being defined in the courts, but within the last few years, there has been a growing acceptance of an in-house counsel privilege within a law firm itself.
Keywords: litigation, mass torts, privilege, intra-law firm counsel, waiver
— David L. Schwan, Concho Resources, Houston, TX
February 25, 2015
Carnaby v. Goodyear Offers a New Jurisdictional Twist
The Carnaby v. Goodyear Tire and Rubber Co. action involving purported toxic workplace exposures in France presents something of a new strategic paradigm for the U.S. jurisdictional restrictions evolving out of the Daimler/Kiobel/Goodyear Dunlop line of cases. Carnaby v. Goodyear Tire and Rubber Co., No. 5:14-CV-0100-JRA (N.D. Ohio, filed May 8, 2014, amended complaint filed Sept. 15, 2014). The action is a putative class action alleging injuries suffered by workers as a result of exposure to toxic substances at a French tire factory operated by the foreign subsidiary of the named defendant. At first glance, such a case would seem to fall outside the jurisdiction of the U.S. courts, under the limitations imposed by recent U.S. Supreme Court precedents over U.S. parents for operations of a foreign subsidiary. The plaintiffs have focused their allegations on the parent’s conduct in deciding on product formulas, production processes, and the chemicals used in the subsidiary’s operations. So, for example, plaintiffs allege that
[i]n order to produce tires of even quality in all its factories, Goodyear in Akron routinely: (a) models processes of rubber mixing, extrusion, heat transfer and rubber curing for all manufacturing sites of Goodyear . . . (b) develops analytical solutions to operational problems likely to occur during the manufacturing process for all manufacturing sites of Goodyear . . . (c) . . . establishes design and operating guidelines or recommendations for all manufacturing sites of Goodyear . . . (d) issues security recommendations in relation to the manufacturing process and issues OSHA compliance guidelines, for all manufacturing sites of Goodyear.
(First Amended Complaint, ¶ 33). The plaintiffs also contend that the parent Goodyear implemented and controlled a global environmental, health, and safety policy. (First Amended Complaint, ¶¶ 49–54).
Goodyear moved to dismiss the amended complaint for failure to state a cause of action against it as the parent, and on grounds of forum non conveniens, in favor of France, which presents an intriguing twist in the jurisdictional tactics in such foreign operations (or product) cases. From a strategic standpoint, the transfer of a mass toxic-tort case from the U.S. to a foreign venue has both upsides and downsides for both plaintiffs and defendants. On one hand, the foreign venue is unlikely to provide for a class action; civil-law jurisdictions, such as France, do not have jury trials in tort actions; and the foreign court is likely to award lower damages compared to a U.S. outcome. On the other hand, discovery is generally unavailable in civil-law jurisdictions and causation standards tend to be more lax, perhaps providing plaintiffs with a better chance to prevail; and even though a class action might be avoided, the defendant might face some sort of consolidated action without the benefit of the types of case-management devices employed in the U.S. courts. Note that the balancing of these considerations will necessarily differ among international fora.
The results of the motion practice (and possible appeals) in Carnaby bear watching as insight to a potential new “jurisdiction” paradigm for mass toxic torts, an end-run around the Daimler-like limitations on jurisdiction over the parent, and the efficacy of a forum non conveniens strategy to confront it.
UPDATE 3/6/2015: We note that on February 26, 2015, in Finerty v. Abex Corp., 2015 NY Slip Op 01709, the New York Appellate Division, First Department, rejected the U.S. parent automaker’s attempt to dismiss claims for asbestos injuries alleged by an Irish mechanic for failure to state a cause of action, finding that “the record demonstrates that Ford USA acted as the global guardian of the Ford brand, having a substantial role in the design, development, and use of the auto parts distributed by Ford UK, with the apparent goal of the complete standardization of all products worldwide that carried the signature Ford logo.” The Appellate Division thus concluded that issues of fact existed as to the parent’s direct liability for its role in “facilitating the distribution of the asbestos-containing auto parts” and satisfaction of its duties to warn and to provide for safe products.
Keywords: litigation, mass torts, forum non conveniens, jurisdiction, toxic tort, international, France
— Paul V. Majkowski, Rivkin Radler LLP, New York, NY
February 25, 2015
Individual Dismissed Cases Appealable Despite Ongoing MDL
In a unanimous decision, the U.S. Supreme Court announced that multidistrict litigation (MDL) participants whose individual cases have been dismissed may seek immediate appellate review despite ongoing MDL proceedings.
In the federal system, Title 28 U.S.C. § 1291 gives courts of appeals appellate jurisdiction over “all final decisions of the district courts of the United States.” However, prior to Justice Ginsburg’s decision in Gelboim v. Bank of America Corp., it was unclear whether individual cases consolidated in MDL, pursuant to 28 U.S.C. § 1407, and subsequently dismissed, were appealable while other cases remained active in the MDL.
In her January 21, 2015, opinion, Justice Ginsburg began by observing that section 1407 does not create a “monolithic multidistrict action.” Gelboim v. Bank of Am. Corp., 135 S. Ct. 897, 904 (2015). To the contrary, “[c]ases consolidated for MDL pretrial proceedings ordinarily retain their separate identities. . . .” Thus, she reasoned, the dismissal of a single case from a consolidated grouping has all “the hallmarks of a final decision”—complete adjudication of the individual complaint and termination of the action. Therefore, “the sensible solution to the appeal-clock trigger is evident: “When [a] transferee court . . . grants a defendant’s dispositive motion ‘on all issues in some transferred cases, [those cases] become immediately appealable. . . .’” Id. at 905-06 (quoting D. Herr, Multidistrict Litigation Manual § 9:21, p. 312 (2014)). In the event that plaintiffs whose cases have not been dismissed hold an interest in the matter on appeal, they can seek a district court’s grant of certification to pursue appellate review, pursuant to Federal Rule of Civil Procedure 54(b).
The opinion reverses the Court of Appeals for the Second Circuit’s sua spontedismissal of certain MDL plaintiffs’ appeals from dismissal of their individual complaints in the district court. The Second Circuit reasoned that it lacked appellate jurisdiction because the lower court had not issued a final order disposing of all claims in the consolidated action. See In re LIBOR-Based Fin. Instruments Antitrust Litig., No. 13-3565-L, 2013 WL 9557843, at *1 (2d Cir. Oct. 30, 2013).
The decision likely will lead to an increased number of appeals during MDL proceedings and an increased awareness by the trial court of appellate review. In addition, litigants may see a greater push from transferee courts to file master complaints and consolidated answers. In footnote three, the Court noted that a “transferee court may treat master pleadings as merging the discrete actions for the duration of the MDL pretrial proceedings.” Gelboim, 135 S. Ct. 897 at 905 n. 3. Thus, while not explicitly stated, filing master pleadings could result in “monolithic” MDLs more impervious to concurrent appellate review, thereby allowing transferee courts to avoid the sense that an appeals court is ‘looking over their shoulders.’ Whether these results are advantageous in the dispensation of justice remains to be seen.
— Maxwell Herman, Law Clerk, District of New Jersey, Newark, NJ
February 18, 2015
SDNY Borrows Privilege Approach from D.C. Circuit
In January 2015, Judge Jesse Furman of the Southern District of New York significantly eased the burden of establishing that communications between counsel and corporate employees during internal investigations are protected by the attorney-client privilege.
In the Second Circuit, “[t]he attorney-client privilege protects communications (1) between a client and his or her attorney (2) that are intended to be, and in fact were, kept confidential (3) for the purpose of obtaining or providing legal assistance.” Brennan Ctr. for Justice at N.Y. Univ. Sch. of Law v. DOJ, 697 F.3d 184, 207 (2d Cir. 2012). However, when privilege is asserted over documents relating to internal investigations, the fact that in-house and outside counsel often play a dual role as corporate advocate and business advisor can present difficulties. In 2007, the Second Circuit held that when presented with such a case, courts should analyze whether the “primary purpose” of the communication was to obtain or provide legal assistance. In re Cnty. of Erie, 473 F.3d 413, 420 (2d Cir. 2007).
In his January 15, 2015, opinion, Judge Furman, borrowing from the D.C. Circuit’s decision in In re Kellogg Brown & Root, Inc., 756 F.3d 754 (D.C. Cir. 2014) (the “KBR decision”), stated that when determining the primary purpose of a communication, the relevant inquiry is whether “obtaining or providing legal advice was one of the significant purposes of the [communication] . . . even if there were also other purposes for the [communication].’” In re Gen. Motors LLC Ignition Switch Litig., No. 14-MD-2543 JMF, 2015 WL 221057, at *7 (S.D.N.Y. Jan. 15, 2015) (emphasis added). This formulation is distinct from, and significantly less onerous than, the “but for” test advocated for by the plaintiffs and the “predominant purpose” test, both of which have been used previously in New York district courts. See e.g., Ovesen v. Mitsubishi Heavy Indus. of Am. Inc., No. 04 CIV 2849(JGK)(FM), 2009 WL 195853, at *3 (S.D.N.Y. Jan. 23, 2009) (“Communication between a corporation’s employee and counsel should only be shielded if it would not have been made but for the client’s need for legal advice or services.”) (citing First Chi. Int'l v. United Exch. Co., 125 F.R.D. 55, 57 (S.D.N.Y. 1989)); Koumoulis v. Indep. Fin. Mktg. Grp., Inc., 295 F.R.D. 28, 43 (E.D.N.Y. 2013) (holding communications not privileged where legal advice was not the predominant purpose of the communication).
Applied to the instant case, the court held that legal advice was a significant purpose behind interviews performed by outside counsel as part of an internal investigation into the General Motors ignition-switch vehicle recalls. Thus, notes and memoranda detailing the contents of those interviews were privileged. The court cited the fact that outside counsel was retained during a criminal investigation and in the face of “inevitable” civil litigation, that counsel was explicitly retained “to provide legal advice,” and that the interview communications were used, in the form of proffers, during the criminal investigation. In re Gen. Motors LLC Ignition Switch Litig., 2015 WL 221057 at **7–8. The court’s decision was despite the fact that the most significant result of the investigation was a 315-page report consisting mostly of “factual findings and [a] series of recommendations relating to business process controls, communications, policies, and training” that cited to “many (but not all) of the witness interviews conducted by [counsel]. . . .”
Further guidance as to the contours of the “significant purpose” test can be found in the KBR decision. In that opinion, the D.C. Circuit explained that it is “not correct for a court to presume that a communication can have only one primary purpose.” In re Kellogg Brown & Root, 756 F.3d at 759. Rather, a court should ask: “was obtaining or providing legal advice a primary purpose of the communication, meaning one of the significant purposes of the communication?” Id. (emphasis in original). Answered in the positive, the third element of the attorney-client privilege analysis is satisfied.
Keywords: litigation, mass torts, attorney-client privilege, internal investigations, ignition switch recall
— Maxwell Herman, Law Clerk, District of New Jersey, Newark, NJ
January 30, 2015
Superstorm Sandy Engineering Firms to Face Evidentiary Hearing
The U.S. District Court, Eastern District of New York, plans to conduct an evidentiary hearing on February 19, 2015, relating to the peer-review process performed by certain engineering firms following Superstorm Sandy. Specifically, plaintiffs claim that two conflicting reports in one case (Raimey v. Wright National Flood Insurance Co.) evidence a pattern of practices undermining the peer-review process. Plaintiffs claim that at issue was the issuance of a “draft” report by an insurance carrier’s inspecting engineer that indicated that there was covered flood damage to the plaintiffs’ property. The inspecting engineer submitted his report to his employer, U.S. Forensic, and the report allegedly was “re-written as a result of a peer review process by a reviewing engineer to indicate that there was no covered damage as a result of Superstorm Sandy to the Plaintiff’s property.” The plaintiffs further claim that the engineer who directed that the report be changed to reflect that there was no covered damage at the plaintiffs’ property, never inspected the property, and merely looked through some photographs to draw his conclusions. Judge Gary Brown issued an order in the Raimey case that subsequently applied to all defendants in the Superstorm Sandy cases, requiring the production of all draft reports performed by third-party vendors, including draft reports, redlines, and markups. Many insurers have disputed the characterization of the practices in Raimey as limited to certain firms/individuals and not applicable to all cases. Furthermore, other carriers have argued that there is no evidence that any adjusting companies have used a similar process or, if so, that such a process tainted the adjustment of damages in any way. Additionally, many insurers were not in possession of draft reports and, therefore, were unaware of any other iterations of same. It was only after the Raimey order was in place that insurers were required to go back to third-party firms to request and ultimately produce any related materials.
The order ultimately was made bilateral, subjecting plaintiffs to the same requirements as defendants.
After a sweeping production of additional documents, which insurers requested from third-party vendors, a handful of additional cases were identified wherein similar practices allegedly occurred. The court overseeing the Sandy cases has indicated it will hold an evidentiary hearing on those cases to question the engineers at issue, their practices relating to the peer-review process, and differences between draft reports regarding flood damage to properties and final versions indicating limited or no flood damage.
Plaintiffs’ counsel has requested that the “Raimey order” be considered and adopted by other courts, such as the Superstorm Sandy Litigation Committee for the U.S. District Court for the District of New Jersey. The committee rejected the invitation to adopt Raimey wholesale and instead advised the parties of their continuing duties to follow discovery rules, and reserved the right for judges in individual cases to have the opportunity to “take appropriate action” if compliance was not forthcoming or if unique factors arose in each individual case.
The evidentiary hearing in New York and subsequent discovery will hold open the question of whether the purported activities of two firms identified to date (US Forensic and HiRise) were limited to the handful of cases identified by plaintiffs after the production of draft reports or, rather, whether additional cases will be included in subsequent hearings. For their part, the wind/ “non-WYO [Write Your Own]” carriers have reserved their rights to be heard on any issues that may apply to them that may arise at the hearings and have requested notice from the court of same.
The cases are In Re Hurricane Sandy Cases, 1:14-mc-00041 and Raimey v. Wright National Flood Insurance Co., No. 14-CV-461, U.S. District Court, Eastern District of New York (Central Islip).
Keywords: mass torts litigation, Superstorm Sandy, peer review, draft reports
January 22, 2015
Fifth Circuit Recognizes Product-Development Protocol Preemption
A December 31, 2014, decision by the U.S. Court of Appeals for the Fifth Circuit extends express preemption under the medical-device amendments (MDA) to devices receiving Food and Drug Administration (FDA) approval through the Product Development Protocol (PDP) process, an alternative to the traditional procedure for pre-market approval (PMA). See Rodriguez v. Am. Med. Sys., Inc., No. 14-40183, 2014 U.S. App. LEXIS 24631 (5th Cir. Dec. 31, 2014).
In Rodriguez, the plaintiff brought suit against American Medical Systems (AMS), claiming his implantable prosthesis—a Class III medical device manufactured by AMS—had malfunctioned and caused him personal injuries. Rodriguez brought claims for manufacturing defect, design defect, and consumer fraud, among others. AMS moved to dismiss, arguing that Rodriguez’s tort claims against it were preempted by the medical-device amendments to the Food, Drug, and Cosmetic Act (FDCA), 21 U.S.C. § 360k(a) et seq. Causes of action under state tort law are expressly preempted under the MDA when they seek to impose requirements on the subject device that are “different from, or in addition to” requirements imposed by federal law. Riegel v. Medtronic, 552 U.S. 312, 321–22 (2008). AMS provided documentary evidence that the FDA had approved the device through the PDP process, as opposed to the traditional PMA process.
The PDP process is an alternative to PMA approval, and allows device sponsors to reach an early agreement with the FDA regarding the steps they must take, and the clinical performance criteria their devices must demonstrate, for the subject devices to receive approval for marketing. See generally 21 U.S.C. § 360e(f). The FDCA provides that a device approved through the PDP process “shall be considered as having” PMA approval. 21 U.S.C. § 360e(f)(1); see also 21 C.F.R. § 814.19.
Although courts have widely recognized that traditional PMA approval imposes federal requirements on a device that trigger MDA preemption of state tort claims, see Riegel, 552 U.S. at 322, few courts have addressed whether PDP approval has similar preemptive effect. Addressing this issue in Rodriguez, the Fifth Circuit concluded that PDP approval, like PMA approval, did impose federal requirements for purposes of MDA preemption, and affirmed the district court’s dismissal of the plaintiff’s tort claims.
The Fifth Circuit’s decision in Rodriguez is, significantly, the first time a federal appellate court has applied MDA preemption to a PDP-approved device. Although some lower courts decided this issue in favor of preemption in the past, see, e.g., Betterton v. Evans, 351 F. Supp. 2d 529, 534–35 (N.D. Miss. 2004), no federal appellate court, before Rodriguez, had addressed the issue. The Fifth Circuit’s application of preemption in this context is a victory for the medical-device industry, as it demonstrates that MDA preemption is not reserved exclusively for devices receiving traditional PMA approval.
But while Rodriguez may broaden preemption in some respects, it limits it in others. Reiterating its holding from an earlier case, Bass v. Stryker Corp., 669 F.3d 501 (5th Cir. 2012), the Fifth Circuit recognized that state tort claims that “parallel” federal requirements—in other words, claims based on alleged misconduct that also violates the applicable federal requirements—are not preempted under the MDA. Although there is presently a federal circuit split on the propriety of such claims, compare Bass, 669 F.3d 501, with In re Medtronic, Inc., Sprint Fidelis Leads Prods. Liab. Litig., 623 F.3d 1200 (8th Cir. 2010), the Supreme Court in 2014 declined to resolve the split, see Medtronic, Inc. v. Stengel, 134 S. Ct. 2839 (2014), so manufacturers will likely continue to face state-law tort claims, at least for now, even in cases involving devices with PMA or PDP approval.
Keywords: mass torts litigation, medical device, preemption, product development protocol, PDP, parallel claim
Ill. Court Reverses Dismissal of Flight MH370 Early Discovery Petition
Several months ago, the husband of a crew member on board Malaysian Airlines Flight MH370 (which disappeared while en route from Kuala Lumpur to Beijing) filed a petition for independent discovery against Boeing Co. in the Circuit Court of Cook County, Illinois. Illinois state law permits the taking of discovery, in the absence of a pending lawsuit, for the sole purpose of ascertaining the identity of potential defendants in a future lawsuit. The petition requested authorization to conduct rather expansive discovery upon Boeing Co., the manufacturer of the aircraft used for flight MH370. The trial court, without holding a hearing, concluded that the petition exceeded the scope of allowable discovery (i.e., to ascertain only the identity of potential defendants) and dismissed the petition as improper. The court noted that the law firm representing the petitioner previously filed similar discovery requests in respect of other airline accidents, and threatened to sanction the attorneys should they file a similar action in the future.
On appeal, the Appellate Court of Illinois held that the trial court, "while understandably frustrated by the repeated fishing expeditions of the petitioner's attorneys, was without authority to dismiss the petitioner's Illinois Supreme Court Rule 224 . . . discovery petition without first holding a hearing." While the appellate court appeared to agree that the request for pre-suit discovery was frivolous, it acknowledged that the "ultimate question as to whether a Rule 224 petition should be granted or denied is complex since different districts of our appellate court seem to disagree as to the scope of Rule 224." As to the procedural requirements, the appellate court noted that the rule is clear and the Illinois courts all agree that a hearing must be held before deciding whether to grant or deny the petition. The appellate court, however, reminded the petitioner's attorneys that they are "on notice of the trial court's warning (with which we find no objection) that going forward with any potentially frivolous Rule 224 discovery petition may subject them to sanctions."
The defense and plaintiff's aviation bar will be watching this case for further clarification as to the limits imposed by the Illinois courts on pre-suit discovery.
Fatt v. Boeing Co., 2014 WL 6686651 (Ill. App. Ct. Nov. 26, 2014).
Keywords: mass torts litigation, pre-suit discovery, sanctions, hearing requests
3rd Cir. Accepts Interlocutory Appeal of Federal Aviation Act Decision
The Third Circuit Court of Appeals in Philadelphia recently granted leave to appeal from a non-final decision of the U.S. District Court for the Middle District of Pennsylvania dismissing certain products-liability claims against the Lycoming Engines Division of AVCO Corp., on grounds that the claims are preempted by the Federal Aviation Act. The district court's decision is significant, as it expanded upon prior decisions finding that the act preempts the entire field of aviation safety, including state-law standards of care pertaining to aircraft design and manufacture, by holding that the issuance by the Federal Aviation Administration of a type certificate for an aircraft engine “denotes the Administrator's finding that the engine met all applicable standards” and thus barred any claim for design defect because a jury would be second-guessing the FAA's determination that the engine met the federal standard of care. The district court’s decision is based on Abdullah v. American Airlines, Inc., 181 F.3d 363 (3d Cir. 1999), in which the Third Circuit held, in the context of a passenger-injury case against an airline, that state standards of care in the field of aviation safety are preempted by federal law under the doctrine of implied field preemption. The district court's decision extends the holding of Abdullah to a products-liability case against an aircraft product manufacturer and is in conflict with decisions of other courts finding that the FAA's issuance of a type certificate does not, in and of itself, satisfy federal standards of care. If affirmed, the decision could have a wide-reaching impact on wrongful-death and personal-injury claims arising out of alleged defective aircraft products, and would potentially create a conflict among the circuit courts of appeals with respect to the scope of preemption of aviation products-liability claims.
Sikkelee v. AVCO Corp., 2014 WL 4447018 (M.D. Pa. Sept. 10, 2014), appeal docketed, No. 14-8120 (3d Cir., Oct. 16, 2014).
Keywords: mass torts litigation, implied preemption, standard of care, aviation regulations
December 16, 2014
Ninth Circuit Joins Other Circuits on CAFA Consolidation
Last month the Ninth Circuit joined the Seventh and Eighth Circuits in finding that plaintiffs can implicitly request a “joint trial” when seeking consolidation, a necessary prerequisite to removability under the Class Action Fairness Act of 2005 (CAFA). Corber v. Xanodyne Pharms., Inc., Nos. 13-56306, 13-56310 (9th Cir. Nov. 18, 2014) (en banc); see also Atwell v. Bos. Scientific Corp., 740 F.3d 1160, 1163 (8th Cir. 2013); In re Abbott Labs., Inc., 698 F.3d 568, 572 (7th Cir. 2012). In Corber, California plaintiffs filed more than 40 actions against Teva Pharmaceuticals USA, Inc. and Xanodyne Pharmaceuticals, Inc., alleging that these companies’ manufacture and distribution of a pain reliever, propoxyphene, caused certain injuries while the product was on the market between 1957 and 2010. In October 2012, a group of plaintiffs’ attorneys filed a petition under section 404 of the California Code of Civil Procedure requesting coordination of the propoxyphene cases before a single judge. Significantly, the plaintiffs requested consolidation “for all purposes” and to avoid “duplicate and inconsistent rulings, orders, or judgments.” Citing CAFA’s removal provision for mass actions, the defendants removed the cases to federal court.
CAFA permits removal of so-called mass actions that meet certain statutory requirements. 28 U.S.C. § 1332(d). These include claims for monetary relief that (1) are filed by 100 or more persons and (2) are proposed to be tried jointly (3) as to common questions of law or fact. The dispute in Corber revolved only around the second element, namely whether the plaintiffs’ coordination petition proposed a joint trial. The district court ordered remand, finding that the plaintiffs’ petition focused on coordination for pretrial purposes and it therefore lacked jurisdiction under CAFA. The defendants appealed the district judge’s order, and a panel of the Ninth Circuit affirmed. On subsequent rehearing, the full Ninth Circuit reversed the district court’s order and found that federal jurisdiction under CAFA was present.
The court began by affirming the general principle that CAFA’s mass action provision is narrow, but the plaintiffs are masters of their own complaints and, in that vein, their petitions for coordination. The court explained that a coordination petition’s words should be accorded their plain meaning, and a request for coordination “for all purposes,” naturally and necessarily includes a joint trial. This conclusion was strengthened by the plaintiffs’ citation of the need to avoid duplicative and inconsistent judgments, which often require a trial on the merits. All that notwithstanding, the court provided a road map to plaintiffs wishing to remain in state court by emphasizing that “if Plaintiffs had qualified their coordination request by saying that it was intended to be solely for pre-trial purposes, then it would be difficult to suggest that Plaintiffs had proposed a joint trial.”
The Corber decision is significant for affirming the principle embraced by other circuits that plaintiffs can implicitly propose a joint trial and satisfy the second element of CAFA’s mass-action jurisdictional provision. While the dissenters in Corber focused on the general rule that federal jurisdiction is to be strictly construed, the majority emphasized that disregarding the plaintiffs’ plain request for coordination for “all purposes” would ignore the substance of that request, which clearly placed the case within the confines of federal jurisdiction as a CAFA mass action.
Keywords: mass torts litigation, CAFA, mass action, trial coordination
— David L. Schwan, Concho Resources, Houston, TX
December 12, 2014
The Importance of Carefully Crafting Litigation Hold Notices
Counsel must be careful in drafting a litigation hold notice, because, as the court held in In re Ethicon Inc. Pelvic Repair Systems Product Liability Litigation, 299 F.R.D. 502 (S.D. W.Va. 2014), the company will be bound by the terms of the hold.
In In re Ethicon, the plaintiffs brought products-liability claims against Ethicon involving its transvaginal mesh products. The multi-district litigation began in 2012, to address 37 cases primarily filed in 2011. The discovery dispute involved evidence relating to the TVT and Prolift products. These two transvaginal mesh products were subject to litigation holds in prior cases in 2003, 2006, 2007, and 2008. After the earlier cases were resolved, however, the prior litigation holds were never withdrawn. The plaintiffs sought sanctions in their motion for spoliation, based on Ethicon's failure to produce documents from 22 custodians who were current or former Ethicon employees. Many of these documents were lost or destroyed by Ethicon due to inadequate retention procedures after employees left the company, and failure to properly monitor the litigation hold to ensure that employees were in compliance.
When Is The Duty to Preserve Triggered?
The court held that the filing of the 2003 and 2006 cases and resulting litigation did not create a duty to implement massive document preservation measures at that time. However, when the court examined a 2011 company-wide consolidated litigation hold notice issued by in-house counsel—which referenced prior company-wide litigation holds issued in 2007 for the TVT device and 2008 for the Prolift product—the court held that the reference to the prior holds in the 2011 letter created a duty to preserve on the respective 2007 and 2008 dates, when the number of lawsuits being filed rapidly increased and the hold notices issued by the in-house counsel were of a broader nature. The court noted: “the only reasonable interpretation of the notice is that the counsel for Ethicon believed that the documents relating to TVT and Prolift were already being preserved company-wide for the purpose of large scale litigation.” Thus, the 2011 hold notice was intended to “refresh” the 2007 and 2008 hold notices.
What Is the Scope of a Defendant's Duty to Preserve?
The court held that Ethicon was bound to the terms of the litigation hold notices that it issued, despite how overbroad they were, because “the scope of the preservation was established by . . . the document preservation notices.”
The court also noted that the custodial files of several key employees were lost or destroyed after the duty to preserve arose and that the plaintiffs demonstrated the likelihood that some of those documents were relevant; therefore, Ethicon breached its duty to preserve evidence with respect to those key, high-ranking employees.
Although the court did not believe that the defendant acted in bad faith, the court did find that the defendant’s “failure to better implement and monitor its litigation holds was negligent, and perhaps grossly negligent in some cases.” Accordingly, while the court declined to impose severe sanctions such as striking defenses or an adverse inference instruction, the court recommended a case-by-case basis analysis by the presiding judge allowing plaintiffs to introduce evidence of the defendant’s loss of the documents, and where appropriate, granting an adverse inference jury instruction. Finally, the court granted the plaintiffs’ request for monetary sanctions, fees, and costs.
- The litigation hold must be adequately broad to cover relevant documents, but specific enough so that the company can effectively implement the hold.
- Too broad of a litigation hold may create a greater duty to preserve evidence than the company would otherwise be held to, and any loss of that otherwise unnecessary evidence that would be subject to the litigation hold, may be considered spoliation.
- Ensure that the hold is effectively implemented by identifying key custodians early on and then monitoring compliance so that relevant information is identified.
- Companies must institute procedures to ensure that data is retained from employees leaving the company while a litigation hold is in place.
- It is important to lift the litigation hold when the case is resolved and the company's duty to preserve evidence ends.
Keywords: mass torts litigation, products liability, medical, eDiscovery, spoliation, electronically stored information
— Ashley J. Heilprin, Stone Pigman Walther Wittmann, LLC, New Orleans, LA
November 25, 2014
Canadian Beekeepers Class Action First of Its Kind in Canada
A class action claiming harm to Canadian beekeepers by neonicotinoid pesticides, or neonics for short, was filed on September 2, 2014. Although there is a history of class proceedings on this issue in the United States, this is the first action of its kind in Canada. The claim seeks to certify a national class that would arguably encompass all Canadian beekeepers who do not opt out. The proposed beekeeper class, represented by two family-owned Ontario honey producers, is seeking $400 million in damages for past (back to 2006) and future pecuniary losses, as well as $50 million in punitive damages.
The statement of claim relies on the law of negligence as opposed to traditional environmental torts such as private nuisance or strict liability (likely due to the recent narrowing of the application of these torts by the Ontario Court of Appeal, see Smith v. Inco (2011)). Specifically, the class alleges that two producers of these widely used pesticides breached and continue to breach various duties of care owed to Canadian beekeepers including to have
- taken reasonable steps to avoid damage to the property of the class members;
- conducted appropriate testing and monitoring of the impact of the pesticides on bees;
- appropriately investigated adverse events associated with the use of the pesticides;
- removed the pesticides from the market after discovering their adverse impact; and
- disclosed the harm caused by the pesticides and taken appropriate remedial action.
Unlike contact pesticides, which remain on the surface of the foliage, neonics are systemic pesticides and, therefore, are highly mobile in plants. Neonics are alleged to cause immunosuppression and neurological disruption damaging bees foraging behaviour, overall mobility, and the ability to communicate. The claim alleges that the chronic effects of the use of neonics have been and continues to be felt by Canadian beekeepers in the form of increased bee deaths, impaired reproduction, immune suppression, behavioural abnormalities resulting in hive loss, reduced honey production, impacts on the quality of honey, contamination of hive equipment, loss of queen bees, breeding stock, and difficulties fulfilling honey product or pollination contracts. It is alleged that these adverse impacts have resulted in lost profits and increased expenses.
To obtain certification, the claim must meet the requirements of section 5(1) of the Ontario Class Proceedings Act, 1992, including that the claim discloses a reasonable cause of action. Under Canadian law, a duty of care at common law is only imposed where the harm caused by the defendant was foreseeable and a sufficiently close and direct relationship of proximity exists such that it would be fair to require the defendant to be mindful of the plaintiff’s interests. Furthermore, Canadian courts are required to consider whether there exist any policy reasons to negate the imposition of a duty of care in the circumstances. While currently banned for use on certain crops in other countries, neonics continued to be used in Canada. However, the Health Canada Pest Management Regulatory Agency has announced that they intend to reevaluate these approvals by investigating the pesticides’ impacts on pollinators.
We expect that one of the battlegrounds in this case will be the existence of a duty of care to the proposed class and it will be interesting to see how this issue is addressed by the court. The result will likely depend on the strength of the scientific evidence presented and whether or not the court sees the issues raised as best left to the legislature to address.
Keywords: mass torts litigation, duty of care, class action, pesticides
November 24, 2014
PA Judge Upholds Statutory Bar of Claims against Biomaterials Suppliers in Pelvic Mesh Litigation
In In Re: Pelvic Mesh Litigation, plaintiffs filed suit for damages allegedly suffered as a result of the implantation of pelvic mesh devices manufactured by Ethicon and Boston Scientific. Plaintiffs also named Secant Medical as a defendant on the basis of its role in supplying Ethicon with parts to manufacture the devices. Plaintiffs alleged numerous state-law claims including but not limited to negligence, fraud and breach of warranty. In response to plaintiffs’ claims, Secant filed preliminary objections, asserting that the claims against it were barred by the Biomaterials Access Assurance Act of 1998 (BAAA). The act provides immunity for a biomaterials supplier that provides component parts for use in the manufacture of an implanted medical device and supersedes any state law that would act to impose such liability.
In support of its objections, Secant submitted affidavits concerning the nature of both Ethicon’s and Boston Scientific's products. Secant further asserted that the affidavits established that Secant is a biomaterials supplier for purposes of BAAA immunity because it supplied component parts for use in the manufacture of the pelvic mesh devices. Moreover, Secant referenced the fact that a device manufacturer is subject to registration, listing, safety, and efficacy requirements under the Federal Food Drug and Cosmetic Act, and Secant is not subject to any such requirements because it only produces large rolls of filament mesh that form a component part of the device.
Secant articulated the conclusion of Congress that a statutory bar was necessary to ensure a stable supply of component suppliers and provide an expeditious manner to dispose of unwanted suits. Secant also highlighted the streamlined process for submission and disposition of a motion to dismiss under the act. Under the BAAA, parties may submit affidavits in support or in opposition of the motion, and the court must rule solely on the pleadings and affidavits. Furthermore, the motion must be granted unless (1) the plaintiff submits an affidavit demonstrating that the defendant is not a biomaterials supplier or (2) the court finds that the defendant may be liable as a manufacturer or seller under the act.
Judge Arnold L. New of the Court of Common Pleas of Philadelphia County considered Secant’s Preliminary Objections as a motion to dismiss under the BAAA. In a very brief order, without written reasons for judgment, Judge New dismissed the claims against Secant, finding that the company was a biomaterials supplier under the BAAA and not a manufacturer or seller of pelvic mesh devices. This ruling, if upheld, could certainly impact the universe of potential defendants in future cases.
Keywords: mass torts litigation, biomedical devices, statutory immunity, pelvic mesh
— Matthew A. Moeller, the Moeller Firm, New Orleans, LA
November 19, 2014
City of Redlands Loses Water Supply Contamination Appeal
In October 2014, the California Court of Appeal, Fourth District, upheld a jury verdict against the City of Redlands in its water-supply-contamination case against Shell Oil Co. and Wilbur-Ellis Co. The case is one of several California state-court coordinated proceedings that allege that Shell, the Dow Chemical Company, and various soil-fumigant distributors and applicators including Wilbur-Ellis are responsible for contamination of groundwater used for municipal water supply with soil fumigants and one of their manufacturing byproducts.
The specific substances at issue are the soil fumigant and nematicide DBCP and TCP, which is a byproduct of the production of the soil fumigants dichloropropane and dichloropropene. These soil fumigants kill nematodes, which are microscopic worms that infest plant roots and inhibit crop production. The fumigants were land-applied at farms in Redlands and elsewhere throughout California beginning in the 1940s. The U.S. Environmental Protection Agency took steps to ban use of DBCP beginning in the late 1970s, and TCP was withdrawn from use in 1984. Redlands claimed both substances are carcinogenic.
Redlands first detected small concentrations of DBCP in its water wells in 1986 and TCP in 2002. In 2004, Redlands sued Shell, Wilbur-Ellis, and others for strict liability, negligence, nuisance, and trespass for allegedly contaminating the city’s groundwater wells, which the city uses for municipal drinking water, with these substances. Shell argued in the trial court that the trace levels of DBCP and TCP found in the city’s water were not hazardous. Indeed, the court of appeal noted that the levels were so low as to be considered insignificant, presenting a negligible cancer risk. Shell also pointed out that Redlands had represented to its citizens in annual drinking-water reports that its water supply was safe. Shell also asserted that the TCP contamination migrated from a nearby Lockheed Martin aerospace facility. Wilbur-Ellis argued there was no evidence that it had distributed the Shell soil fumigants in the Redlands area.
The trial court granted Shell’s motion for summary adjudication and Wilbur-Ellis’s motion for summary judgment on Redlands’ claims for nuisance and trespass. A jury trial proceeded on Redlands’ claims against Shell for negligence and strict liability on theories of product-design defect and failure to warn. The jury did not find that Shell’s product design, failure to warn, or negligence was a “substantial factor in causing harm” to Redlands. The trial court accordingly entered judgment in Shell’s favor. Redlands appealed the judgments in favor of Shell and Wilbur-Ellis.
The court of appeal upheld the judgments. It found that substantial evidence supported the jury’s findings that Shell did not cause the city harm, supporting the jury verdict on the strict-liability and negligence claims against Shell. Accordingly, other purported errors by the trial court were not relevant. The court of appeal also held that the city’s claims sounded in products liability, not nuisance and trespass, and Shell did not direct the application of its products at specific locations, so the trial court’s grant of summary judgment to Shell on these claims was appropriate. Finally, the court of appeal upheld summary judgment in favor of Wilbur-Ellis because Shell had no liability, meaning that Wilbur-Ellis, a purported distributor of Shell products, could have no liability either.
This case involves at least two practical tips. First, it is important for trial counsel representing defendants to develop a consistent theme of the case. Here, it is clear that Shell’s theme at trial was that it simply did not cause any harm to Redlands’ water supply. This theme appears to have played well with the jury. Second, trial counsel should pay close attention to juror selection. Although the court of appeal decision does not mention it, Redlands, which is somewhat rural, is generally regarded as having a jury pool that is more favorable to corporate defendants in cases involving agricultural products than more urban jurisdictions such as Los Angeles or San Francisco. Shell appears to have done a good job selecting jurors who could be receptive to its trial theme.
Keywords: litigation, mass torts, products liability, negligence, Shell Oil Company
Update on Interaction of RICO with 1978 Airline Deregulation Act
Aviation practitioners have long struggled through the nuanced and difficult maze of “federal preemption” as it relates to claims against airlines. Generally speaking, the federal Airline Deregulation Act of 1978 (ADA) preempts claims that arise out of state law that conflict with the federal legislative and regulatory scheme promulgated by the Federal Aviation Administration (FAA). As a simple example, courts typically hold that generic state–law negligence claims against an airline are preempted if the claimed conduct is addressed by federal law.
A different and unique question, however, was recently addressed by the Eleventh Circuit Court of Appeals as to whether a certain federal law is preempted by the ADA. In Ray v. Spirit Airlines, No. 13-15681 (11th Cir. Sept. 23, 2014), the plaintiffs alleged that Sprit Airlines had violated the Racketeer Influenced and Corrupt Organizations Act (RICO) by holding itself out as a low-fare airline while concealing certain “usage fees” during the time that a would-be passenger agreed to purchase a ticket via the airline’s website. The conduct, according to the plaintiffs, used “mails and wires” (a predicate to a RICO claim) to effectuate this so-called concealment.
The district court dismissed the case pursuant to Federal Rule of Civil Procedure 12(b)(6), finding that the claim was preempted by the ADA. The circuit court reversed the dismissal. Without addressing whether the claim satisfied Iqbal/Twombly standards, the court focused on the sole issue of whether a federal RICO claim is preempted. The court answered the question in the negative. In its analysis, the court distinguished RICO from state-law claims that are traditionally preempted. The court held that, unless the airline could show that Congress expressly or impliedly, in a clear and manifest way, repealed RICO as it pertains to the ADA, the RICO claim was not preempted.
The Spirit court thereby agreed with the only other court to hold that RICO claims predicated on mail or wire fraud are not preempted by the ADA. See All World Prof’l Travel Servs., Inc. v. Am. Airlines, Inc., 282 F. Supp. 2d 1161 (C.D. Cal. 2003). Similar to the Spirit case, a travel agency in All World sued an airline relating to allegedly fraudulent conduct in handling a post-September 11 fee dispute. The All World court rejected the airline’s preemption arguments, finding that the ADA did not establish a comprehensive scheme of liability preempting RICO claims altogether. Moreover, while the court found that some RICO claims in which the predicate acts are covered by comprehensive labor legislation may be preempted, the case involved claims of underlying fraud that are separate from any ADA violations. Thus, Spirit and All World stand for the proposition that RICO claims predicated on general fraud claims can generally coexist with the provisions of the ADA and should not be preempted.
Keywords: mass torts litigation, RICO, airline deregulation, implied preemption
— Brian Moskal, Greenberg Glusker Fields Claman & Machtinger LLP, in Los Angeles, CA
October 29, 2014
Diversity Initiatives in the Section of Litigation
“Goal III (formerly Goal IX) of the American Bar Association directs the Association ‘to promote the full and equal participation in the legal profession by women, minorities, persons with disabilities, and persons of differing sexual orientations and gender identities.’ The ABA Section of Litigation strongly supports Goal III.” ABA Section of Litigation Diversity Plan (Revised August 2008). The Section of Litigation is taking this charge quite seriously: “[w]e believe that from a richer range of experience emerge fresher perspectives, enhanced collaboration, and superior lawyering. Through diversity and inclusion, we become better as a section, which benefits not only our clients and the community but also the world. The ABA Section of Litigation is a change agent of diversity and inclusion.” Accordingly, the Section has instituted a number of diversity initiatives, working on many fronts to improve the diversity profile of the Section, as well as within the profession.
The need for such initiatives is painfully obvious. Minority representation within the Section is embarrassingly low: African Americans represent only 3.53 percent of the membership; Asian Americans only 3.02 percent; Hispanics 2.77 percent; and Native Americans 0.56 percent. Goal III Report: The State of Racial and Ethnic Diversity in the American Bar Association, p. 6, ABA Commission on Racial and Ethnic Diversity in the Profession (2012). These statistics stand in stark contrast to the representative populations within the broader nation: African Americans account for 12.2 percent of the general population; Asian Americans 4.9 percent; Hispanics 16.3 percent; and Native Americans 0.7 percent. 2010 Census.
Recognizing that the problem of underrepresentation within the Section and within the broader profession is a multifaceted one, the Section has created its Diversity & Inclusion Committee (DIC). See “Improving Diversity: Where Do I Begin?.” That committee has been given authority to institute initiatives that will be carried out by the various substantive committees within the Section, as well as by the DIC itself. Initiatives for the 2014–15 bar year include a number of outward-focused programs designed to attract more minority talent to the Section and to the profession. Two in particular deserve special mention.
The DIC’s Leadership Initiative requires each substantive committee to identify and invite diverse practitioners into leadership within specially selected geographic markets of interest to the section. The DIC has selected 40 markets to target, where each Committee will work to bring at least one diverse leader into its ranks. With 34 substantive committees taking on this task, the Section has high expectations for this initiative.
The Section’s DIC, working in conjunction with the bigger ABA’s Standing Committee of Diversity & Inclusion, has also established a pipeline program, which focuses on encouraging students to pursue careers in the law. Section Chair Nancy Degan has made it the objective of each and every substantive committee to pay visits to local schools to encourage pursuit of the practice of law, as well as membership in the Section. No doubt this initiative will prove helpful to improving the Section’s diversity profile.
Keywords: mass torts litigation, diversity, ABA initiatives, inclusion
— Rudy R. Perrino, Walsworth Franklin Bevins & McCall, Los Angeles, CA
October 27, 2014
An Emerging Structure of ADR in Mass Torts
The official statistics provided by the Judicial Panel on Multidistrict Litigation in recent years count products liability as nearly one quarter of all pending multidistrict litigations (MDLs), making it the largest category among all classifications.
Many of these product-liability MDLs, especially pharmaceutical and medical-device mass torts, continue to dominate headlines in mainstream and legal media. These mega-cases dominate and potentially drain the resources of the courts, counsel, and parties to the litigation. The magnitude of these matters, combined with the statistical likelihood of eventual settlement in nearly all of them, requires focus on trends that facilitate resolution.
Alternative dispute resolution (ADR) has a longstanding role in resolving some of the largest and most high-profile matters. As with any evolving industry, ADR models are developed to streamline processes for the efficient resolution of disputes. This is certainly true within the context of mass torts, where a cooperative, working model has emerged because stakeholders buy in to its effectiveness.
With increasing frequency, defendants are creating settlement teams that are separate from trial teams, sometimes very early in the litigation. Plaintiffs are exercising the same strategy with the formation of plaintiffs’ steering committees. Both teams consist of individuals with earned reputations as effective negotiators. Simply put, these teams work with the judges, magistrate judges, mediators, and special masters to form a cohesive settlement process.
A parallel evolution is also occurring on the special-master side. Historically, MDLs often used a discovery special master, but the emerging trend is an additional designation of a “settlement special master.” Whether appointed by the court or selected through agreement of counsel, this role is becoming the analog of the plaintiff and defense settlement teams. For example, in the Gadolinium Contrast Dyes Product Liability Litigation MDL, the Hon. Dan Polster, Northern District of Ohio, appointed Cathy Yanni as settlement special master. According to Yanni, “[w]orking as the Settlement Special Master, I was able to negotiate settlements with the assistance of the court and had the authority to work independently with the parties and counsel to settle groups of cases as well as individual cases.”
Given the scope and size of mass-tort actions and the incredible burden on all involved, the use of improved ADR methodologies—including the use of settlement special masters—is a practical and valuable consideration for all practitioners.
Keywords: mass torts litigation, ADR, settlement special master, multidistrict litigation, MDL
— John T. Pardun, JAMS, Orange, CA
October 24, 2014
Know Your Client
Counsel filing mass-tort actions received a warning from the Eleventh Circuit in September regarding communication with clients during protracted litigation. The Eleventh Circuit strongly affirmed a district-court decision dismissing the claims of more than 580 former smokers and 160 claims of spouses and children after refusing to allow plaintiffs’ counsel to amend the pleadings to correct certain deficiencies. See In re Engle Cases, Nos. 13-10839, 13-12901, 13-14302 (11th Cir. Sept. 10, 2014).
Plaintiffs’ counsel essentially neglected to keep track of his clients to file proper claims on their behalf. Indeed, the court questioned whether or not plaintiff’s counsel even had permission to file the claims asserted. For example, plaintiffs’ counsel filed personal-injury claims on behalf of 521 smokers that predeceased the filing of the claims. The court summarized counsel’s actions as follows: “[W]e are left with the inevitable conclusion that he filed lawsuits in 2008 for many individuals whose last, and perhaps only, contact with his firm was nearly a decade earlier, who never authorized him to file suit, and who, in all likelihood, had no earthly idea that [plaintiff’s counsel] considered himself to be their lawyer.” Rule 17(a)(3), which typically allows the substitution of the real party in interest, cannot save such conduct by counsel. According to the court, “Rule 17 was not promulgated to allow lawyers to file placeholder actions . . . to keep a limitations period open while they investigate their claims and track down the proper parties.”
This should serve as a reminder to all attorneys, particularly in mass-tort actions involving numerous parties and that can last not just years, but decades, that ongoing communication with your client(s) is of vital importance. In fact, the Model Rules of Professional Conduct require such communication with clients. See Model R. Prof. Conduct 1.4. Thus, an attorney should maintain regular and consistent contact with the client, even in the absence of significant action in the matter for which the attorney is engaged. Such diligence will avoid potential landmines down the road.
Keywords: mass torts litigation, client communication, legal ethics, multiple clients
— Donald F. Winningham III, Maynard, Cooper & Gale, P.C., Birmingham, AL
GM Seeks to Coordinate Discovery in Ignition Switch MDL
General Motors, LLC (New GM) has proposed a coordinated discovery effort in the GM Ignition Switch Multi-District Litigation (MDL), seeking to limit discovery in state-court proceedings unless plaintiff’s counsel can articulate how any such evidence could not be obtained through the MDL.
At issue is the Georgia state proceeding involving the death of Brooke Melton, a 29-year-old nurse who was fatally injured in a motor vehicle crash in 2010. There, plaintiff counsel plans to conduct depositions as early as October 2014 relating to a confidential settlement in the Melton case. GM contends that plaintiff’s attorney Lance Cooper plans to seek documents in addition to those that already have been submitted to the MDL repository.
In an August 29, 2014, proposal to U.S. District Court Judge Jesse M. Furman, presiding over the GM Ignition Switch MDL, GM proposed a discovery-coordination effort that it maintains will assist in the collection and dissemination of discovery. Absent such an effort, GM maintains that state counsel will circumvent the MDL court’s orders and seek to obtain additional document discovery outside of the common MDL document repository containing approximately three million pages of documents. Any efforts to thwart or circumvent the MDL court’s rulings would be inconsistent with all of the prior efforts the court has undertaken, and GM has insisted that given the plaintiff’s positions in the Melton state-court action, if the proposed order and approach are not adopted, “this MDL will fail one of its essential purposes—that is, the ability to efficiently manage and coordinate discovery.”
In its proposal, GM has suggested that coordination should be effected by all documents coming to the MDL electronic depository, which would be open for all. Anyone desiring access to the depository would be required to sign the MDL protective order. Additionally, GM has requested that depositions should be cross-noticed, with MDL counsel being given the opportunity to ask questions first. Such deposition transcripts would then be included in the MDL depository.
In light of this proposal, as well as additional requests to stay discovery in the Georgia proceeding pending Judge Furman’s ruling, the court has ordered parties to submit briefs on what, if any, steps the court should take with respect to the attorneys in the Melton case as well as any other litigation and/or further arguments on the parties’ proposed coordination orders. The court has asked parties to consider, inter alia, issues including the use of technology for efficiency’s sake, cost-sharing, and who may be included in depositions of previously deposed witnesses.
The case is In re: General Motors LLC Ignition Switch Litigation, No. 1:14-mc-02543, pending in the U.S. District Court for the Southern District of New York.
Keywords: mass torts litigation, coordinated discovery, multi-district litigation, ignition
— Kristin Beckman, Barrasso Usdin Kupperman Freeman & Sarver, LLC, New Orleans, LA
August 29, 2014
Putative Class of Cancelled Policyholders Denied Certification Again
In 2001, WellPoint, a health insurer, acquired an insurance company, RightCHOICE, withdrew it from the Illinois state market, and cancelled all RightCHOICE policies the next year. Later, WellPoint offered the cancelled policyholders costlier substitute policies. Those cancelled policyholders who declined the costlier policies had to shop for replacement policies, which did not cover pre-existing conditions. A group of cancelled policyholders filed suit in federal court asking the court to certify a class of former RightCHOICE policyholders. After the district court declined to certify the class, no appeal was taken. Instead, a separate group of named plaintiffs filed suit in Illinois state court to certify a similar class per Smith v. Bayer Corp, 131 S. Ct. 2368 (2011), which held that a “federal decision not to certify a class did not prevent state courts from reaching a contrary decision.” WellPoint removed the state-court action under 28 U.S.C. § 1453, the Class Action Fairness Act (CAFA), and after remand was denied, an appeal followed. See Myrick v. WellPoint, Inc., Nos. 12-3882, 13-2230, 2014 WL 4073065 (Aug. 19, 2014).
August 29, 2014
False-Arrest and Defamation Claims against JetBlue Dismissed
The U.S. District Court for the Southern District of Ohio recently held that New Jersey law bars punitive damages for prescription pharmaceuticals that are approved by the Food and Drug Administration.
Earlier in 2014, we reported the U.S. Supreme Court's decision in Air Wisconsin Airlines Corp. v. Hoeper, 134 S. Ct. 852 (2014), regarding the scope of immunity from civil liability afforded airlines and their employees, under the Aviation and Transportation Security Act (ATSA), 49 U.S.C. § 44941, for reporting security threats to the Transportation Security Administration (TSA). Under ATSA, airlines and their employees are immune from civil liability for reporting suspicious behavior to the TSA unless (1) the disclosure is made with actual knowledge that it was false, inaccurate, or misleading, or (2) the disclosure is made with reckless disregard as to the disclosure’s truth or falsity. In the Hoeper case, the Supreme Court held that immunity under the ATSA extends to all reports of suspicious behavior except those statements that are found to be materially false.
New Jersey Law Precludes Punitive Damages in Aredia/Zometa Cases
The U.S. District Court for the Southern District of Ohio recently held that New Jersey law bars punitive damages for prescription pharmaceuticals that are approved by the Food and Drug Administration.
In Williams v. Novartis Pharm. Corp., No. 3:12-cv-00145, Slip Op. (S.D. Ohio Apr. 21, 2014) and Sheffer v. Novartis Pharm. Corp., No. 3:12-cv-00238, Slip Op. (S.D. Ohio Apr. 21, 2014), the plaintiffs, both Ohio residents, separately filed suit in the District of Columbia alleging personal injuries in connection with their use of the prescription pharmaceuticals Aredia and Zometa, manufactured by defendant Novartis, a New Jersey corporation. The cases were transferred to the U.S. District Court for the Southern District of Ohio based on the plaintiffs’ residency.
Keywords: litigation, mass torts, choice-of-law, preemption, punitive damages
— Jessica L. Brennan, Drinker Biddle & Reath LLP
SCOTUS Invites Solicitor General's Comments on FSIA Decision
In a personal-injury case involving the expansion of jurisdiction under the Foreign Sovereign Immunities Act (FSIA), 28 USC §§ 1602 et seq., the U.S. Supreme Court has invited the U.S. solicitor general to comment on the petition for certiorari recently filed on behalf of OBB Personenverkehr AG, the railway instrumentality of the Republic of Austria. The case was filed against OBB by a U.S. citizen who was injured in a train-related accident in Innsbruck, Austria. OBB seeks to reverse a Ninth Circuit Court of Appeals en banc decision stripping OBB of immunity under the FSIA notwithstanding its status as an instrumentality of a foreign state with no American office or operations. The Ninth Circuit held that the commercial-activity exception to the FSIA applies because the claim is based on the plaintiff's online purchase of a Eurail pass from a Massachusetts-based Internet ticket seller, even though the seller had no contractual relationship with OBB and the accident occurred during European travel.
The case initially was dismissed by the U.S. District Court for the Northern District of California on the ground that the acts of the ticket seller could not be imputed to OBB. On appeal, a panel of the Ninth Circuit Court of Appeals affirmed the dismissal. Upon rehearing en banc, the Ninth Circuit reversed, holding that the ticket agent's activities in the U.S. could be imputed to OBB based on common-law agency principles, thus invoking the commercial-activity exception to sovereign immunity. The court held that a foreign instrumentality engages in commercial activity in the United States when “it sells tickets in the United States through a travel agent regardless of whether the travel agent is a direct agent or subagent of the common carrier.” OBB filed a petition for certiorarito the U.S. Supreme Court arguing that the Ninth Circuit disregarded the FSIA's definitions of "foreign state" and "agency" in imputing acts of the travel agent to the OBB, and ignored settled law narrowly applying exceptions to immunity under the FSIA. The Court's request for the solicitor general’s views is significant as the response could determine the fate of OBB’s petition for review. The decision, if it stands, could lead to an expansion of U.S. jurisdiction over state-owned entities, including air carriers, for accidents occurring outside the United States.
The case is OBB Personenverkehr AG v. Sachs, 737 F.3d 584 (9th Cir. 2013).
June 10, 2014
Fifth Circuit Addresses FDA Preemption of State-Law Claims
The Fifth Circuit Court of Appeals recently addressed the ever-present question of FDA preemption of state-law pharmaceutical claims, specifically those arising under Texas law. From 2007 to 2009, Roy Eckhardt suffered from gastrointestinal problems, for which his physician prescribed Reglan, the brand name for metoclopramide. Wyeth and Schwarz Pharma (the “brand defendants”) manufactured and distributed Reglan, while Qualitest Pharmaceuticals and Vintage Pharmaceuticals (the “generic defendants”) produced the generic alternative of metoclopramide.
Keywords: litigation, mass torts, pharmaceuticals, preemption, products liability
Fifth Circuit Clarifies Jurisdiction of Severed CAFA Claims
In the so-called Louisiana Road Home Litigation, The Fifth Circuit Court of Appeals in New Orleans clarified when a severed action must have an independent jurisdictional basis to remain in federal court. In so doing, the Fifth Circuit evaluated the intersection of the established general rule—jurisdictional facts are determined at the time of removal—and the Honeywell exception—for severed actions, jurisdictional facts are determined at the time of severance. See Louisiana v. Am. Nat. Prop. Cas. Co., --- F.3d --- (5th Cir. Mar. 26, 2014) (citing Honeywell Int’l, Inc. v. Phillips Petroleum Co., 415 F.3d 429 (5th Cir. 2005)).
After Hurricanes Katrina and Rita devastated the Louisiana coast in August and September 2005, the Louisiana government established an assistance program known as the “Road Home” project. As part of this enactment, Louisiana homeowners assigned individual insurance policies to the state in exchange for home repair and rebuilding assistance. The state sued insurers to recover on these policies under the Louisiana class-action statue, and the defendant insurers removed the case to federal court, asserting jurisdiction under the Class Action Fairness Act of 2005 (CAFA). The district court agreed with the defendant insurers that CAFA supplied federal subject-matter jurisdiction, and the Fifth Circuit affirmed.
Having established federal jurisdiction, the defendant insurers moved to dismiss the claims under Louisiana law per the policies’ anti-assignment clauses, and this decision was also appealed. The Fifth Circuit certified the question to the Louisiana Supreme Court, which held that “applying anti-assignment clauses to post-loss assignments did not violate Louisiana public policy, but the issue ‘must be evaluated on a policy by policy basis.’” Id. at *2 (internal citations omitted). In response, the district court ordered the severance of individual claims from the collective action. The state filed amended complaints for each policyholder, and each was given a new case number and randomly assigned a district judge. At this post-severance stage, the jurisdictional question emerged again, and separate district courts held that “once these cases were individually severed from their former home in the class action, CAFA did not supply jurisdiction” and ordered the cases remanded to state court. The defendant insurers appealed the remand.
The Fifth Circuit reversed. Applying the general rule, the Fifth Circuit held that CAFA supplied federal jurisdiction over the state’s claims at the time of removal, and thus the severed claims should remain in federal court. Distinguishing Honeywell, the court noted that the facts, citations, and subsequent history for Honeywell supported the conclusion that the exception applies to severed claims that were brought in federal court merely on a theory of supplemental, not original, jurisdiction. For example, a severed third-party claim must be remanded under Honeywell when the court exercised supplemental jurisdiction over the claim with pendant federal-question claims in the same action. See id. at **4–5 (citing United States v. O'Neil, 709 F.2d 361 (5th Cir. 1983) and 28 U.S.C. § 1367). Unlike Honeywell, in the Road Home Litigation, the district court had original jurisdiction over every severed and subrogated policyholder’s claim under CAFA. Therefore, the Honeywell exception relating to supplemental jurisdiction does not apply, and the general rule does, making jurisdictional facts at removal and not post-severance determinative.
Keywords: litigation, mass torts, CAFA, jurisdiction, Road Home Litigation
— Arlene Hennessey, King & Spalding, LLP, Houston, TX
FDA Considers Changes to OTC Drug Review
The Food and Drug Administration (FDA) is currently contemplating changes to its Over-The-Counter Drug Review (also known as the “OTC monograph process”). The OTC Drug Review was instituted over 40 years ago and is used to regulate more than 300,000 over-the-counter drug products currently on the market. Described broadly, the FDA’s stated goal is to “modernize” the OTC Drug Review so that it is “more efficient and more responsive to newly emerging information and evolving science, and allow for more rapid product innovation where appropriate.” Over-The-Counter Drug Monograph System—Past, Present and Future; Public Hearing, 79 Fed. Reg. 10168, 10169 (Feb. 24, 2014). While it is not entirely clear how the FDA will change the OTC Drug Review, we do have an idea of just how far the overhaul is intended to go. The FDA has expressed the “ideal, comprehensive solution” as one that would:
- use modern standards for safety and efficacy;
- provide an efficient mechanism for finalizing the status of drug products that are currently marketed under pending TFMs [Tentative Final Monographs];
- allow for innovative changes to drug products;
- provide the FDA with the ability to respond promptly to emerging safety or effectiveness concerns;
- allow the FDA to easily and quickly require additional information or data necessary to develop pediatric labeling where appropriate; and
- allow the FDA to obtain final formulation information about individual products or readily establish final formulation testing standards.
79 Fed. Reg. 10171.
Even though the FDA is looking to improve the process, it recognizes that “[t]he OTC Drug Review has been successful in a variety of ways.” 79 Fed. Reg. 10169. In fact, the FDA achieved important accomplishments through the current process, including: “evaluat[ion] [of] the safety and efficacy of thousands of OTC drug products by therapeutic category, instead of reviewing NDAs for each drug product,” “issu[ance] [of] final monographs for the majority of the original drug categories,” and the removal of unsafe and/or ineffective drugs from the market.
In late March, the FDA held a public hearing to obtain input on how to improve the OTC Drug Review. Pharmaceutical manufacturers and others have responded to the FDA’s invitation with several ideas and recommendations. For example, the Consumer Healthcare Products Association (CHPA), whose members manufacture over 90 percent of OTC drugs in the United States, told the FDA that the current “regulatory framework works well and is not in need of fundamental changes.” But, the CHPA also stated that the FDA could improve the OTC Drug Review by: (1) “issu[ing] guidance documents to explain what types of data are needed to support innovation[;]” (2) “shortening the Time and Extent Application process from three steps to fewer steps to support addition of new ingredients to Monographs[;]” and (3) “exercis[ing] enforcement discretion to allow new/updated information to be added to product labels.” The CHPA also recommended that the FDA institute “a more transparent process in the rulemaking clearance process” with greater publicly available information.
Regardless of how far the FDA’s modifications ultimately go, however, changes to the OTC Drug Review could be significant for pharmaceutical manufacturers, consumers, and the attorneys who represent them. The deadline to submit comments to the FDA is May 12, 2014. Comments may be submitted at http://www.regulations.gov or by paper submission to the Division of Dockets Management (HFA-305), Food and Drug Administration, 5630 Fishers Lane, Rm. 1061, Rockville, MD 20852.
Keywords: litigation, mass torts, Food and Drug Administration, FDA, over-the-counter, OTC, Drug Review, monograph
April 30, 2014
Allergan Seeks Review of Oklahoma Appellate Court Decision
In 2009, plaintiff Sharla Helton, an Oklahoma City physician, filed suit against Botox’s manufacturer, Allergan Inc., alleging that the drug caused her to develop botulism, small fiber neuropathy, and other problems that interrupted her medical practice. The plaintiff alleged liability for failure to warn and for negligence. After deadlocking twice, the jury awarded the plaintiff $15,000,000 in damages under her negligent-failure-to-warn cause of action. In September 2013, the Oklahoma Court of Civil Appeals affirmed the jury’s verdict and damages award. Specifically, the court upheld the trial court’s determination that the plaintiff, several of her colleagues, and her physician husband, none of whom were qualified as experts, were permitted to provide medical causation opinions as lay witnesses based on their knowledge of medicine and understanding of technical literature.
In its petition for certiorari to the Oklahoma Supreme Court (currently pending), Allergan challenges the appellate court’s affirmation of the admission of the lay-witness-opinion testimony. Allergen argues that the appellate decision eliminated the distinction between lay and expert testimony, and impaired the trial court’s important gatekeeping function of policing the reliability of expert testimony. Allergen further asserts that the purpose of lay-witness-testimony limitations, established by section 2701(3) of Title 12 of the Oklahoma Statutes and Rule 701(c) of the Federal Rules of Evidence, is to eliminate the risks that the reliability requirements established for the admission of expert testimony will be evaded through proffering an expert in lay-witness clothing. Moreover, Allergan relies on an Oklahoma criminal decision in which the court interpreted section 2701(3) and found that only experts can offer opinions based on scientific, technical or other specialized knowledge. As the Supreme Court has yet to interpret section 2701(3), Allergan seeks an interpretation of the statute. The Supreme Court’s decision whether or not to grant certiorari could have a significant impact on the potential scope of lay-witness-opinion testimony under Oklahoma law.
Keywords: litigation, mass torts, lay opinions, gatekeeping, expert testimony
— Matthew A. Moeller, The Moeller Firm LLC, New Orleans, LA
April 7, 2014
IL State Court Dismisses Malaysia Airlines Flight 370 Petition
National headlines are still focused on the mystery of what actually happened to Malaysia Airlines Flight 370. Meanwhile, the first lawsuit filed arising out of the presumed crash of the mystery flight has been dismissed. Specifically, in Siregar v. The Boeing Co. & Malaysian Airlines, Docket No. 14-L-3408 (Cir. Ct., Cook Co. Ill.), a relative of one of the passengers brought a petition for discovery under Illinois Supreme Court Rule 224, seeking discovery regarding, among other things, the aircraft’s owners, operators, and maintenance history. The plaintiff also sought the appointment of a special administrator for purposes of bringing a wrongful-death lawsuit.
In dismissing the petition, the court determined that the petitioner’s suit was procedurally defective in that Rule 224 was an inappropriate vehicle for the relief sought by the petitioner. Specifically, the court held that the law only permits such petitions when the identities of potential defendants are unknown. Since the petitioner “clearly possessed . . . the identification of two entities who may be liable[,] . . . the petition exceeds the allowable scope” of Illinois Rule 224. In addition to dismissing the petition, the court also admonished the plaintiff’s counsel for continual filing of these petitions in Illinois after aviation crashes, and suggested that sanctions may be imposed.
Keywords: litigation, mass torts, Illinois Supreme Court Rule 224, pre-suit discovery
— Andrew Scholz, Goldberg Segalla LLP, White Plains, NY
April 2, 2014
SCOTUS Reverses 9th Cir. in Frequent-Flyer Class-Action Lawsuit
On April 2, 2014, the U.S. Supreme Court issued today a unanimous decision in Northwest, Inc. v. Ginsberg, a closely watched preemption case arising from a frequent-flyer-program dispute out of the Ninth Circuit. The Supreme Court reversed the Ninth Circuit Court of Appeals' holding that claims for breach of implied covenant of good faith and fair dealing are "categorically exempted" from preemption under the Airline Deregulation Act of 1978 (ADA) because they are "too tenuously connected to airline regulation to trigger pre-emption under the ADA." The class-action lawsuit was commenced by a former participant in the Northwest WorldPerks Platinum Elite frequent-flyer program after the airline revoked his membership for abuse. The district court in California dismissed the plaintiff's claim for breach of good faith and fair dealing as preempted by the ADA. The Ninth Circuit reversed and reinstated the claim as exempted from ADA preemption because it was too remotely connected to "prices, routes or services."
March 31, 2014
5th Cir. Clarifies Law-of-the-Case Doctrine as Applied to CAFA Jurisdiction
The Fifth Circuit recently reviewed the distinction between holdings and dicta, and how that distinction affects cases on remand from an appellate court. In 2011, Mississippi’s attorney general sued LCD (liquid crystal display) manufacturers in state court, asserting antitrust and restitution claims on behalf of the state and its affected citizens. Mississippi ex rel. Hood v. AU Optronics Corp., 134 S. Ct. 736, 740 (2014). The defendants removed the case and argued that the case was either a “class action” or “mass action” subject to removal under the Class Action Fairness Act of 2005 (CAFA). The district court disagreed and remanded the case after finding that (1) the case did not qualify as a “class action” because it was not filed under Rule 23 of the Federal Rules or the state analogue; and (2) while the case met the numerosity requirement for a “mass action” (100 persons, when counting Mississippi consumers as real parties in interest), the case was brought on behalf of the public generally and must be remanded under the “general public exception.”
March 31, 2014
CA Federal Court Dismisses Lessor from Yemenia Crash Case
The U.S. District Court for the Central District of California dismissed all claims filed against International Lease Finance Corporation (ILFC) arising from the crash in 2009 of Yemenia Airways Flight 626 off the Comorian coast in the Indian Ocean. The plaintiffs sued the ILFC as the lessor of the accident aircraft under theories of negligent entrustment of the aircraft to Yemenia Airways. The court dismissed the claims of surviving family members based on their lack of standing to sue under the Death on the High Seas Act (DOHSA).
Airline Immune from Civil Liability if Statements Are Materially True
The U.S. Supreme Court clarified the scope of immunity afforded airlines and their employees under the Aviation and Transportation Security Act (ATSA), 49 U.S.C. § 44941, from civil liability arising out of reporting security threats to the Transportation Security Administration (TSA). In Air Wisconsin Airlines Corp. v. Hoeper, No. 12-315, 571 U.S. __ (Jan. 27, 2014), the Court unanimously reversed the Supreme Court of Colorado’s decision affirming a jury award to a pilot who sued Air Wisconsin for allegedly defamatory statements contained in the airline’s report to the TSA about the pilot.
Plaintiff William Hoeper was a pilot for Air Wisconsin Airlines Corp. who failed a flight test required for his continued employment with Air Wisconsin. Upon failing the test, Hoeper threw off his headset and exchanged words with the flight instructor. Hoeper subsequently went to the Denver airport to board a flight. Hoeper, as a federal flight-deck officer (FFDO), was allowed to "carry a firearm while engaged in providing air transportation." After determining that, as an FFDO, Hoeper may be allowed to circumvent airport security and may possess a firearm, Air Wisconsin reported the situation to the TSA. The record established that Air Wisconsin made the following statements to the TSA: (1) Hoeper "was an FFDO who may be armed"; (2) the airline was "concerned about his mental stability and the whereabouts of his firearm"; and (3) "an unstable pilot in the FFDO program was terminated today." Acting on this report, the TSA removed Hoeper from the aircraft, searched him, and questioned him about his gun. Hoeper sued Air Wisconsin, inter alia, for defamation in Colorado state court. Under ATSA, airlines and their employees are immune from civil liability for reporting suspicious behavior to the TSA unless (1) the disclosure is made with actual knowledge that it was false, inaccurate, or misleading or (2) the disclosure is made with reckless disregard as to the disclosure's truth or falsity. Air Wisconsin unsuccessfully moved for summary judgment, and later for a directed verdict, relying on immunity under the ATSA because, according to Air Wisconsin, the statements were not materially false. The trial court submitted the ATSA immunity question to the jury, which awarded Hoeper U.S. $1.2 million. The jury award was based on a finding that the airline’s statements to the TSA were made with reckless disregard to their truth or falsity. The Colorado Supreme Court affirmed, determining that the trial court's submission of the immunity question to the jury was harmless error, and that Air Wisconsin was not entitled to immunity because even materially true statements, if made recklessly, do not qualify for ATSA immunity.
The Supreme Court reversed, holding that immunity under the ATSA extends to all reports of suspicious behavior except those statements that are found to be materially false. The Court noted that Congress borrowed the ATSA immunity-exception language from the actual-malice standard of New York Times Co. v. Sullivan, 376 U.S. 254, 84 S. Ct. 710, 11 L. Ed. 2d 686 (1964), thereby incorporating long-standing precedent that the actual-malice standard requires a finding of material falsity. The Court held that a “statement otherwise eligible for ATSA immunity may not be denied immunity unless the statement is materially false.” The Supreme Court noted that Congress, by incorporating the actual-malice standard into the ATSA, intended to give air carriers “the ‘breathing space’ to report potential threats to security officials without fear of civil liability for a few inaptly chosen words.” The analysis embraced by the Colorado Supreme Court removed that protection and eviscerated the immunity provision of the ATSA. Thus, minor inaccuracies do not amount to falsity in the meaning of the ATSA and its actual-malice standard.
This part of the Court’s opinion was unanimous, but Justice Scalia (joined by Justices Kagan and Thomas) dissented from the majority’s further determination that, as a matter of law, Air Wisconsin’s report to the TSA was not materially false. Justice Scalia stated that because neither the jury nor the courts below considered the issue of material falsity, the case should have been remanded for determination of that issue, and that “the Court reaches out to decide a factbound question better left to the lower courts and then proceeds to give the wrong answer.” Because the issue of materiality is a “mixed question of law and fact” typically resolved by juries, Justice Scalia stated, the court should have remanded for a determination of materiality.
Cases on the Horizon for 2014
Another decision affecting the airline industry is expected to be handed down by the Supreme Court in the coming months in the case of Ginsberg v. Northwest Airlines, 695 F.3d 873 (9th Cir. 2012), cert. granted, No. 12-462 (argued Dec. 3, 2013). That case arises out of an airline's denial of frequent-flyer-program membership to an individual and whether the individual's claim for breach of the duty of good faith and fair dealing is preempted by the Airline Deregulation Act of 1978 (ADA), 49 U.S.C. § 41713. The Court heard oral argument in that case in early December.
Additionally, petitions for certiorari were filed in two other cases involving the scope of preemption under the ADA: Brown v. United Airlines, No. 12-1543; 12-2056 (1st Cir. July 9, 2013) (whether the ADA preempts airline Skycaps' common-law claims for unjust enrichment and tortious interference based on an airline's imposition and retention of baggage-handling fees for curbside service), and Bower v. EgyptAir, 731 F.3d 85 (1st Cir. 2013) (whether the ADA preempts common-law tort claims against an airline arising out of a parental kidnapping incident). Both of these cases are out of the First Circuit Court of Appeals, which has decided several ADA preemption cases in recent years.
OFAC Poised to Increase Sanctions Enforcement in Insurance Sector
The U.S. Office of Foreign Assets Control (OFAC) is poised to increase sanctions enforcement activity in the insurance sector. Significant industry enforcement actions are expected in the first quarter of 2014 and they will likely target the aviation market. U.S. sanctions have long targeted banks as a means to choke off funding and support to sanctioned countries and entities. Over the past three years, however, specific sanctions provisions targeting insurers, reinsurers, and underwriting service providers (including brokers) have appeared in multiple congressional sanctions acts. The repeated appearance of such provisions has not been by accident—a new tool has found a permanent home in the sanctions toolbox. And OFAC has not been shy about its desire to make use of that tool in a way that will focus the industry's attention on the need to comply.
Sanctions penalties in the banking sector have historically far outstripped those paid by insurers and reinsurers. The headline-grabbing sanctions penalties in the banking sector over the past several years—as much as $619 million—have been based on the fact that a very large number of transactions were at issue. U.S. sanctions provide for a fine of up to $250,000 per transaction, and when thousands of transactions are involved, the penalty amount grows quickly.
In the insurance sector, particularly in a subscription market, the number of separate "transactions" can be enormous. Each premium and claim/loss bordereau entry might be deemed a separate transaction, with implications for insurers, reinsurers, brokers, and service providers. Under such circumstances, it is not difficult to imagine insurance-sector sanctions penalties being levied that rival those that are becoming increasingly common in the banking sector.
Thus, insurers and reinsurers are advised to exercise vigilance to remain compliant with U.S. sanctions. When mistakes happen, there are important steps that can be taken. First, consider that OFAC gives credit to those who voluntarily self-disclose sanctions violations before an enforcement action is commenced. Second, after an enforcement notice is received, various steps can be taken to mitigate any ultimate penalty, including immediately stopping the conduct at issue, cooperating with OFAC as it makes its investigation, and taking remedial steps to upgrade and correct compliance-program deficiencies. Third, OFAC will give the target of an enforcement action an opportunity to tell its side of the story and present its case on the appropriate sanctions penalties, and it is critical to make the most of that opportunity.
— Douglas Maag, Clyde & Co US LLP, New York, NY
January 14, 2014
NY High Court Rejects Cause of Action for Medical Monitoring
In a December 17, 2013, decision, the New York Court of Appeals refused to adopt an independent equitable cause of action for medical monitoring by a four-to-two vote in Caronia v. Philip Morris USA, Inc., No. 227 (N.Y. Dec. 17, 2013). The decision resolved a split among New York intermediate appellate courts and New York federal district courts that had addressed the issue, and placed New York in the majority of highest state courts that have addressed the issue of “no injury” medical monitoring and rejected such a cause of action. The New York court did recognize that medical monitoring could be a compensable item of damages “so long as the remedy is premised on the plaintiff establishing entitlement to damages on an already existing tort cause of action.” Slip op. at 14. (For comparison, please see our April 1, 2013 News & Developments piece regarding a similar decision by the Court of Appeals of Maryland.)
The Caronia case involved a claim for medical monitoring of cigarette smokers, who had not been diagnosed with lung cancer or were “currently ‘under investigation by a physician for suspected lung cancer.’” Slip op. at 2. The monitoring was to consist of low-dose CT scans (LDCT) of the chest. LDCT is a newer diagnostic technology that purportedly allows earlier detection of subcellular changes. In January 2013, the American Cancer Society, based on its review of several studies regarding LDCT, recommended LDCT screening for “high-risk patients . . . aged 55 to 74 years and in fairly good health, [who] have a smoking history equivalent to a pack a day for 30 years, and [who] currently smoke or have quit within the past 15 years.” In its recommendation, ACS acknowledged that the “idea of screening is appealing because it has the potential of finding the cancer earlier, when it’s easier to treat,” but also acknowledged that there are risks that limit the patients for whom such screening is appropriate.
Notably, the Massachusetts Supreme Judicial Court had adopted an independent medical-monitoring cause of action in an earlier case against Philip Morris predicated on the same theory of LDCT screening of asymptomatic smokers. Donovan v. Philip Morris USA, Inc., 455 Mass. 215, 914 N.E.2d 891 (2009).
The New York Court of Appeals declined the judicial creation of the new cause of action. Writing for the majority, Judge Pigott discussed the split among the lower courts applying New York law and New York’s traditional requirement of a physical injury for tort damages, as well as the split among the highest courts of other states. While acknowledging the court’s “authority to recognize a new tort cause of action,” Judge Pigott observed the need to consider the “foreseeable and unforeseeable consequences, most especially the potential for vast, uncircumscribed liability” if a new cause of action were to be created.
The majority concluded that the multiple policy reasons militate against the creation of a new medical-monitoring tort, including that:
“[D]ispensing with the physical injury requirement could permit “tens of millions” of potential plaintiffs to recover monitoring costs, effectively flooding the courts while concomitantly depleting the purported tortfeasor’s resources for those who have actually sustained damage”
Id. at 12.
“[As] it is speculative, at best, whether asymptomatic plaintiffs will ever contract a disease; allowing them to recover medical monitoring costs with first establishing physical injury would lead to the inequitable diversion of money away from those who have actually sustained an injury as a result of the exposure”
Id. at 13.
“The courts lack the technical expertise to implement and administer a medical monitoring program.”
The court deferred to the legislature as being “in the better position to study the impact and consequences of creating such a cause of action, including the costs of implementation and the burden on the courts in adjudicating such claims.” Although not mentioned by the court, in this regard, we would note that the New York legislature should probably consider whether New York class-action procedures are sufficient to address medical-monitoring class claims and adopt any needed revisions (CPLR article 9 is in some respects less robust and developed than the federal class-action scheme).
The two dissenting judges (Chief Judge Lippman and Judge Rivera) argued that “overall fairness” compelled the recognition of an independent equitable cause of action for medical monitoring, consistent with the evolution of such standards in other jurisdictions “in response to ‘a world in which people regularly encounter environmental toxins, the effects of which are largely unknown’ and the ‘growing recognition that exposure to toxic substances . . . may cause substantial injury which should be compensable even if the full effects are not immediately apparent.’” Caronia, dissenting slip op., at 1–2. The dissent’s contention that the majority’s refusal to adopt the new cause of action is incorrect as the circumstances could not be “more worthy of the exercise of this Court’s equitable powers,” is perhaps misplaced to the extent that it would equate tobacco with all other supposed “environmental toxins,” for which purported associations between exposure and adverse health effects are far weaker. In this respect, the floodgates point relied upon by the majority would seem to have substantial merit. That is, creating a medical-monitoring cause of action would set the stage for any number of litigations based upon a myriad of substances and health effects, which suits would likely be denominated as class actions (which class action allegations raise additional concerns, as noted above).
— Paul V. Majkowski, Rivkin Radler LLP, Uniondale, NY
January 14, 2014
Ticket-Refund Claim Preempted by Airline Deregulation Act
Plaintiff Kamlesh Banga brought an action against Emirates for a total refund of a one-way (United States to India) ticket plaintiff purchased for her mother through a travel agency. The plaintiff claimed that her mother had ear surgery prior to the flight and was under medical instructions not to fly. The plaintiff further claimed that, although she provided Emirates with a physician's letter certifying the no-fly instructions and that it was Emirates' policy to waive any penalty or fees in the event of an unexpected illness, Emirates refused to issue a refund. The plaintiff filed suit in California state court under the California Unfair Competition Law (UCL), a consumer-protection statute. After removal to the U.S. District Court for the Eastern District of California, the court granted Emirates' motion to dismiss, holding that the Airline Deregulation Act preempted the plaintiff's UCL claim. The court also denied the plaintiff's request to amend her complaint, holding that any such amendment would be futile, as the plaintiff failed to bring her claim within the two-year limitations period set forth in Emirates' conditions of carriage. Banga v. Gundumolgula, 2013 WL 3804046 (E.D. Cal. 2013).
January 14, 2014
Invoking Montreal Convention Requires Awareness of "International Carriage"
The plaintiff, an attorney, purchased two first-class tickets from Singapore Airlines Ltd. for travel from Bankgok, Thailand, to Los Angeles, via Singapore. The Internet service on the flight was inoperable. The plaintiff brought breach-of-contract and negligence claims against Singapore Airlines in California state court for the full $16,442.20 cost of the two tickets and $6,500 for lost billings the plaintiff allegedly would have generated if the Internet had been available. The airline removed the action to the U.S. District Court for the Central District of California, and moved to dismiss the action, on the ground that the Montreal Convention completely preempted the plaintiff's state-law claims. The plaintiff moved to remand the case to state court, arguing that the Montreal Convention did not preempt his state-law claims because the airline's alleged breach of contract did not occur on a flight recognized by the convention. "International carriage," to which the convention applies, is carriage where the place of destination and place of departure are within the territories of two state parties to the convention or within the territory of a single state party (if there is an agreed stopping place within the territory of another state). Under Ninth Circuit precedent (Coyle v. P.T. Garuda Indonesia), when determining whether transportation is "international carriage," the court must look to the parties' intent (established by reference to the ticket or other instrument). As stated in Coyle,
[a]bsent an objective showing of actual knowledge by the air carrier of the passengers' overall itinerary—that is, an admission that the airline . . . actually understood the disputed flight to have been part of the decedent's international journey— . . . other kinds of extrinsic evidence are not appropriately introduced to contradict what the tickets (and the objective facts of the ticketing) unambiguously reveal.
The court found that the only objective evidence of the parties' intent was the passenger-name record produced by the airline that showed that the flight at issue originated in Thailand, which is not a state party to the convention. Although the plaintiff provided a discovery response that clearly showed that the plaintiff's complete round-trip itinerary originated and ended in the United States (a state party to the convention), the court, following Coyle, found that there was no objective evidence demonstrating that the airline was aware at the time of contracting that the at-issue flight was part of an international journey covered by the Montreal Convention. Accordingly, the court remanded the case to state court and denied the airline's motion to dismiss as moot. Richards v. Singapore Airlines Ltd., 2013 WL 6405868 (C.D. Cal. Dec. 4, 2013).
January 14, 2014
GARA Statute of Repose Barred Claims Arising from Tennessee Crash
In a case involving the Tennessee crash of a 1979 Beechcraft 95 B55 Baron airplane in which all individuals on board were killed, the Arkansas Supreme Court affirmed an order granting summary judgment to defendant Hawker Beechcraft Corp. (HBC) on the ground that the plaintiffs' claims were barred by the 18-year statue of repose of the General Aviation Revitalization Act (GARA). The court rejected the plaintiffs' argument that the fraud exception to the statute of repose applied. The plaintiffs had alleged that HBC negligently designed the aircraft to have a propensity to enter an unrecoverable flat spin and HBC misrepresented, concealed, and withheld information from the Federal Aviation Administration (FAA) on this matter. The court found that, despite certain disagreements between HBC and the FAA in a letter provided by the plaintiffs, the evidence indicated that HBC's communications with the FAA were open and candid. The plaintiffs also unsuccessfully argued that HBC's allegedly defective update of a flight manual (which the plaintiffs claimed failed to include current information on spin avoidance) triggered the rolling feature "exception" of the 18-year statute of repose. The rolling feature "exception" extends the period to file suit against a manufacturer "with respect to any new component, system, subassembly, or other part originally in, or which was added to, the aircraft, and which is alleged to have caused such death, injury, or damage." The court found that although a revised flight manual can constitute a new aircraft part, the rolling provision is triggered when the manufacturer "substantially alters, or deletes a warning from the manual within the last 18 years," not when the manufacturer fails to revise the manual or warn of an issue. Tillman v. Raytheon Co., 2013 WL 6122298 (Ark. Nov. 21, 2013).
November 27, 2013
DVT Negligence Claim Preempted by FAA Regulatory Scheme
The plaintiff, a passenger on a Spirit Airlines flight from Detroit, Michigan to Atlantic City, New Jersey, developed a blood clot in her left leg after the flight was held on the ground for over two hours while waiting for the pilot (who was delayed by a labor strike). During the delay, Spirit crew members advised passengers to remain seated. The U.S. District Court for the Eastern District of Michigan dismissed the plaintiff's state-law negligence claims, finding them implicitly preempted by the Federal Aviation Administration's (FAA) regulatory scheme for airline safety and tarmac operations.
Keywords: litigation, mass torts, aviation, airline, tarmac delay, preemption, FAA
November 27, 2013
Frequent-Flyer Breach-of-Contract Claims Not Preempted by ADA
Members of the British Airways (BA) frequent-flyer program brought a putative class action against BA in the U.S. District Court for the Eastern District of New York. Under the program, the plaintiffs were able to collect frequent flyer points to purchase tickets on BA flights but, even when using the points, remained responsible for certain charges, including BA fuel surcharges. The plaintiffs allege that BA violated the frequent-flyer program contract by assessing fuel surcharges that were not based on the actual cost of fuel.
Keywords: litigation, mass torts, aviation, airline, class action, frequent flyer program, airline deregulation act, preemption, contract claims, fuel surcharges
November 27, 2013
Baggage-Carousel Claims Not Preempted by Montreal Convention
Plaintiffs Christopher J. Bridgeman and Martin A. Borger brought an action against United Continental Holdings Inc. for events that occurred at a baggage carousel after their United Continental flight from Costa Rica arrived in Norfolk, Virginia. While retrieving their bags, the plaintiffs discovered that a "sex toy had been removed from one of their bags, covered in a greasy foul-smelling substance and taped atop the bag." The plaintiffs brought claims in Texas state court for intentional infliction of emotional distress, invasion of privacy, and negligence.
Keywords: litigation, mass torts, aviation, airline, Montreal Convention, emotional distress, breach of privacy
November 27, 2013
No Private Right of Action under EU 261 in Courts Outside EU States
Class-action plaintiffs raised a claim under EU 261 for uncompensated delayed or canceled flights against Delta Air Lines in the U.S. District Court for the Northern District of Illinois. The court granted Delta's motion to dismiss, finding that EU 261, by its own terms, does not provide enforcement outside of European Union (EU) Member States.
Keywords: litigation, mass torts, aviation, airline, class action, European Union, EU 261, Airline Deregulation Act, Montreal Convention
November 26, 2013
Sixth Circuit Sides with Courts over Arbitrators
The U.S. Court of Appeals for the Sixth Circuit recently held that courts, not arbitrators, decide disputes over whether an arbitration agreement permits class-wide arbitration. Reed Elsevier v. Crockett, No. 12-3574, ___ F.3d ___ (6th Cir. Nov. 5, 2013). Class-wide arbitrability issues can have “momentous consequences” and make the difference between arbitrating “one claim or 1,000 in a single proceeding.” Id. at 6. Reed Elsevier is the first federal appellate-court ruling on the question since the Supreme Court signaled that it remained unresolved.
In Reed Elsevier, the plaintiff alleged that the defendant breached a subscription agreement by charging extra fees without sufficient warning. The subscription agreement contained an arbitration clause, which was silent regarding the availability of class-wide arbitration. The plaintiff’s arbitration demand sought class-wide damages, prompting the defendant to bring a declaratory judgment action asserting that class-wide arbitration was not permitted. The district court agreed, and the Sixth Circuit affirmed.
Keywords: litigation, mass torts, class action, arbitration, class-wide arbitration, gateway question, subsidiary question
SCOTUS Aims to Resolve Circuit Split in CAFA Parens Patriae Actions
The U.S. Supreme Court is set hear oral argument on November 6, 2013, in Mississippi, Ex Rel. Hood v. AU Optronics Corp., 133 S. Ct. 2736, 186 L. Ed. 2d 191 (2013), presumably to resolve a circuit split regarding the removability of certain attorney-general actions under the Class Action Fairness Act (CAFA). The issue presented is whether a state's parens partiae action is removable as a "mass action" under CAFA when the state is the sole plaintiff, the claims arise under state law, and the state's attorney general possesses statutory and common-law authority to assert all claims in the complaint.
In 2011, the State of Mississippi filed a lawsuit on behalf of the state and its citizens against a group of liquid crystal display (LCD) manufacturers, claiming that they engaged in a price-fixing conspiracy for LCD panels, thereby artificially inflating prices. The manufacturers removed the case to federal court, asserting that the claims were either a "class action" or a "mass action" under CAFA. The state sought to remand the case on the grounds that the claims were asserted on behalf of the general public, which would fall under the "general public" exception of CAFA, and preclude federal jurisdiction (The "general public" exception provides that a suit is not a mass action if "all of the claims in the action are asserted on behalf of the general public (and not on behalf of individual claimants or members of a purported class) pursuant to a state statute specifically authorizing such action." 28 U.S.C. § 1332(d)(11)(B)(ii)(III)). The U.S. District Court for the Southern District of Mississippi granted the motion to remand, and the LCD manufacturers then appealed to the U.S. Fifth Circuit Court of Appeals.
Under CAFA, removal to federal court is proper if the suit qualifies as a "class action" or a "mass action." 28 U.S.C.S. § 1453(b); 28 U.S.C.S § 1332(d)(11)(A). A "class action" is defined as any civil action filed under Federal Rule of Civil Procedure 23 or similar state statute or rule of judicial procedure authorizing an action to be brought by one or more representative persons as a class action. 28 U.S.C.S. § 1332(d)(1)(B). Because the state did not bring the suit under Rule 23 and Mississippi law explicitly prohibits class actions, the Fifth Circuit held that the suit was not brought under a state statute "similar" to Rule 23 and thus, the suit did not qualify as a "class action" under CAFA. State ex rel. Hood v. AU Optronics, Corp., 701 F. 3d 796, 799 (5th Cir. 2012).
Removability could have also been proper if the action qualified as a "mass action," which is defined as a civil action in which (1) monetary relief claims of (2) 100 or more persons (3) are proposed to be tried jointly on the ground that the plaintiffs' claims involve common questions of law or fact and (4) include an amount in controversy exceeding $75,000. 28 U.S.C.S. § 1332(d)(11)(B)(i). In applying the claim-by-claim approach to determine the real party in interest as outlined in Louisiana ex rel. Caldwell v. Allstate Insurance Co.,536 F. 3d 418 (5th Cir. 2008), the Fifth Circuit held that the suit qualified as a "mass action." AU Optronics, Corp., 701 F. 3d at 800. Specifically, the court based its holding on three factors: (1) The complaint included a variety of allegations demonstrating remedies sought for consumers such as money damages, which includes individual consumers, not just the state; (2) the state statutes do not authorize public collection of private damages; and (3) even if the state were acting in its parens partiae authority, the state is not the sole party in interest, noting, "when a state pursues the interests of a private party, the state is not asserting its sovereign interest, and the state remains only a nominal party." Id. at 801 (citing Snapp v. Puerto Rico, 458 U.S. 592, 602, 102 S. Ct. 3260, 73 L.Ed.2d 995 (1982)). The Fifth Circuit also held that both the individual citizens and the state were real parties in interest, and because not all of the claims were asserted on behalf of the general public, the general-public exception was not applicable. Thereafter, the state appealed the Fifth Circuit's ruling to the Supreme Court, seeking review of whether the state's parens partiae action is removable as a "mass action" under CAFA.
A prior Fifth Circuit ruling in In re Katrina Canal Litigation Breaches, 524 F. 3d 700 (5th Cir. 2008) held that CAFA is applicable to attorney-general class actions, but removability will hinge on whether the state or the individuals on whose behalf the state seeks redress are the real parties in interest.
Appellate courts are split on how to identify the real party in interest in CAFA actions. The Fifth Circuit's claim-by-claim approach allows the court to pierce the pleadings and look at the real nature of a state's claims to prevent forum shopping. AU Optronics, Corp., 701 F. 3d at 799. However, this approach has been criticized by the Fourth, Seventh, and Ninth Circuits, which instead look at a state's complaint "as a whole" and then subjectively determine if the state alone is the real party in interest.
In the coming months, it will be interesting to see whether the Supreme Court adopts the Fifth Circuit's claim-by-claim approach or the more common approach of evaluating the complaint "as a whole." Undoubtedly, the outcome of this case will impact the “jurisdictional gamesmanship” involved with the litigation of mass-torts actions and must be considered when establishing a comprehensive case strategy.
Keywords: litigation, mass torts, attorney general actions, CAFA, removal, parens partiae, class action, mass action
— Ashley J. Heilprin, Stone Pigman Walther Wittmann LLC, New Orleans, LA
Claims Against Airline Arising from Kidnapping Preempted by ADA
The U.S. Court of Appeals for the First Circuit recently affirmed the decision of the federal district court in Massachusetts dismissing a claim against EgyptAir Airlines arising from the abduction of two minor children by their mother to Egypt. Bower v. EgyptAir Airlines Company, 2013 U.S. App. LEXIS 20190 (1st Cir., Oct. 2, 2013). The children were illegally flown from the United States to Egypt in violation of a court custody order. The mother and children remain in Egypt and the father sued the mother and EgyptAir for damages on behalf of himself and his sons.
The father alleged that the airline was negligent in failing to call the police or take some other action to prevent the children's travel because the circumstances surrounding the mother's travel with her children allegedly were "unusual." The district court held that EgyptAir did not breach any duty of care to the children because it was not reasonably foreseeable that the mother might be abducting her children in violation of the father's parental rights. The court also determined that EgyptAir did not owe or breach any duty to the father with whom it had no contractual or other relationship. Although it dismissed the claims on common-law grounds, the district court rejected the airline's alternative argument that the claims were preempted by the Airline Deregulation Act, 49 U.S.C. § 41713 (ADA). The district court's decision is reported at Bower v. El-Nady, 847 F. Supp. 2d 266 (D. Mass. 2012).
The First Circuit affirmed the district court's dismissal of the action based on EgyptAir's argument that the claims are preempted by the ADA. The court noted that the ADA expressly disallows states from enacting any regulation, law, or "other provision having the force and effect of law" related to "a price, route, or service of an air carrier that may provide air transportation." The court found that state common-law claims fall within the preemptive scope of the ADA because they are covered by the language "other provision having the force and effect of law" and that while Congress did not intend to preempt all common-law tort claims, the plaintiff's claims against EgyptAir challenged airline ticketing, check-in, and boarding procedures and thus, relate sufficiently to the "service" of an air carrier.
Keywords: litigation, mass torts, abduction, child, airline, duty of care, foreseeable, Airline Deregulation Act
— Deborah Elsasser, Clyde & Co US LLP, New York, NY
October 18, 2013
U.S. Class-Action Settlements in Canadian Settlement-Approval Hearings
Canadian class-action judges increasingly compare parallel U.S. settlements in making class-action-settlement-approval decisions. They review whether proposed Canadian settlements are in line with or exceed benefits to plaintiffs received in the U.S. proceeding. Where there is no comparable U.S. proceeding, Canadian courts generally view this as indicating increased risk to plaintiffs in continuing litigation, or at least a substantially higher cost to litigation, and will accordingly look more favorably on an early settlement.
A recent example of these Canada/United States comparisons arose in Petit v. New Balance Athletic Shoe Inc., 2013 QCCS 3569. Allegations were made against New Balance that its statements concerning toning shoes were misleading. In considering whether to approve the proposed settlement agreement, the Cour Supérieure du Quebec noted that the settlement was more favorable to the plaintiffs than its American counterpart, and that extrapolating from the take-up rate of the settlement in the United States, the Canadian settlement provided more than enough funds to cover the expected Canadian claimants. The court stated:
In addition to avoiding substantial expense and time in litigation as a result of the early settlement, the terms of settlement are arguably better than those even received in the American settlement. The Court views the following features of the settlement very positively:
a) a claim can be made online without any proof of purchase for one pair of the Toning Shoes for which a claimant would receive a $100.00 cash reimbursement, i.e. 80% of a $125.00 retail price;
b) a claimant for multiple purchases may receive up to $200.00 by way of cash reimbursement but a proof of purchase may be required for any second or additional pair of shoes;
c) the “take-up rate” in the U.S. is 1.25% which the Court understands is 1.25% of the 1,250,000 of U.S. unit sales. Given that Canadian sales are approximately 5% of U.S. sales, this would mean, if this take-up rate was applied to the 60,000 units likely sold in Canada, the expected number of claims would be 750. If this is the case, then multiplied times $100.00 per claim, would mean a total of $75,000.00 in claims to be paid. Since the Settlement Agreement provides for a total payout of up to $155,000.00, this will be more than ample to cover all Canadian-resident claimants; . . .
The Quebec court determined that these advantages far outweighed any inconvenience and granted approval of the settlement agreement, for all Canadians.
Keywords: litigation, mass torts, class action, Canada, parallel actions, settlements
— Barry Glaspell and Rachel Belanger, Borden Ladner Gervais LLP, Toronto, Ontario
October 3, 2013
Second Phase of BP Oil Spill Case Begins
In a true black-swan event that resulted in one of the biggest mass torts in the history of the country, the second phase of the government's case against BP arising out of the 2010 oil spill in the Gulf of Mexico began on September 30, 2013. The first phase dealt with liability questions as to the cause(s) of the blowout. The key issue in the second phase involves a determination over the amount of crude oil that spilled into the Gulf of Mexico. Potentially billions of dollars are at stake in answering this question because, under the Clean Water Act, a "polluter" can be responsible for up to $4,300 per barrel of spilled oil.
The government contends that 4.2 million barrels filled into the gulf. BP's estimate is approximately 2.45 million barrels.
The $4,300 maximum penalty can only be imposed if BP is found to be grossly negligent. The government not only accuses BP of being grossly negligent, but also accuses it of lying about how much oil was being dispersed into the gulf.
The trial is scheduled to last four weeks. To keep the trial on schedule, District Court Judge Carl Barbier has imposed strict limits on examination of witnesses.
The trial is significant for many reasons, including the fact that very few mass-tort matters are ever tried. Consequently, the trial, including everything from evidentiary rulings to substantive claims, will undoubtedly be cited as precedent in future mass-tort cases. We will consequently follow the trial as well as any appeals.
Keywords: litigation, mass torts, BP oil spill, Gulf of Mexico
— Andrew J. Scholz, Goldberg Segalla, White Plains, NY
September 23, 2013
U.S. Supreme Court Accepts Certiorari in Two Aviation Cases
Frequent-Flyer Class-Action Lawsuit: Are Claims for Breach of Good Faith and Fair Dealing Relating to an Airline's Frequent Flyer Program Preempted by the Airline Deregulation Act?
Northwest, Inc. v. Ginsberg
695 F.3d 873 (9th Cir. 2012), cert. granted, No. 12-462 (May 20, 2013)
In a closely watched case arising from a frequent-flyer-program dispute, the U.S. Supreme Court granted Delta Air Lines and Northwest Airlines' petition for writ of certiorari to address the scope of preemption under the Airline Deregulation Act of 1978 (ADA). The class-action lawsuit was commenced by a former participant in the Northwest WorldPerks Platinum Elite frequent-flyer program after the airline revoked his membership for abuse. The plaintiff filed a claim for misrepresentation, breach of contract, and breach of the implied covenant of good faith and fair dealing. The district court in California dismissed all but the breach-of-contract claims, finding that they were preempted by the ADA. The breach-of-contract claim was dismissed for failure to plead a breach of contract because the frequent-flyer program gave the airline the right to revoke membership for conduct that the airline deemed improper. The Ninth Circuit Court of Appeals reinstated the claim for breach of implied covenant of good faith and fair dealing, holding that such claims are "categorically exempted" from ADA preemption because they are "too tenuously connected to airline regulation to trigger preemption under the ADA." The petition filed by Delta/Northwest emphasized the Ninth Circuit's string of ADA preemption decisions that depart dramatically from Supreme Court precedent in this area of the law. The Supreme Court will review whether the Ninth Circuit erred by holding that the plaintiff's claim against Delta/Northwest for breach of the implied covenant of good faith and fair dealing, based on the airline's revocation of the plaintiff's frequent-flyer status, is not preempted because such claims are categorically unrelated to a price, route, or service. The Supreme Court will hear argument on December 3, 2013.
Scope of Immunity under the Aviation Transportation Safety Act for Disclosures
Air Wisconsin Airlines Corp. v. Hoeper
2012 WL 907764 (Colo. March 19, 2012), cert. granted, No. 12-315, 2013 WL 2922134 (June 17, 2013)
In an interesting case regarding the scope of immunity afforded an airline for reporting suspicious behavior to the Transportation Security Administration (TSA), the Supreme Court granted certiorarion a rather narrow issue arising out of a defamation claim against regional air carrier Air Wisconsin Airlines.
The Aviation Transportation Safety Act (ATSA) (49 U.S.C. § 44941), provides immunity from civil liability to an air carrier that voluntarily reports suspicious transactions or behavior to the TSA. Immunity does not extend to reports made with actual knowledge of their falsity or statements made with reckless disregard as to the truth or falsity of the statement. The case involved a pilot for Air Wisconsin Airlines who was attempting to become certified on a particular aircraft. During his fourth (and final) attempt at passing his flight-proficiency test, the pilot had an angry exchange with the test administrators who he thought were deliberately sabotaging his efforts to pass the exam. After he left the facility for his flight home, an Air Wisconsin manager contacted the TSA to report his concern that the pilot was a disgruntled employee and that he might be carrying a firearm (the pilot was a federal flight-deck officer who had been issued a firearm by the TSA although the manager was unaware whether the pilot was carrying the gun at that time). The pilot was taken off the plane and arrested, but subsequently was released by authorities. The pilot brought a defamation claim against Air Wisconsin and was awarded $1.4 million by a Colorado jury based on their finding that the statements made by the Air Wisconsin manager were defamatory and made with knowledge of their falsity or with reckless disregard as to the truth. The Colorado Court of Appeals affirmed and found that the trial court correctly permitted the jury to determine whether immunity under the ATSA applied to Air Wisconsin. The Colorado Supreme Court found that the trial court erred in not deciding the issue of immunity as a matter of law, but affirmed the verdict on the record evidence, finding that Air Wisconsin was not entitled to immunity as a matter of law and that evidence supported the jury's finding that the manager acted with reckless disregard of the truth of his statements to the TSA. The U.S. Supreme Court granted certiorari on the question of whether ATSA immunity may be denied without a determination that the air carrier's disclosure was materially false. The Supreme Court will hear argument on December 9, 2013.
— Deborah Elsasser, Clyde & Co US LLP, New York, NY
August 6, 2013
FDA Proposes New Rule to Bypass Mensing
A new Food and Drug Administration (FDA) rule may allow failure-to-warn claims against generic drug manufacturers.
The new rule, which could once expose generic drug manufacturers to failure-to-warn claims, was forwarded by the Food and Drug Administration to the U.S. Office of Management and Budget on July 26, 2013. Since the U.S. Supreme Court's decision in PLIVA, INC. v. Mensing, 131 S. Ct. 2567 (U.S. 2011), plaintiffs allegedly harmed by generic drugs have been without remedy against the manufacturers of those drugs in failure-to-warn claims. Mensing held that because generic manufacturers only had to copy the warning labels of a drug's lead brand-name drug manufacturer, state law failure-to-warn claims against them were preempted.
The FDA’s proposed new rule will subject generic drug manufacturers to its so-called changes being effected (CBE) rules, allowing generic manufacturers to alter their labeling in response to new safety information that they learn about adverse reactions to the drug even before the FDA requires that the new information be included. The stated purpose of the rule would be to "create parity between NDA [New Drug Application] holders and ANDA [Abbreviated New Drug Application] holders with respect to submission of CBE labeling supplements." See Supplemental Applications Proposing Labeling Changes for Approved Drugs and Biological Products, Spring 2013 Unified Agenda & Regulatory Plan, HHS/FDA, RIN No. 0910-AG94 (July 3, 2013).
Although court action would be required to interpret the new rule, if promulgated, commentators seem confident that this "could open the door to lawsuits against generic drug companies for the first time since" the Court initially curtailed such suits in Mensing. Katie Thomas, “F.D.A. Rule Could Open Generic Drug Makers To Suit”, N.Y. Times, July 4, 2012, at B2.
Even if this happens, of course, it will still be months—maybe years—in the making. The proposed rule must clear procedural obstacles before being implemented and it is highly unlikely that the rule would be anything other than prospective in application. After that, litigation with the right set of facts would ensue before we would see an appellate ruling interpreting the rule. Only then will we really know whether the rule will have its anticipated effect.
Keywords: mass torts litigation, generic pharmaceuticals, failure to warn, Mensing, Bartlett, FDA, CBE
— Steven Casey, Jones Walker LLP, Birmingham, AL
CO Appeals Court Reverses Trial Court Lone Pine Order
In a recent appellate decision from Colorado, the Colorado Court of Appeals in Strudley v. Antero reversed the trial court’s issuance of a Lone Pine order, as well as the court’s subsequent summary-judgment decision predicated on the plaintiffs’ failure to prove a causal nexus between their personal-injury claims and nearby fracking activities.
Specifically, the three-panel appellate court ruled that the issuance of a Lone Pine order was improper under the Colorado Rules of Civil Procedure. The court reviewed various federal and state cases from other jurisdictions that permitted Lone Pine orders in toxic-tort matters. The court also noted that some courts refused to issue Lone Pine orders “where existing statutes, rules, and procedures provide sufficient protection against frivolous or unsupported claims and burdensome discovery.”
In the end, the court concluded that the Strudley case was “distinguishable from those cases in which Lone Pine orders have been issued” because, in other cases, “substantial discovery occurred.” Moreover, the court held that the “case is not as complex as cases in other jurisdictions in which Lone Pine orders were issued.” The court further rejected the lower court’s analysis and the defendants’ arguments that the plaintiffs’ claims presented complex toxic-tort analysis that is entirely dependent on expert testimony. Therefore, the court saw “no reason why existing procedural mechanisms should be supplanted by ad hoc procedures not otherwise provided for under Colorado law.”
Plaintiffs’ counsel was subsequently quoted by the media as stating, “Obviously, we are thrilled that our clients will now have a chance to obtain the discovery necessary to support their claims and as a result we trust they will ultimately have their day in court.”
It is unclear at this juncture whether the defendants will appeal the decision.
Keywords: mass torts litigation, fracking, personal injury, toxic tort, Lone Pine
— Andrew Scholz, Partner, Goldberg Segalla, White Plains, NY
Binding Representations of Patent Holder Moot Declaratory Relief
Organic farmers, seed sellers, and agricultural organizations brought suit against patent holders Monsanto Co. and Monsanto Technology, LLC, seeking a declaratory judgment that the patents-in-suit are not infringed by plaintiffs, likely “inadvertent infringers.” On February 24, 2012, the Southern District of New York granted Monsanto’s motion to dismiss for lack of subject-matter jurisdiction, finding that the plaintiffs’ claims did not amount to a live controversy. Organic Seed Growers & Trade Ass’n v. Monsanto Co., 851 F. Supp. 2d 544 (S.D.N.Y 2012). The Federal Circuit affirmed and stated that no justiciable case or controversy was present when Monsanto made binding assurances that it would not take legal action where crops “inadvertently contain traces of Monsanto biotech genes” and the plaintiff-appellants did not allege any circumstances “placing them beyond the scope of those assurances.” Organic Seed Growers & Trade Ass’n v. Monsanto Co., No. 2012-1298, 2013 WL 2460949, at *1 (Fed. Cir. June 10, 2013).
Monsanto’s 23 patents at issue incorporate certain protective traits into various “Roundup Ready” seeds. These genetically modified seeds are known for resistance to the active ingredient in Monsanto’s flagship herbicide, Roundup. While use of Roundup eliminates weeds and has limited or no effect on the modified seeds, it tends to kill conventional seeds grown, sold, or used by the appellants. The appellants oppose the use of the active ingredient in Roundup, and “do not want to use or sell [genetically modified] seed.” Though the appellants do not allege they have detected cross-contamination in their crops, Monsanto acknowledged and the district court held that “it is likely inevitable that conventional crops will be contaminated by trace amounts of windblown pollen or seeds from genetically modified crops or other sources.”
Monsanto refused to waive any claims for patent infringement against the appellants by providing a covenant not to sue. However, Monsanto made two key statements: (1) a positing on its website publicly committing that it will not pursue patent-infringement suits where its patented traits appear inadvertently in trace quantities and (2) counsel’s letter to appellants stating that Monsanto is “unaware of any circumstances that would give rise to any claim for patent infringement or any lawsuit against [appellants].” Even so, the record reflects that Monsanto historically prosecutes unauthorized use of its seed. Between 1997 and 2010, it brought 144 infringement suits and settled an additional 700 cases prior to litigation. Against this backdrop, the appellants alleged that the threat of seed contamination and subsequent infringement suits forced them to take costly precautions to avoid contamination and risk of suit.
Controversy Must Evolve Organically (Pun Intended)
The appellate court agreed with Monsanto and reasoned that despite the possibility of infringement, Monsanto’s binding representations moot any potential controversy. A covenant not to sue a declaratory-judgment plaintiff can moot a controversy between parties, and putting substance over form, the court stated that “[w]hile Monsanto’s representations are not a covenant not to sue, they have a similar effect.” Further, the court stated that in relying on Monsanto’s representations, they are binding as a matter of judicial estoppel. Noting that the appellants had not alleged any circumstances placing them beyond the scope of Monsanto’s representations and at risk of an infringement suit, the court found there is no justiciable case or controversy. In acknowledging the narrow scope of Monsanto’s representations (applicable only to inadvertent growers or sellers of “trace” amounts, or less than one percent of modified seed), the court recognized the possibility that a claim could proceed under circumstances that include inadvertent contamination of greater than “trace” amounts. For now, though, the guidance appears workable for both sides.
May 9, 2013
Supreme Court Limits Reach of Alien Tort Statute
In April 2013, the U.S. Supreme Court dismissed a suit arising under the Alien Tort Statute (ATS) brought by Nigerian nationals who argued that certain Dutch, British, and Nigerian corporations aided the Nigerian government in violating customary international law. The Court’s opinion, authored by Chief Justice Roberts and joined by four justices, found that the presumption against extraterritoriality governed the ATS, and the statute did not reach the alleged conduct occurring in foreign territory by foreign corporations. 133 S. Ct. at 1669.
The petitioners were Nigerian residents of Ogoniland, an area of half a million residents in the Niger delta. Respondents Royal Dutch Petroleum Co. and Shell Transport and Trading Co, p.l.c., were Dutch and English companies, respectively. The third respondent, Shell Petroleum Development Co. of Nigeria, Ltd. (SPDC), was their joint subsidiary and a Nigerian corporation. The petitioners alleged in their complaint that the respondents aided the Nigerian government’s violent suppression of the Ogoni people’s protests against the SPDC’s drilling practices in the early 1990s. The petitioners claimed that the respondents provided their property as a staging ground for the looting and pillaging of Ogoni villages.
The petitioners fled to the United States where they sought and were granted political asylum. They filed their original complaint against the respondents in the Southern District of New York, arguing that the ATS provided original jurisdiction to remedy the alleged violations of customary international law. The ATS states that “[t]he district courts shall have original jurisdiction of any civil action by an alien for a tort only, committed in violation of the law of nations or a treaty of the United States.” 28 U.S.C. § 1350. The district court dismissed the petitioners’ complaint in part, holding that the facts alleged did not support certain international-law claims. On interlocutory appeal, the Second Circuit dismissed the entire complaint, holding that the law of nations does not recognize corporate liability. 621 F.3d 111 (2d Cir. 2010). The Supreme Court affirmed the Second Circuit’s dismissal; however, the Court employed different reasoning and held that the petitioners’ allegations of foreign misconduct by foreign entities did overcome the ATS’s presumption against extraterritorial application.
To reach its holding, the Supreme Court explored the boundaries of the statutory canon of extraterritoriality: A statute should not be construed to reach conduct outside the United States unless the statutory language clearly provides for such an application. According to the Court, “[t]he presumption against extraterritorial application helps ensure that the Judiciary does not erroneously adopt an interpretation of U.S. law that carries foreign policy consequences not clearly intended by the political branches.” 133 S. Ct. at 1664. And in this case, the court found that the statute did not clearly indicate any extraterritorial intent. Although the statute used broad language, e.g. “any tort,” the Court cited prior precedent to support a restrictive view of generic terms such as “any” or “every” that do not specify a specific class of torts.
The Court also examined the historical context of the ATS’s passage in 1789 to support its interpretation. The Court found that two cases regarding violations of customary international law occurred in the 1780s, and they involved the French and Dutch ambassadors’ rights while living in the United States. Given this diplomatic background, and the lack of historical support for an expansive view of the ATS, the Court held that the presumption against extraterritoriality was necessary to apply and prevent reciprocal diplomatic strife should a foreign power broaden its enforcement of customary law and hale U.S. citizens into foreign courts for alleged violations anywhere in the world. (“The presumption against extraterritoriality guards against our courts triggering such serious foreign policy consequences, and instead defers such decisions, quite appropriately, to the political branches.”). The Court further held that the petitioners in this case had not pled sufficient facts to displace the presumption, as all relevant conduct occurred outside the territory of the United States and concerned foreign companies and nationals. The Court refrained from defining what a plaintiff would need to allege to proceed under the ATS, stating only that “even where the claims touch and concern the territory of the United States, they must do so with sufficient force to displace the presumption against extraterritorial application.”
Justice Kennedy wrote a brief concurrence, providing his support for the Court’s narrow holding that declined to define the parameters of when the presumption against extraterritorial application could be shown. Justice Alito, in an opinion joined by Justice Thomas, wrote separately to point out that the Court had previously held that the ATS provided a cause of action for international-law violations for three types of conduct identified by Blackstone: violation of safe conducts, infringement of the rights of ambassadors, and piracy (citing Sosa v. Alvarez-Machain, 542 U.S. 692 (2004)). Thus, according to Justice Alito, “a putative ATS cause of action will fall within the scope of the presumption against extraterritoriality—and will therefore be barred—unless the domestic conduct is sufficient to violate an international law norm that satisfies Sosa’s requirements of definiteness and acceptance among civilized nations.”
Justice Breyer, joined by three Justices, concurred in the Court’s judgment. Justice Breyer found that the majority’s application of the presumption was unjustified because the ATS was specifically enacted to address issues of foreign import. Justice Breyer would instead have held that jurisdiction should lie “where (1) the alleged tort occurs on American soil, (2) the defendant is an American national, or (3) the defendant’s conduct substantially and adversely affects an important American national interest, and that includes a distinct interest in preventing the United States from becoming a safe harbor (free of civil as well as criminal liability) for a torturer or other common enemy of mankind.” Id. at 1671. In this case, where the alleged tort occurred in Nigeria by foreign corporations, Justice Breyer agreed that the respondents’ nominal ties to a corporate office in New York was a slender reed upon which to rest jurisdiction. Further, that indirect legal presence provided no support for jurisdiction based on the third category, namely the vindication of a distinct American interest, such as precluding the United States from becoming a safe harbor for an enemy of all mankind. For those reasons, Justice Breyer concurred in the Court’s judgment affirming the Second Circuit’s dismissal, but not its reasoning.
In sum, while the Court extended the presumption against extraterritoriality to the Alien Tort Statute, the Court’s majority opinion may be most notable for what it does not do, namely, define the limits of that presumption. What is clear is that future courts will have to wrestle with that question and provide guidance on a case-by-case basis in the ever-evolving field of international tort law.
Kiobel v. Royal Dutch Petrol. Co.
133 S. Ct. 1659 (2013)
— David Schwan, Houston, TX
2nd Cir: GARA Bars Wrongful Death Suit Against Manufacturer
The Second Circuit Court of Appeals recently affirmed the dismissal of a wrongful-death action against Mitsubishi Heavy Industries of America, Inc. and Mitsubishi Heavy Industries, Inc. (collectively, "Mitsubishi") arising from a 2002 crash of a Mitsubishi MU-2B aircraft near San Juan, Puerto Rico. After several years of discovery and motion practice, Mitsubishi moved for summary judgment, arguing that the 18-year statute of repose under the General Aviation Revitalization Act (GARA) of 1994, Pub. L. No. 103-298, 108 Stat. 1552 (appended as a note to 49 U.S.C. § 40101) bars the plaintiff's claims.
GARA bars civil actions against aircraft manufacturers for death or injury arising out of an accident involving a general aviation aircraft brought more than 18 years after the date of delivery of the aircraft to its first purchaser. GARA, § 2(a), 3(3). GARA contains four exceptions and in this case, the plaintiff invoked the fraud exception, arguing that the action was not barred because Mitsubishi knowingly withheld from the FAA required information that is material and relevant to the performance, maintenance, or operation of the aircraft and causally related to the accident. Specifically, the plaintiff argued that pursuant to 14 C.F.R. § 21.3, Mitsubishi was required to disclose to the FAA a 1973 report from the United Kingdom's Civil Aviation Authority (1973 CAA Report) highlighting performance and control issues experienced by the MU-2B when operating at low speeds. The plaintiff argued that the 1973 CAA Report documented a failure, malfunction, or defect in the aircraft that Mitsubishi was required to report under 14 C.F.R. § 21.3, and that Mitsubishi's failure to report the 1973 CAA Report triggered the fraud exception to GARA.
Mitsubishi countered that the 1973 CAA Report was not "required information" under the GARA fraud exception because 14 C.F.R. § 21.3, which defines "required information," exempts from the reporting requirement aircraft manufactured by a foreign manufacturer under a U.S. type certificate issued under 14 C.F.R. § 21.29 (this particular aircraft was manufactured in Japan and exported to the United States). The trial court agreed with Mitsubishi that the aircraft at issue was not subject to the reporting requirement and thus, the fraud exception did not apply.
The trial court rejected the plaintiff's argument that because Mitsubishi subsequently
manufactured this model aircraft in the United States under a new AS10W type certificate, Mitsubishi was required to disclose the 1973 CAA Report and its failure to do so triggered the fraud exception. The court held that GARA's fraud exception cannot be read without specific reference to the type certificate of an aircraft and to do so, would contradict the plain language of the statute as well as the intent of the FAA to place "responsibility for providing information about foreign manufactured aircraft on the foreign aviation authorities in the nation where the manufacturing takes place." Therefore, the trial court held that "When, as in this case, it is undisputed that the specific aircraft at issue was manufactured under a type certificate that exempts the manufacturer from sharing information directly with the FAA, the fraud exception cannot be established by reliance on 14 C.F.R. § 21.3(a), because that provision does not apply."
Ovesen v. Mitsubishi Heavy Industries of America, Inc., 2012 U.S. Dist. LEXIS 27259 (S.D.N.Y. Feb. 29, 2012), aff'd, 2013 U.S. App. LEXIS 5850 (2d Cir. Mar. 25, 2013)
— Deborah Elsasser, Clyde & Co US LLP, New York, NY
April 11, 2013
Fifth Circuit Affirms Extension of Immunity to FEMA Trailer Suits
In a highly publicized litigation, Katrina victims who were provided temporary homes by the Federal Emergency Management Agency (FEMA) filed a class action claiming that the homes, commonly referred to as “FEMA trailers,” contained formaldehyde.
As Doug Pepe previously reported here, the district court found that the “discretionary function” exception to the Federal Tort Claims Act applied to the plaintiffs’ tort-based claims. The plaintiffs appealed the decision and the Fifth Circuit affirmed the district court.
Specifically, the Fifth Circuit found that the “government made a choice both to provide housing assistance and to utilize travel trailers,” which satisfied part of the discretionary-function test. The court also noted that the federal government was not under any obligation to provide the housing. Rather, FEMA made a decision while considering, among other things, the “most feasible, convenient, and readily available housing” under the circumstances. In short, the Fifth Circuit agreed that FEMA’s decisions about “when, where, and how” to provide emergency housing were precisely the “types of decisions that the discretionary function exception was designed to shelter from suit.”
The Fifth Circuit’s decision is noteworthy for a number of reasons. For one, it is becoming common for those affected by mass disasters to commence tort lawsuits against various public and private entities for their respective decision-making in the immediate aftermath of a crisis. The decision, like other recent similar decisions, confirms that government agencies can be immune as a matter of law for their post-decision emergency decisions.
Keywords: litigation, mass torts, Katrina, Immunity, FEMA, class action, formaldehyde, Federal Tort Claims Act
— Andrew Scholz, Goldberg Segalla, White Plains, NY
April 1, 2013
New Standards for Medical-Monitoring and Fear-of-Cancer Claims
The Court of Appeals of Maryland has adopted standards for medical-monitoring and fear-of-cancer claims in a pair of companion decisions regarding alleged exposure to methyl tertiary-butyl ether (MTBE) and benzene arising out of an underground gasoline leak. See Exxon Mobil Corp. v. Albright, No. 15, Sept. Term 2012 (Md. Feb. 26, 2013); Exxon Mobil Corp. v. Ford, No. 16, Sept. Term 2012 (Md. Feb. 26, 2013). The court also addressed the sufficiency of the plaintiffs’ fraud, punitive-damages, and property-damage claims.
Keywords: litigation, mass torts, Maryland, toxic tort, medical monitoring, fear of cancer, methyl tertiary-butyl ether, MTBE, benzene
— Paul V. Majkowski, Rivkin Radler LLP, Uniondale, NY
Court Dismisses Burn-Pit-Exposure Claims
The U.S. District Court for the District of Maryland recently dismissed all cases in multidistrict litigation against KBR Inc. and Halliburton Co. (collectively, KBR) arising out of the exposure of U.S. military personnel to alleged toxic emissions from open-air burn pits and contaminated water at military bases in Iraq and Afghanistan on the ground that the court lacked jurisdiction over the claims under the political-question doctrine.
Fifth Circuit Upholds Mississippi's Cap on Non-Pecuniary Damages
The U.S. Court of Appeals for the Fifth Circuit recently reviewed and upheld as constitutional Mississippi’s $1 million cap on damages for non-economic damages in a case involving alleged brain injuries and bone fractures suffered in a motor-vehicle accident. A jury rendered a general verdict of $4 million in compensatory damages in favor of the plaintiff against Sears (whose employee was operating a van that collided with the plaintiff). On post-trial motions and based on the evidence presented at trial with respect to economic damages, the district court allocated $2.2 million of the jury’s award to non-economic damages and then reduced that part of the award to $1 million.
"Any Breath" Causation Continues to Be Rejected in 2013
In the last few years, numerous courts in asbestos litigation have addressed plaintiffs’ experts’ proposed testimony seeking to establish general causation based on a plaintiff’s single exposure to an asbestos-containing product. Generally, the experts opine that, regardless of dose, any exposure to an asbestos-containing product is a substantial contributing factor sufficient to establish causation. Courts from numerous jurisdictions have essentially rejected the theory as a matter of law. See e.g., Moeller v. Garlock Sealing Technologies, LLC, 660 F.3d 950, 952 (6th Cir. 2011); Wills v. Amerada Hess Corp., 379 F.3d 32, 40, 53 (2d Cir. 2004); Smith v. Kelly-Moore Paint Co., Inc., 307 S.W.3d 829, 839 (Tex. App. 2010); Betz v. Pneumo Abex, LLC, 44 A3d 27, 58 (Pa. 2012).
In 2013, yet another court has extensively reviewed the scientific literature and concluded that the expert theory of causation is inadmissible. In Smith v. Ford Motor Co., 2:08-cv-630, 2013 U.S. Dist. LEXIS 7861 (D. Utah Jan. 18, 2013), the plaintiff’s expert opined that a plaintiff’s “every breath” or “every exposure” to an asbestos-containing automotive brake product was a substantial contributing factor to the plaintiff’s development of mesothelioma. Pursuant to Federal Rule of Evidence 702, defendant Ford Motor Co. challenged the plaintiff’s expert’s methodology as unreliable as a matter of law.
After extensive briefing and oral argument, the District Court ultimately agreed with Ford, holding that such a causal connection is, essentially, “scientifically grounded speculation: “This court agrees with the general assessment of these various state and federal courts that the every exposure theory does not qualify as admissible expert testimony.” Smith, 2013 U.S. Dist. LEXIS 7861, at *8–13.
The Smith decision furthers the growing precedent rejecting the “every exposure” theory of causation. As a consequence, the every-breath theory will continue to present an uphill battle for asbestos plaintiffs until such time as there is peer-reviewed scientific literature to support it. Meanwhile, for recently named peripheral defendants in asbestos litigation, this growing precedent offers a rare glimmer of good news in a decades-old litigation.
— Andrew Scholz, Goldberg Segalla, White Plains, NY
Inconsistency in Foreign Air Crash Cases Against U.S. Manufacturers
Two recent decisions, rendered on the same day, highlight the broad discretion given to trial courts to balance the various private and public interest factors in determining whether actions against U.S. manufacturers arising from foreign air crashes should be litigated in the United States or in an alternate available jurisdiction.
2008 Spanair Accident Litigation Against Boeing
The Ninth Circuit Court of Appeals affirmed the decision of the Central District of California dismissing 116 consolidated actions against Boeing, Honeywell, and Esterline Technologies, arising from the 2008 Spanair accident in Madrid. The appellate court affirmed the trial court's finding that Spain was an adequate alternative forum and a more convenient forum for the litigation of negligence and products-liability claims brought by the non-U.S. plaintiffs against the U.S. manufacturers. The court rejected the plaintiffs' argument that the trial court improperly focused on witnesses and evidence located in Spain and failed to give sufficient weight to the fact that the claims against the U.S. manufacturers concern only allegations regarding the design of the takeoff warning system (TOWS). The court found that cockpit recordings, information about the crash (alleged fault of crew and ground personnel), and results of Spanish investigations were relevant factors that the trial court carefully balanced with factors concerning the design of the TOWS system. Finally, the court held that the district court acted within its discretion in refusing to retain jurisdiction over the cases to resolve future discovery disputes. Fortaner v. The Boeing Co., 2013 U.S. App. LEXIS 674 (9th Cir., Jan.10, 2013).
2009 Helicopter Crash Near Blackpool in Lancashire, England
The U.S. District Court for the Eastern District of Pennsylvania refused to dismiss a wrongful-death action brought by non-U.S. plaintiffs against U.S. manufacturers Lycoming Engines, Avco Corp., Textron Systems Corp., Precision Automotive, Schweizer Holdings, UTC, Sikorsky Aircraft Corp., and Champion Aerospace LLC arising out of a 2008 helicopter crash in Lancashire, England. Unlike the California court in the Spanair case, the Pennsylvania court focused on the location of witnesses and evidence relating to the design and manufacture of the helicopter (U.S.-based), rather than the evidence related to the pilot training, maintenance of the helicopter, operation of the helicopter, and accident investigation (U.K.-based). The court found that the defendants had not established that the witnesses and documents located in the United Kingdom outweigh the importance of the witnesses and evidence located in the United States, and appeared to attach particular significance to the fact that the wreckage was moved from the United Kingdom to the United States (Delaware). While several public interest factors (interest of the United Kingdom in the litigation; ability to implead U.K.-based tortfeasors) weighed in favor of the defendants, the court ultimately decided that the balance of factors on the whole did not tip decidedly in favor of trial in the United Kingdom. Lewis v. Lycoming, 2013 U.S. Dist. LEXIS 3845 (E.D. Pa., Jan. 10, 2013).
— Deb Elsasser, Clyde & Co, New York, NY
Market-Share Liability Rejected, Again
A recent decision by the Eastern District of New York in Bezuidenhout v. Abbott Laboratories declined to impose market-share liability in a diethylstilbestrol (DES) case. As most lawyers learned in law school, DES is a drug once prescribed during pregnancy to prevent miscarriages or premature deliveries. In the United States, an estimated five to ten million persons were exposed to DES from 1938 to 1971, including pregnant women prescribed DES and their children. DES litigation began more than 40 years ago and gave rise to the doctrine known as market-share liability. Efforts to expand the market-share liability beyond DES cases have been mostly rejected. Courts have declined to expand the market-share approach to asbestos, handguns, and lead paint. The Bezuidenhout decision now calls into question the continued viability of market-share liability, even in DES cases.
The plaintiff in Bezuidenhout was born in 1957 in Texas. Her mother took DES while pregnant with her. The DES was prescribed to, and ingested by, her mother in Texas. The plaintiff filed suit in the Eastern District of New York against every drug company that manufactured DES during the time her mother was allegedly exposed to the drug and sought to recover damages under personal-injury and future-risk theories. Because the plaintiff’s mother was prescribed DES in Texas, ingested DES in Texas, and any in utero exposure to the plaintiff occurred in Texas, Texas law controlled her claims. The defendant drug companies moved for summary judgment, arguing that the plaintiff could not identify which manufacturer made the DES her mother took, as required under Texas law.
Product identification is, of course, an essential element of the cause-in-fact requirement of every tort claim. Product identification requires a plaintiff to show that he or she was injured by a product that was actually manufactured by the defendant against whom claims are asserted. Product identification typically prevents a plaintiff from simply establishing that he or she was injured by a type of product that the defendant manufactures or sells. In other words, the plaintiff must link the product causing his or her injury to the entity that actually manufactured that specific product. The product-identification requirement of tort claims is problematic for injuries that do not manifest themselves for years after exposure to a product. Accordingly, a small minority of jurisdictions have flirted with weakening the traditional cause-in-fact requirement by adopting some form of the "market share" doctrine, under which defendants may be held proportionately liable to a plaintiff who cannot show which manufacturer sold the product that caused the injury. The market-share-liability doctrine assesses liability against each defendant based on the percentage of the market they controlled for the sale of the product at issue. Most jurisdictions found that the doctrine of market-share liability was flawed. Accordingly, the doctrine did not gain wide acceptance.
In the Bezuidenhout case, the plaintiff could not identify the drug company that manufactured the DES that her mother ingested. She argued that Texas law was unsettled and that Texas courts had not clearly rejected the market-share theory. The Eastern District of New York explained that it need not wade too deeply into the plaintiff’s "pool of hypotheticals," because it rested upon a false premise—that Texas law is unsettled with regard to proof of causation. The court explained that Texas federal courts have considered the issue in In re Fibreboard Corp., 893 F.2d 706 (5th Cir. 1990), and Cimino v. Raymark Indust., Inc., 151 F.3d 297, 312 (5th Cir. 1998). Both courts held that it is a fundamental principle of traditional products-liability law that the plaintiff must prove that the defendants supplied the product that caused the injury. Accordingly, the court concluded that Texas law does not permit recovery under a collective-liability or market-share theory. The court went on to suggest that one of the primary goals of the Bezuidenhout case was to unsettle Texas law with regard to product identification.
Because the court found that Texas law does not recognize market-share liability, the court found that the defendants’ motions for summary judgment were due to be granted because the plaintiff had not proffered sufficient evidence to identify any defendant as the manufacturer of her mother's DES.
Supporters of the market-share-liability doctrine will argue that the Bezuidenhout court did not reject the market-share-liability doctrine as a whole, but rather applied Texas law to the facts before it as required. On the other hand, opponents of the market-share-liability doctrine will praise the decision as yet one more well-reasoned rejection of the doctrine. Objective observers will certainly have to question the continued viability of the market-share-liability doctrine.
— David A. Lester, Jones Walker LLP, Birmingham, AL
January 31, 2013
Claims for Injunctive Relief Mooted in Deepwater Horizon MDL
The Center for Biological Diversity filed suit in the summer of 2010 against BP and Transocean in the Deepwater Horizon litigation pending in the Eastern District of Louisiana in New Orleans. The center alleged violations of the Clean Water Act (CWA), the Environmental Response, Compensation, and Liability Act (CERCLA), and the Emergency Planning and Community Right-to-Know Act (EPCRA). Among other things, the center (1) requested an injunction enjoining defendants from operating their offshore facilities in a manner inconsistent with the federal environmental statutes; (2) sought an order that the defendants disclose a complete list and amounts of toxic pollutants contained in the release; and (3) sued for civil penalties. The district court held that the claims for injunctive relief were moot because the killed Macondo well was no longer a viable facility, there was no reasonable possibility for a future release, and no ongoing violation.
Then, on January 9, 2013, the Fifth Circuit Court of Appeals dismissed all of the center’s claims against BP and Transocean except for those brought under EPCRA. Center for Biological Diversity v. BP Am., et al., No. 12-30136, 2013 WL 104928 (5th Cir. Jan. 9, 2013).
Killed Well and Abandoned Claims for Civil Penalties
Noting that the Macondo well was permanently killed in September 2010, and that no viable offshore facility remained from which a release could occur, the court of appeals upheld the district court’s primary ruling on the mootness of the plaintiff’s claims for injunctive relief.
The Fifth Circuit disagreed with the center’s argument that the district court’s application of the stringent test for mootness was flawed because there must be absolutely no possibility for the recurrence of the alleged violations, and here, the defendants were reasonably likely to continue to violate environmental statutes. In response to the center’s argument, the Fifth Circuit stated, “this standard applies when a defendant’s voluntary conduct is claimed to have mooted the plaintiff’s suit” and not where, as here, the killing of the Macondo well was not a feigned voluntary act to avoid litigation, but it occurred under the supervision granted by the extraordinary powers of the president to direct the nation’s response to the spill. Id. at *9.
Therefore, the Fifth Circuit used the “realistic prospect” mootness standard and framed its analysis by the question “whether the citizen-suit plaintiff has proven that there is a realistic prospect that the violations alleged in its complaint will continue notwithstanding government-mandated corrective action.” Id. at *9 (internal quotations omitted). Analyzing the plaintiff’s claims for injunctive relief, the Fifth Circuit upheld the district court’s ruling, holding that because “there is no realistic prospect that further discharges will occur, there can be no meaningful relief granted by an injunctive order enjoining the defendants from operating the site in violation of CWA, CERCLA, and EPCRA.” Id.
Lastly, the Fifth Circuit addressed the center’s argument that its claims for civil penalties precluded a mootness finding. Even though the center requested civil penalties of $37,500 per day for CERCLA and EPCRA violations, the center abandoned these claims when it sought a final judgment from the district to perfect its appeal. Therefore, the potential deterrent effect of civil penalties did not overcome mootness. See id. at *10
BP Must Disclose Chemical Information
Although the Fifth Circuit largely upheld the district court’s dismissal, the appellate court reinstated the center’s claim alleging the defendants had violated reporting provisions of EPCRA. In so holding, the Fifth Circuit concluded that the center had standing to bring an EPCRA claim even though the well was effectively killed, there is no continuing discharge from the well, and the defendants pointed to information about the spill available on the Internet. The center specifically sought relief based on a release of substances that had already occurred but remained unreported under EPCRA; therefore, an order from the district court mandating the defendants comply with EPCRA’s reporting requirement would redress the center’s claimed informational injury. See id. at *13.
— Arlene Hennessey, King & Spalding, Houston, TX
January 11, 2013
$9 Million Verdict Reversal Confirms Importance of Daubert Hearing
In an important federal decision for mass-tort practitioners, the U.S. Court of Appeals for the Ninth Circuit in Barabin v. AstenJohnson, Inc. reversed a $9 million asbestos-related jury verdict because the district court failed to hold a Daubert hearing in relation to the defendants’ motions in limine challenging the admissibility of the plaintiff’s causation experts.
Specifically, the court stated:
Unfortunately, because no Daubert hearing was conducted as requested, the district court failed to assess the scientific methodologies, reasoning, or principles [plaintiffs’ expert] applied. None of the Daubert factors was considered. Instead, the court allowed the parties to submit the experts’ unfiltered testimony to the jury.
As a consequence, the circuit court found that the district court’s error was so significant that a new trial was required.
The decision furthers the discussion of whether or not a full Daubert hearing is always required in relation to an expert challenge, particularly as to causation experts in toxic-tort cases. The answer is not uniform throughout the various circuits. Accordingly, practitioners must know the relevant case-law in the relevant jurisdiction where the action is pending.
— Andrew J. Scholz, Goldberg Segalla LLP, White Plains, NY
November 26, 2012
Illinois Court Refuses to Dismiss EU 261 Breach-of-Contract Claims
The U.S. District Court for the Northern District of Illinois recently denied the motion of Iberia Líneas Aéreas de España, S.A. to dismiss a putative class-action lawsuit filed by Texas residents against Iberia for breach of contract and failure to pay damages for delay under Regulation No. 261/2004 of the European Parliament and European Council. The regulation, commonly known as EU 261, applies to all E.U. airlines for flights operating anywhere, and to non-E.U. airlines for flights operating from E.U. airports. Although EU 261 does not provide compensation for delay per se, the Court of Justice of the European Union (CJEU) has interpreted EU 261 to require airlines to treat delays of three or more hours as cancellations for purposes of awarding passengers the fixed compensation under EU 261, except where the delay is caused by extraordinary circumstances that could not be avoided. See Case C-581/10, Nelson v. Deutsche Lufthansa AG/Case C-629/10 TUI Travel v. Civil Aviation Authority, 23 October 2012; see also Cases C-402/07 & C-432/07, Sturgeon v. Condor Flugdienst GmbH, 2009 E.C.R. 1-10923.
—Deborah Elsasser, senior counsel at Clyde & Co. U.S. LLP in New York, New York, and cochair of the ABA Section of Litigation Matt Torts Litigation Committee
November 7, 2012
Court Grants Summary Judgment for Lack of Warning Causation
A New Jersey federal court granted summary judgment to Baxter Healthcare Corporation last month based on a familiar legal concept rarely applied in the Garden State—warning causation. In Baker et al. v. APP Pharmaceuticals LLP et al., No. 3:09-05725 (D.N.J., Aug. 21, 2012), the court held that even if the warning label at issue was inadequate—which it was not—it could not have proximately caused the plaintiff’s injury because the prescribing physician was already aware of the product’s risks, chose not to read its label, and stood by his decision to administer the therapy. The court’s decision in Baker provides additional support for pharmaceutical manufacturers seeking to demonstrate a lack of proximate causation.
In Baker,the plaintiff, Evangeline Baker, filed suit alleging that the administration of heparin, an anticoagulant manufactured by Baxter that prevents blood clots, caused her to develop heparin induced thrombocytopenia (HIT) as well as heparin induced thrombocytopenia and thrombosis (HITT), ultimately resulting in the amputation of her leg. Despite the fact that heparin’s FDA-approved labeling contained information about HIT and HITT in the “Warnings” section, the plaintiff alleged that Baxter failed to warn of the dangers of the product’s administration and was defective in design because it did not have an adequate warning label.
At the outset, the court addressed why the “super-presumption” afforded by the New Jersey Products Liability Act (PLA) to U.S. Food and Drug Administration-approved prescription drug labels was not rebutted in this case. Under the PLA, a plaintiff may rebut the presumption of adequacy of a drug label with evidence of “intentional misconduct by the manufacturer.” Bailey v. Wyeth, Inc., 37 A.3d 549, 569 (N.J. Super. Ct. Law Div. 2008). Here, the plaintiff was not able to demonstrate that Baxter deliberately concealed relevant information from the FDA—known as “the Perez exception”—nor did she offer any evidence that Baxter manipulated the post-market regulatory process for profit—known as “the McDarby exception.” See Perez v. Wyeth Labs., Inc., 734 A.2d 1245, 1259 (N.J. 1999); see also McDarby v. Merck & Co., Inc., 949 A.2d 223, 256 (N.J. Super. Ct. App. Div. 2008). Consequently, the court found that Baxter was entitled to summary judgment because its warning was adequate under the PLA.
While the court’s analysis could have ended there, it went on to explain that even if Baxter’s warning had been inadequate, summary judgment would still be appropriate because the warning was not the proximate cause of the plaintiff’s injury. In doing so, the court laid out a roadmap for a successful warning causation defense.
In New Jersey, pharmaceutical defendants often times do not assert the warning causation defense due to New Jersey’s “heeding presumption” rule, which presumes that if an adequate warning had been given, the prescribing physician would have read and heeded it, and thus would not have prescribed the drug to the plaintiff. To meet their burden, a plaintiff would simply have to “show that adequate warnings would have altered [his or her] doctors’ decision to prescribe the drug.” In this case, however, the court found that the presumption was adequately rebutted by the testimony of the prescriber.
First, the prescriber stated that he regularly used heparin in his cardiac surgery practice, was familiar with its risks and benefits, including the risk of HIT, and “stood by his decision to administer heparin to Mrs. Baker.” Second, he admitted that he does not read the label of drugs he frequently prescribes, including heparin. Finally, the prescriber “never testified that he would have consulted a black box warning or ‘Dear Doctor’ letter, or that he ever reviewed the Physicians’ Desk Reference when prescribing heparin. Therefore, a different warning would not have made a difference in Mrs. Baker’s treatment or outcome because [the prescriber] would not have reviewed it.” Thus, as the learned intermediary, the physician’s conduct broke the chain of causation between Baxter and the plaintiff.
In a state overflowing with pharmaceutical litigation, it is surprising that warning causation has been effectively applied in so few cases. The in-depth analysis of Baker further strengthens the strategy of pharmaceutical defendants in failure to warn cases.
Keywords: litigation, mass tort, Baxter Healthcare Corporation, proximate causation, heparin, U.S. Food and Drug Administration, FDA, New Jersey Products Liability Act
—Arameh Zargham O’Boyle, Sedgwick LLP, San Francisco, California
After Helicopter Crash, a Dismissal Rises from the Ashes
A recent decision by the Fifth Circuit Court of Appeals serves as a lesson in the necessity of carefully evaluating the impact of all potentially applicable choice of law rules upon a settling tortfeasor's contribution claim before actually settling the case. The Fifth Circuit affirmed the dismissal of an insurer's contribution action—which was originally commenced in Hawaii state court, subsequently removed to Hawaii federal district court, then transferred to the Northern District of Texas—on the ground that Texas law bars contribution claims by settling tortfeasors.
The case arises out of a helicopter crash in Hawaii during an aerial sightseeing tour operated by Heli-USA. The cause of the crash was determined to be mechanical failure due to faulty maintenance. Heli-USA conducted all maintenance on the helicopter in Hawaii and obtained spare parts for the helicopter from American Eurocopter Corp (AEC), a Delaware corporation headquartered in Texas. AEC obtained the parts from its parent company, Eurocopter SAS, which designed and manufactured the helicopter in France.
The insurer for Heli-USA decided to settle the passenger personal injury and death claims, and took releases for AEC and Eurocopter even though they were not parties to the settlement. The insurer then sued AEC in Hawaii state court seeking contribution based on negligent design and manufacture of the helicopter and replacement parts, and also for failure to warn. AEC removed the case to federal court and moved to dismiss for lack of personal jurisdiction.
The Hawaii court found that it lacked personal jurisdiction over AEC and denied the insurer's request for jurisdictional discovery. The Hawaii court transferred the case to the Northern District of Texas. The insurer did not challenge the merits of the transfer to Texas.
The Northern District of Texas court ruled that Texas law applied and dismissed the contribution claim on the ground that Texas law does not permit a settling tortfeasor to seek contribution from other potential tortfeasors (citing Beech Aircraft v. Jinkins,739 S.W.2d 19, 21-22 (Tex. 1987).
On appeal to the Fifth Circuit the insurer argued:
- The Hawaii district court erred in denying the insurer's motion for jurisdictional discovery and in transferring the case to Texas based on lack of jurisdiction. Had the Hawaii court transferred the case based on convenience, the Texas court would have applied Hawaii choice of law rules rather than Texas (see Tel-Phonic Servs., Inc. v. TBS Int'l., Inc., 975 F.2d 1134, 1141 (5th Cir. 1992) (the choice of law rules applicable in the transferor court apply to suits transferred to another district for convenience of parties rather than lack of jurisdiction).
- The Texas court erred in holding that Texas law rather than Hawaii law applied to the claims.
The Fifth Circuit rejected both arguments:
- As to the first argument, the Fifth Circuit held that it had no jurisdiction to review the decision of the Hawaii court.
- As to the second argument, the court reviewed the decision of the Texas court de novo and held that under the most significant relationship test, Texas law applied even though the accident took place in Hawaii, the parts were sent to Heli-USA in Hawaii, and the maintenance was performed in Hawaii. The court found that Texas had the greater interest in the litigation because AEC is based in Texas and the parties' relationship was "centered" in Texas by virtue of a choice of law clause in the Parts Agreement between Heli-USA and AEC calling for Texas law to apply to disputes arising under that agreement.
- The court held that Texas public policy, which does not permit contribution claims by settling tortfeasors, should not be frustrated to the detriment of a Texas defendant unless other factors overwhelmingly favored a different forum. The court found Hawaii's policy interests "attenuated" because the settling crash victims have been compensated at the expense of a non-Hawaii entity (the insurer).
- As for the parties' expectations, the Fifth Circuit stated:
"[w]e note that nothing prevented [the insurer] from apprising itself of the provisions of the parts agreement and the differing treatment of contribution claims under Hawaii and Texas law before deciding to settle the passenger claims out of court."
The court denied the insurer's motion to certify a question to the Texas Supreme Court inviting it to reconsider the settling tortfeasor rule as set forth in the Jinkins case, because the Supreme Court will not accept a certified issued unless it presents a question of Texas law having no controlling Supreme Court precedent.
The insurer's petition for rehearing and petition for rehearing en banc was denied on September 25, 2012.
Keywords: litigation, mass torts, tortfeasor
—Deborah Elsasser, senior counsel at Clyde & Co. U.S. LLP in New York, New York, and cochair of the ABA Section of Litigation Matt Torts Litigation Committee
Jurisdiction, Montreal Convention Shield Balloon Operator
The U.S. District Court for Massachusetts recently dismissed personal injury and wrongful death claims filed against a hot air balloon operator in Tanzania and its English affiliate arising from a hot air balloon accident in Tanzania in 2010. The court held that there was no jurisdiction over the Tanzanian operator or its affiliate, and dismissed all claims against the two entities. The court found that the plaintiff stated a prima facie negligence claim against the Massachusetts travel agency that arranged for the plaintiffs' African safari trip.
The plaintiffs, both Florida residents, were passengers on a hot air balloon excursion in the Serengeti National Park when they encountered wind conditions that caused the basket in which they were traveling to crash into a tree, killing the one passenger and injuring the other. The plaintiffs asserted common law negligence claims, as well as strict liability under the Montreal Convention of 1999 based on the argument that the balloon excursion constituted "international carriage." The court held that the Montreal Convention did not apply because the wholly domestic balloon ride within Tanzania was not "international carriage" as defined by Article 1(2) of the Convention, which specifically states that "carriage between two points within the territory of a single State Party without an agreed stopping place within the territory of another State is not international carriage for purposes of this Convention."
Additionally, the court found that there was no basis upon which to exercise either general or specific jurisdiction over the Tanzanian balloon operator and its English affiliate due to the lack of contacts either company has with Massachusetts. There was no continuous or systematic activity in Massachusetts by either company to support general jurisdiction.
As to specific jurisdiction, the court rejected the argument that the balloon operator and its affiliate were in an actual or apparent agency relationship with the Massachusetts travel agency, such that the travel agency's contacts with the forum should be attributed to them because there was "no evidence to suggest that they knowingly accepted the benefits of a transaction initiated in Massachusetts." In reaching this conclusion, the court noted the "restrictive approach to personal jurisdiction posited by the plurality opinion in J. McIntyre Machinery, Ltd. v. Nicastro, 131 S. Ct. 2780 (2011). Ultimately, the court found that the balloon operator and its affiliate did not target business in Massachusetts, and their contacts with the forum were insufficient for the court to assert jurisdiction in accordance with due process.
Keywords: litigation, mass torts, Montreal Convention of 1999
—Deborah Elsasser, senior counsel at Clyde & Co. U.S. LLP in New York, New York, and cochair of the ABA Section of Litigation Matt Torts Litigation Committee
September 20, 2012
Proposed Class Plaintiffs to Pay Pre-Certified Discovery Cost
In an important decision of “first impression,” U.S. District Court Judge Michael Baylson held that proposed class plaintiffs must bear costs associated with pre-class certification document and electronic discovery of the proposed class defendant. In Boeynaems v. LA Fitness International, LLC, 2:10-CV-02326, 2011 (E.D.Pa. Aug. 16, 2012), plaintiffs sued LA Fitness, claiming that the exercise and fitness chain engaged in deceptive practices in relation to members’ attempts to cancel their memberships.
The parties engaged in extensive discovery with LA Fitness, spending in excess of $300,000 in reviewing more than 500,000 membership notes, 1,000 boxes of cancellation requests, more than 19,000 pages of documents, as well performing an electronic search of more than 32,000 emails. An impasse was reached when plaintiffs demanded additional discovery they said was needed for their class certification motion. LA Fitness claimed the demand was unduly burdensome and would cost the company at least $200,000 more to comply with. LA Fitness also noted that its initial discovery review yielded little responsive information.
Plaintiffs, however, argued that additional discovery—although extensive—was relevant since the documents related to corporate policies and practices regarding how LA Fitness managers respond to requests for membership cancellation.
In coming to its conclusion, the court analyzed the interplay of various discovery concepts, such as a “discovery fence,” “asymmetrical discovery” and cost-shifting. The discovery fence—a metaphor coined by the court—related to the issue of scope of discovery. The court described the concept as follows, “[d]iscovery need not be perfect, but discovery must be fair.” Id, at p. 4. After reviewing the demands that plaintiffs argued were necessary, the court found that many demands were not atypical in the commercial litigation context. Consequently, the court directed that LA Fitness comply.
With respect to the issue of which party should bear the costs, the court first addressed the concept of “asymmetrical discovery,” meaning the dramatically increased “economic pressure on the defendant” in the class action context. (Id, at 7-8) The court extensively analyzed the existing case law on cost-shifting as to both paper and electronic documents. Although none of the cost-shifting cases involved pre-class certification discovery, the court was:
[p]ersuaded, it appearing that Defendant has borne all of the costs of complying with Plaintiff’s discovery to date, that the cost burdens must now shift to Plaintiffs, if Plaintiffs believe that they need additional discovery. In other words, given the large amount of information Defendant has already provided, Plaintiffs need to assess the value of discovery for their class action motion.
Id, at 21.
The decision is significant in that it is the first known decision ordering cost-shifting during pre-certification discovery. If followed by other courts, the decision will force future proposed class plaintiffs to more carefully evaluate the estimated value of their case earlier and tailor the scope of their demands accordingly.
Keywords: litigation, mass torts, proposed class, Judge Michael Baylson, discovery fence, asymmetrical discovery, cost-shifting, pre-class certification, discovery
—Andrew J. Scholz, special counsel to Goldberg Segalla LLP in White Plains, New York, and cochair of the ABA Toxic Tort Subcommittee
September 12, 2012
It’s a Pleasure to Serve You . . . Eventually
Perhaps the cardinal rule of the serving process is to serve the defendant promptly—and correctly. Under the Federal Rules of Civil Procedure, a district court may, in the absence of good cause, dismiss an action when a plaintiff fails to serve a defendant within 120 days of filing a complaint. Fed. R. Civ.P. 4(m); see, e.g., Romaguera v. Gegenheimer, 162 F.3d 893, 895 (5th Cir. 1998). In the mass-tort context, many defendants are large corporations with readily identifiable registered agents who are all too happy—one might hope—to be served on a daily basis. But many other defendants are foreign corporations, or may be visiting the United States for a short time before returning to an overseas residence. Rule 4(m) contains a notable and often overlooked exception applicable to this situation; the 120-day rule does not apply to service through the Hague Convention and other internationally agreed means (such as the Inter-American Convention on Letters Rogatory) under Rule 4(f). 4B Charles Alan Wright & Arthur R. Miller, Federal Practice & Procedure § 1134 (3d ed. 2008).
The Ninth Circuit has indicated that this exception is limited to what it says, namely that when service must be perfected in a foreign country under Rule 4(f), an unlimited time period controls. Lucas v. Natoli, 936 F.3d 432 (9th Cir. 1991) (per curiam). Other courts have disagreed and placed restrictions on Rule 4(m)’s seemingly unlimited window for service. The Second Circuit, for example, will not exempt a plaintiff from the rule unless he attempts to serve the foreign defendant within the 120-day period. See USHA (India), Ltd. v. Honeywell Int’l, Inc., 421 F.3d 129, 133-34 (2d Cir. 2005); In re Southold Dev. Corp., 148 B.R. 726, 729-30 (E.D.N.Y.1992) (“It seems illogical to allow a plaintiff who does not even attempt to serve a defendant for more than 120 days after the filing of the complaint to avoid dismissal under Rule [4(m)] by eventually attempting service in a foreign country pursuant to Rule [4(f)]”). In August, the First and Fifth Circuits joined the Seventh Circuit, holding the middle ground in this debate. Lozano v. Bosdet, No. 11-60736, 2012 WL 3764046, at *3 (5th Cir. Aug. 31, 2012); Feliz v. MacNeill, Nos. 10-1549, 11-1308, 2012 WL 3590807, at *3 (1st Cir. Aug. 22, 2012) (Souter, J., sitting by designation); see Nylok Corp. v. Fastener World Inc., 396 F.3d 805, 807 (7th Cir. 2005).
In Lozano, the Fifth Circuit held that a flexible due-diligence standard applies in the foreign service context, and a plaintiff’s failure to demonstrate “good faith and reasonable dispatch” when serving a defendant in a foreign country subjects his complaint to dismissal under Rule 4(m). Lozano, 2012 WL 3764046, at *3. In that case, Gloria Lozano was a passenger in a vehicle that was struck by Julie Bosdet in Horn Lake, Mississippi on February 23, 2006. Id. at *1. The accident report listed Bosdet as a Canadian resident, but she was living in England when the lawsuit was instituted. After Lozano filed suit on February 23, 2009 in Mississippi state court, she attempted service by mail under the Mississippi rules. Then, after the suit was removed to federal court in March, Lozano again attempted to serve Bosdet in Canada to no avail. After 120 days, Lozano moved for and received an additional four months for service, expiring on November 17, 2009. She received a 30-day extension after the November deadline passed. She again requested more time at the end of that period, claiming that she was diligently attempting to serve process outside the United States under Rule 4(f). The district court disagreed and dismissed her suit under Rule 4(m).
As stated above, the Fifth Circuit reversed on appeal, holding that the district court should have imposed a more flexible, due-diligence approach when determining Lozano’s timeliness of service under Rule 4(f). Id. at *3. The Fifth Circuit noted, however, that in some cases, foreign service within 120 days may be the only proper course, and failure to do so will subject the plaintiff’s suit to dismissal. Id.; see also Feliz, 2012 WL 3590807, at *3 (“In arriving at a reasonable limit in a given case, [Rule 4(m)’s] 120-day cutoff for domestic service can be instructive . . .”). This standard provides district courts with latitude to move cases along and control their dockets, while recognizing no specific timing requirements for plaintiffs to avail themselves of Rule 4(m)’s foreign service exception. Nevertheless, the more flexible standard should not be viewed by practitioners as a license to delay prompt service. Attorneys will be well-served (pun intended) to begin service of a foreign defendant quickly after filing to ensure that any delays, which are likely when serving a defendant abroad, are viewed as an understandable part of the process—and not the result of an attorney’s failure to move with alacrity.
Keywords: litigation, mass torts, Fifth Circuit, Federal Rules of Civil Procedure, Hague Convention
—David L. Schwan, Houston, Texas
September 12, 2012
Case of First Impression: Airport Operator as Carrier Agent
The U.S. District Court for the Eastern District of New York recently held that an airport terminal operator acted as an “agent of the carrier” in such that the passenger's claim for delay was exclusively governed by the international aviation treaty known as the Montreal Convention (Convention for the Unification of Certain Rules for International Carriage by Air, done at Montreal on 28 May 1999, ICAO Doc. No. 9740 (entered into force Nov. 4, 2003), reprinted in S. Treaty Doc. 106-45, 1999 WL 33292734).
The passenger brought a class action complaint on behalf of herself and other passengers on flights to John F. Kennedy International Airport in New York from December 26, 2010 to December 31, 2010. New York experienced a severe snowstorm which shut down the airport and caused many aircraft to be held on the tarmac for several hours after landing. The court found that because the terminal operator was acting in furtherance of the contract of carriage between the passenger and the airline, the Montreal Convention provided the sole cause of action for the passenger's claims. Ultimately, the court held that the Montreal Convention's presumptive liability provisions did not apply to provide a remedy for the passenger because the passenger did not sustain "bodily injury" as required under Article 17 of the Convention (purely emotional harm does not constitute "bodily injury" under the Convention). The passenger also was not able to recover “delay” damages under Article 19 of the Convention because Article 19 allows recovery only for economic loss arising from delay, and not for purely emotional harm experienced by the passenger because of a delay.
Keywords: litigation, mass torts, Eastern District of New York, Montreal Convention
September 12, 2012
CA Court Denies Aircraft Lessor's FNC Motion for Dismissal
The U.S. District Court for the Central District of California has denied the forum non conveniens (FNC) dismissal motion of aircraft lessor International Lease Finance Corporation (ILFC) in a wrongful death action arising from the June 30, 2009, crash of Yemenia Airlines Flight 626 into the Indian Ocean near the Comoros Islands.
The case was commenced on behalf of the estates and next of kin of passengers who perished in the crash, alleging a single claim against ILFC based on negligent entrustment of the A310 aircraft to Yemenia Airlines (jointly owned by the governments of Yemen and Saudi Arabia) under the Death on the High Seas Act. ILFC moved to dismiss on FNC grounds, arguing that France was a more convenient forum for the litigation because: (a) the plaintiffs/decedents were not US citizens or residents (most were residents of France who had commenced litigation against Yemenia Airlines in France); (b) the aircraft was manufactured by Airbus; (c) the accident was investigated by the Civil Aviation Authority of Comoros with the assistance of the French Bureau of Enquiry and Analysis for Civil Aviation Safety; and (d) all witnesses and documents relating to the accident and investigation, as well as the decedents, were located in France or Comoros.
Despite noting these factors weighed in favor of dismissal, the court concluded that the factors "only somewhat tip that way," and that potential difficulty in enforcement of a foreign judgment favored keeping the case in California.
In denying the FNC motion, the court focused on evidence located in the United States relating to the lease of the aircraft to Yemenia Airlines, and the fact that ILFC as a California corporation could not claim inconvenience as a result of being sued in its home forum. The court did not deem significant the lack of a connection between the accident and the United States, even with respect to plaintiffs' allegations that Yemenia had maintenance and safety sanctions imposed by other countries—notably France—and evidence relating to those issues would be located outside of the United States. The court held that ILFC "failed to demonstrate that the private and public interest factors strongly favor a French forum such that it is appropriate to disturb plaintiffs' choice of forum."
Keywords: litigation, mass torts, Central District of California, forum non conveniens, Yemenia Flight 626, International Lease Finance Corporation, Death on the High Seas Act
September 10, 2012
Sixth Circuit Says No Liability for Inadequate Drug Labels
In Strayhorn v. Wyeth Pharmaceuticals, Inc., __ F.Supp.2d __, 2012 WL 3217672 (W.D.Tenn. Aug. 8, 2012), the U.S. District Court for the Western District of Tennessee held that manufacturers of brand-name pharmaceuticals cannot be liable for product liability claims when the plaintiff took only the generic form of a prescription drug. Certain plaintiffs in Strayhorn ingested the generic drug metaclopramide and allegedly suffered injuries. The plaintiffs sued the manufacturers of generic metaclopramide as well as the manufacturer of Reglan®, the brand-name version of the drug. The manufacturer of Reglan® moved for summary judgment on the grounds that if plaintiffs never took Reglan®, they could not state a claim against its manufacturer.
The plaintiffs sought to avoid the application of Sixth Circuit precedent in Smith v. Wyeth, Inc., 657 F.3d 420, 423 (6th Cir. 2011)—which applied Kentucky law to hold that a manufacturer of a brand-name pharmaceutical cannot be liable to a plaintiff who only took the generic version of the drug—by arguing that their claims were not controlled by the Tennessee Products Liability Act. The Tennessee federal court, however, found that the plaintiffs’ claims fell squarely within the Tennessee Product Liability Act, and that Smith v. Wyeth was indeed applicable. As a result, the court granted the brand-name manufacturer summary judgment on the plaintiff’s claims. This decision further confirmed the law in the Sixth Circuit that if a plaintiff takes only a generic version of a prescription drug, it cannot avoid the effects of Mensing preemption by asserting claims against the brand manufacturer.
Keywords: litigation, mass torts, Reglan®, metoclopramide, Sixth Circuit, Tennessee Products Liability Act
—Eric Hudson, Butler, Snow, O'Mara, Stevens & Cannada, PLLC, Memphis, Tennessee
August 31, 2012
Chevron Seeks Proof of Plaintiff Bribes
In the most recent installment of the 19-year-old Chevron v. Lago Agrio litigation, Chevron Corp. has appeared in the Southern District of Florida seeking records from an Ecuadorian bank in Miami. Chevron claimed the bank held money used to bribe experts and improperly influence the Ecuadorian court that issued a multi-billion dollar judgment against the company in February 2011.
The history of Chevron v. Lago Agrio litigation is long and interwoven, and has touched court systems and arbitral panels across the globe for nearly two decades. In February 2011, an Ecuadorian court ruled against Chevron to the tune of $18.2 billion in damages in favor of Ecuadorian plaintiffs known as the “Lago Agrio.” Shortly after that award was announced, Chevron filed a racketeering suit against the plaintiff’s attorneys in New York, claiming they had bribed experts and improperly influenced the court in Ecuador, and that the damages award was the result of a fraud. In January 2012, an Ecuadorian appellate court upheld the damages award and Chevron promptly sought relief before the Permanent Court of Arbitration at The Hague on the fraud claims.
Chevron is now turning to the Southern District for assistance in obtaining records in support of that application at The Hague by way of a 28 U.S.C. § 1782 action.
Chevron alleges that Ecuadorian Banco Pichincha held money in eight reportedly “secret” accounts that lawyers used to bribe experts to sign off on reports that plaintiffs had ghostwritten. Chevron claims these funds were processed at a Miami branch of Banco Pichincha, C.A.—an international bank agency that often serves as an intermediary bank—and that the account records will show the amount of money transferred to pay bribes and when the transfers took place.
Chevron hopes the records will support its application at The Hague by showing that the Ecuadorian judgment against the company was the result of fraud. In addition to all documents on the eight Banco Pichincha accounts, Chevron’s subpoena also requests any suspicious activity reports (SAR) filed by the bank in relation thereto, bringing into play protective bank secrecy laws in both Florida and in Ecuador.
On June 11, 2012, Federal Magistrate Judge William C. Turnoff agreed with Chevron and recommended the Miami branch of Banco Pichincha turn over the records the company sought. Chevron Corporation v. Banco Pichincha, 1:11-cv-24599-MGC. The bank plaintiffs objected, and claimed that the Miami branch of the bank is a non-party and acted as a mere intermediary processing wire transfers. Plaintiffs further claim that Section 1782 is only intended to reach documents in the United States, and the records sought are located in Ecuador. Even if the bank were able to access the records—which the Miami bank says it cannot—disclosure of the documents would violate Ecuador’s bank secrecy laws.
With regard to the plaintiff’s claim that Chevron was misusing the Section 1782 action, Judge Turnoff disagreed, saying that “the applicant need only show that the information sought has some relevance as a general matter,” and that there is no need for the court to determine whether or not the discovery would be admissible in a foreign proceeding.
If U.S. District Judge Marcia Cooke follows Judge Turnoff’s recommendation, it will be a victory for Chevron and would likely open the door for a more expansive use of the Section 1782 action in aid of foreign proceedings. Her ruling would also shine light on notoriously protective laws shielding banks from having to disclose documents and SAR materials.
Keywords: litigation, mass torts, Section 1782, suspicious activity report
—Anna A. Mance, Aballi Milne Kalil PA, Hialeah, Florida
August 14, 2012
Environmental Groups Seek to Expand Public Trust
The “public trust” doctrine is a principle that dates back to the days of the Roman Empire for some. It holds that the certain resources—most notably, water—are to be preserved and protected by the government for public use. As it applies to water, the doctrine has found its way into the common law of various states.
Recently, however, environmental groups have sought to expand the doctrine beyond the area where it has been traditionally applied to specifically include the atmosphere. This is an apparent attempt to bypass existing various federal and state protection laws and regulations that the environmental groups deem inadequate, and utilize the court system to directly impose upon governments a common law obligation to tackle greenhouse gas emissions. Despite significant obstacles—including a lack of supporting precedent and adverse preemption decisions under the federal Clean Air Act— some recent decisions breathe temporary life into the argument.
In the first decision, Bonser-Lain v. Texas Commission on Environmental Quality, -1-GN-11-002194 (Tex. Dist. Ct., Travis County July 9, 2012), Judge Gisela Triana, in a short letter decision, rejected the State of Texas’ arguments that the public trust doctrine is limited to water. Specifically, Judge Triana stated:
The Court will find that the Commission’s conclusion, that the public trust doctrine is exclusively limited to the conservation of water is legally invalid…[b]ecause the legal landscape is uncertain, the Court will find, at this time, the Commission’s refusal to exercise its authority based on current litigation is a reasonable exercise of its discretion.
In a second case, Sanders-Reed v. Martinez, Docket No. 101-CV-1514 (N.M.Dist. Ct. 2011), Judge Sarah Singleton, in a similarly concise decision, refused to dismiss the plaintiff’s complaint that sought to apply the public trust doctrine to issues of climate change—specifically, carbon emissions. The Court held that the plaintiff’s complaint, which alleged that the state’s “process has gone astray and the state is ignoring the atmosphere with respect to greenhouse emissions,” stated a claim. The Court, however, permitted the state the right to request certification to the intermediate appellate court after the conclusion of summary judgment proceedings.
In Svitak v. State of Washington, Docket No. 87198-1 (Sup. Ct. King Co.), the Washington Superior Court dismissed the plaintiff’s claims as failing to state a claim. In Svitak, briefing to the Washington State Supreme Court has just begun.
Similarly, in Alec L. v. Lisa P. Jackson, 11 CV 2235 (May 31, 2012 D.C.D.C.), the district court rejected plaintiff claims of a federal common law-based public trust doctrine, and even if such a doctrine existed, the court stated that it would be preempted by federal statute, namely the Clean Air Act.
According to reports, environmental groups have filed lawsuits in nearly a dozen states specifically seeking to expand the doctrine. Ramit Plushnick-Masti, Texas judge rules atmosphere, air is public trust, The Boston Globe (July 12, 2012). The Bonser-Lain and Sanders Reed decisions bolster—at least temporarily—environmentalists’ hopes that they will be able to obtain a few favorable “public trust” rulings. Those decisions, like the Svitak and Alec L. decisions, will ultimately work their way through the respective appellate courts. Future significant developments regarding these cases and similar cases will be reported here.
Keywords: litigation, mass torts, Texas District Court, public trust, greenhouse, atmosphere
—Andrew J. Scholz, special counsel to Goldberg Segalla LLP in White Plains, New York, and cochair of the ABA Toxic Tort Subcommittee
August 14, 2012
Second Circuit Weighs in on Litigation Holds and Sanctions
When it comes to proper discovery procedures, legal practitioners have known for generations that they have a duty to preserve relevant evidence for pending or reasonably anticipated litigation. See, e.g., Fed. R. Civ. P. 37(f) Advisory Committee Note (“A preservation obligation may arise from many sources, including common law, statutes, regulations, or a court order in the case.”). It is also recognized that this preservation obligation is generally met in the business context when the company suspends its document-retention policy and implements a litigation hold to ensure that potentially relevant documents are not destroyed after the duty to preserve has been triggered. While litigation holds are nothing new, recent case law in the electronic-discovery context has led to new concerns about onerous sanctions for failing to issue written litigation holds in particular.
In 2010, Judge Shira Scheindlin of the Southern District of New York made waves with an opinion holding that, once the preservation duty is clear, the failure to issue a written litigation hold constitutes gross negligence per se, a finding that supports the imposition of discovery sanctions. See Pension Comm. of Univ. of Montreal Pension Plan v. Banc of Am. Secs., LLC, 685 F. Supp. 2d 456, 464–65 (S.D.N.Y. 2010). Judge Sheindlin was guided by her previous rulings in the Zubulake line of e-discovery cases that established, as of 2004 at the latest, that a written hold was necessary to avoid the likelihood of the destruction of relevant information. Id. at 465. After the Zubulake and Pension Committee decisions, wary businesses beefed up their litigation-hold procedures and initiated robust preservation programs to ensure that the shoals of discovery sanctions, terrifying from a legal and public-relations perspective, would be avoided. And although not all district courts have agreed with Judge Scheindlin’s per se gross negligence standard, cautious companies with operations in multiple jurisdictions made sure that they complied with Pension Committee’s strict standard, thus complying with more lenient approaches as well. See Surowiec v. Capital Title Agency, Inc., 790 F. Supp. 2d 997, 1007 (D. Ariz. 2011); Haynes v. Dart, 2010 WL 140387, at *4 (N.D. Ill. Jan. 11, 2010) (“The failure to institute a document retention policy, in the form of a litigation hold, is relevant to the court’s consideration, but it is not per se evidence of sanctionable conduct.”)
Just last month, the Second Circuit waded into these murky waters and attempted to provide clarity in this area of the law. See Chin v. Port Auth. of N.Y. & N.J., 2012 WL 2760776, at *21 (2d Cir. July 10, 2012). The court rejected Pension Committee’s per se rule and instead agreed with other courts that “‘the better approach is to consider [the failure to adopt good preservation practices] as one factor’ in the determination of whether discovery sanctions should issue.’” Id. (quoting Orbit One Commc’ns, Inc. v. Numerex Corp., 271 F.R.D. 429, 441 (S.D.N.Y. 2010)). And even if the district court finds gross negligence in a particular case, that finding merely permits, and does not mandate, an adverse-inference instruction or other sanctions. The Chin case thus indicates that, while litigation holds may be best practice, a failure to issue them is not automatically culpable conduct, as it may be reasonable in certain circumstances, such as in a small business, to invoke other informal, yet sufficient preservation methods to meet a party’s duties under the rules and the common law. Further, even culpable conduct that results in the destruction of relevant evidence may not justify harsh sanctions if the prejudice to the innocent party is slight or nonexistent. For example, in the Chin opinion itself, the court upheld the district court’s determination that an adverse-inference instruction was inappropriate when the destroyed evidence did not prejudice the plaintiff’s presentation of proof obtained from available sources.
In sum, the Chin opinion provides some breathing room to businesses who, for whatever reason, do not issue a written litigation hold when the preservation duty arises for a particular case. But businesses should make that choice carefully, as the failure to issue a written hold can lead to ripple effects in other jurisdictions that may still follow the per se rule.
Keywords: litigation, mass torts, Second Circuit, sanctions, litigation holds, electronic discovery
—David L. Schwan, Houston, Texas
July 18, 2012
No Due-Process Opt Out in Limited-Fund Class Settlement
The Eleventh Circuit panel in Juris v. Inamed Corporation, 2012 WL 2681445 (11th Cir. 2012), held that neither Schutts nor the due-process clause require absent class members to be afforded an opportunity to opt out in limited-fund class actions because the presence of a res or fund within the jurisdiction of the court alone is sufficient to give the court jurisdiction over all claims against that fund and to bind all potential claimants wherever located. Following Juris, in the Eleventh Circuit, there is no due-process, opt-out right in limited-fund class actions under Schutts.
Keywords: litigation, mass torts, Eleventh Circuit, class actions, due process
—Douglas J. Pepe, partner, Gregory P. Joseph Law Offices LLC, New York, New York, and cochair of Mass Torts’s Experts and Evidence Subcommittee
Canadian Court Certifies Lawyer Class in Copyright Case
In the recent decision of Waldman v. Thomson Reuters Corporation,  ONSC 1138, the Ontario Superior Court of Justice certified a class of lawyers alleging copyright infringement against Thomson Reuters Canada Ltd. Justice Perell did narrow the proposed class to exclude clients, self-represented litigants, in-house counsel and lawyers working in the public sector. He found that such individuals were not necessary parties, as they were not similarly situated to the representative plaintiff, a lawyer in private practice. Specifically, the court found that those excluded were unlikely to have a commercial interest in protecting court documents from copyright infringement and, therefore, would require a different assessment of compensation.
Despite making changes to the class definition and to the proposed common issues, the court certified the class in the face of significant legal uncertainty and an acknowledgment that significant individual issues would remain to be resolved following the common-issues trial. The Waldman decision confirms that a class of lawyers will receive the same treatment in Canada as other prospective classes and must only vault over a series of “low bars” to obtain certification. Thomson Reuters has been denied leave to appeal.
Keywords: litigation, mass torts, class actions, class certification, Canada
May 22, 2012
Federal Court Approves Computer-Assisted Review
Could the recent decision of U.S. Magistrate Judge Andrew J. Peck of the Southern District of New York mark a turning point in the judicial march to driving the costs associated with e-discovery higher and higher? In a case of first impression, a federal court has put its imprimatur to a form of computer-assisted review called predictive coding. The software for predictive coding determines how a document should be coded based on an earlier sample analyzed by a small group of reviewers. Essentially, the program learns to code based on the coding of the previous reviewers of the sample "seed" set. By matching the subjects and terms of the seed set, the computer program dramatically reduces the need for the massive numbers of lawyer hours typically spent manually reviewing each document prior to production.
In the case of Moore v. Publicis Groupe and MSL Group, Judge Peck held in a case of first impression that the use of predictive coding met the standards of Federal Rule of Civil Procedure 26 and Federal Rule of Evidence 702. The Moore case was brought by a group of five women against Publicis Groupe, one of the world's largest advertising conglomerates, and its U.S. subsidiary, MSL Group, based on gender and pregnancy discrimination and alleged violations of the Equal Pay Act and the Fair Labor Standards Act. The defendants proposed the use of predictive coding, which the plaintiffs did not oppose in principle; rather, it was the implementation of the coding that was at issue.
In this large data case involving more than three million emails, the court was convinced that there was no approach—manual or otherwise—that would insure 100 percent accuracy. "There simply is no review tool that guarantees perfection," commented Judge Peck. The court also noted that the use of keyword searches presented its own challenges. In fact, Judge Peck went to great lengths to show that, in studies comparing manual to computer-assisted review, there was no evidence that the manual review was superior. Judge Peck noted that "even if all parties were willing to entertain the notion of manually reviewing the documents, such review is prone to human error and marred with inconsistencies from the various attorneys' determination of whether a document is responsive." Moreover, the court considered the necessity of proportionality as set forth in F.R.C.P. 26 (b)(2)(C) in terms of the cost, the results of the predictive-coding process, and the amount in controversy in the case.
In this case, approximately 2,500 documents were reviewed by senior defense lawyers to develop the seed set from which the computer would learn to tag the remaining documents. In addition, the approved protocol demanded a 95 percent confidence level. To insure the accuracy of the searches, "judgmental sampling" and keyword searches were used coding the top 50 hits. The judge made clear that the seed set would need to be made available to the plaintiffs to ensure the validity of the coding. This element of transparency was critical to the judge's decision. To make the predictive coding as an e-discovery tool more workable, the court also agreed to phased discovery.
While this ruling does not mandate the use of predictive coding due to the parties' prior agreement, it does approve its use as an alternate approach to the lengthy and costly manual review long viewed as the "gold standard." However, Judge Peck conceded that computer-assisted review may not be appropriate for every case. Monique DaSilva, et al. v. Publicis Groupe & MSL Group, 11 Civ. 1279 (ALC) ) (AJP).
Keywords: litigation, mass torts, technology, predictive coding, document review
—Beatrice O'Donnell, Duane Morris LLP
Welding Fume MDL Settlement Shows Increased Use of QSFs
Nine years after the creation of a multidistrict litigation (MDL) involving plaintiffs' allegations concerning exposure to hazardous welding fumes and the ensuing discovery battles undertaken by the parties, the welding-rod litigation has settled [PDF] with the many defendants agreeing to the creation of $21.5 million Welding Fume Resolution Fund, which will be administered by David R. Cohen. The comprehensive settlement includes not only the more than 100 lawsuits pending in the MDL, but also another 700-plus lawsuits pending in other states, including Arkansas, California, Georgia, Kentucky, Louisiana, Mississippi, Teas, and West Virginia.
The underlying claims involved the inhalation of welding fumes from welding rods, which the plaintiffs say contained manganese and thereby caused neurological damage. The settling defendants included A.O. Smith Corp.; Arcos Industries, LLC; AvestaPolarit Welding, Inc.; Bohler Welding Group USA, Inc.; CBS Corp.; DeloroStellite LP; Eutectic Corp.; Hobart Brothers Co.; Linde, LLC; Praxair, Inc.; Sandvik, Inc.; Select-Arc.; Sarco Corp.; TDY Industries; Techalloy Co.; Thermadyne Holding; and The Lincoln Electric Co.
Notably, the vehicle used for the settlement fund, approved by Ohio Federal District Court Judge Kathleen O'Malley, constitutes a qualified settlement fund (QSF), a settlement mechanism that has grown increasingly popular in the context of mass-tort settlements. Included among the many benefits of a QSF are the tax deductions made available to the defendants that contribute to the fund and the independence it gives plaintiffs in terms of receiving payments from the fund. In short, the Welding Rod QSF is the latest in the increased use of QSFs as a mass-tort settlement vehicle.
Keywords: litigation, mass torts, MDL, QSF, qualified settlement, toxic, welding rod
—Andrew J. Scholz Esq., special counsel to Goldberg Segalla, LLP, and cochair of the Mass Torts Committee's Toxic Tort Subcommittee
Federal Court Considers Climate Change Suit Dead in Water
In March 2012, a court in the Southern District of Mississippi again dismissed coastal Mississippi property owners' claims against the oil and coal industries for damages arising from Hurricane Katrina. See Comer v. Murphy Oil USA, Inc., No. 1:11-cv-220-LG-RHW (S.D. Miss. Mar. 20, 2012). The Comer plaintiffs alleged that the defendants' energy operations released harmful byproducts that, in turn, caused an increase of global warming, led to a more intense Hurricane Katrina, and produced massive damage to their coastal property. As explained below, this was the plaintiffs' second trip to federal court, as their first suit in 2007 was dismissed on causation and political-question grounds. After reviewing the new complaint, Chief Judge Louis Guirola held that the plaintiffs' claims were barred by the doctrines of res judicataand collateral estoppel. In addition, "in an abundance of caution," the court went further and found the plaintiffs' case should also be dismissed on alternate grounds, including the political-question doctrine, limitations, and standing.
In 2007, Judge Guirola dismissed the plaintiffs' original suit, in which the court found the plaintiffs lacked standing because their alleged damages arising from Hurricane Katrina were not "fairly traceable" to the defendants' actions and that their claims were non-justiciable under the political-question doctrine. The plaintiffs' appeal to a Fifth Circuit panel was successful, but in 2010, the defendants' petition for rehearing en banc was granted. Thereafter, with the disqualification of an appeals-court judge, the en banc panel lost its quorum, but, according to the Fifth Circuit rules, the plaintiffs' appeal was properly vacated. In early 2011, the U.S. Supreme Court denied the plaintiffs' petition for a writ of mandamus to reinstate their appeal. The plaintiffs were undeterred, and they re-filed their claims under the auspices of a Mississippi savings statute purportedly allowing re-filing.
Lack of Standing for Climate-Change Plaintiffs
Though the case was primarily dismissed on res judicata and collateral estoppel grounds, the main thrust of Judge Guirola's March 2012 opinion is its lengthy discussion on the plaintiffs' lack of standing. Although two federal courts of appeal found standing for climate-change plaintiffs, Judge Guirola makes clear that he does not agree. See Connecticut v. Amer. Elec. Power Co., 582 F. 3d 309 (2nd Cir. 2009) and Comer v. Murphy Oil USA, Inc., 585 F. 3d 855 (5th Cir. 2009). InJudge Guirola's March 2012 opinion, the court explained that plaintiffscould not show a causal connection between their injury and the defendants' conduct and thus could not demonstrate the second element needed to establish constitutional standing. While plaintiffs need not show proximate cause to survive a standing challenge, the court stated that the "injury [must] be fairly traceable to the defendant" and the "more attenuated or indirect the chain of causation between the defendant's conduct and the plaintiff's injury, the less likely the plaintiff will be able to establish the causal link sufficient for standing." The court disagreed with the plaintiffs' reliance on the Clean Water Act cases for the proposition that the plaintiffs need only allege the "defendants' emissions contributed to the kinds of injuries that they suffered." Instead, the court cited Native Village of Kivalina v. Exxonmobil Corp., 663 F. Supp. 2d 863 (N.D. Cal. 2009), and agreed with the defendants that statutory water-pollution claims are distinguishable from global-warming claims because, without federal standards limiting the discharge of greenhouse gases, the plaintiffs do not benefit from a presumption that any defendants' conduct harmed the plaintiffs. Here, the Comer plaintiffs could not show the defendants' emissions of greenhouse gases caused Hurricane Katrina and that their injuries would not have occurred absent such emissions.
What Comes Next?
Whether a Fifth Circuit panel will again reverse Judge Guirola's analysis regarding the plaintiffs' lack of standing remains to be seen. Even so, Judge Guirola dismissed the plaintiffs' claims on a litany of other grounds. Prognostication may be forthcoming, as oral arguments in Kivalina have already been heard before the Ninth Circuit, and that court will have the benefit of both the Fifth Circuit's panel decision for the Comer plaintiffs as well as Judge Guirola's dismissals.
Keywords: litigation, mass torts, Fifth Circuit, climate change, Hurricane Katrina, dismissal
—Arlene Hennessey, King & Spalding, cochair of the Mass Torts Litigation Committee's Young Lawyers Subcommittee
Discoverability of Social Media: A Plaintiff's Perspective
With the advent of social networking sites, our society has hastened the pace at which we share opinions, basic information, pictures, videos, and more. The issue of whether information posted on these sites is discoverable is arising in a variety of contexts, including mass-tort cases. Although surprisingly few published decisions exist, a number of courts are allowing broad discoverability of this evidence.
Due to the inherently public nature of social networking sites, many believe that users should have a low expectation of privacy for the information placed therein. The court in Moreno v. Hanford Sentinel, Inc. stated that "[b]y posting [an] article on myspace.com [the plaintiff] opened the article to the public at large." 172 Cal. App. 4th 1124, 1130 (Cal. Crt. App. 2009). That the plaintiff "expected a limited audience does not change the analysis." Id. "[Her] potential audience was vast." Id.; see also Bass v. Miss Porter's School, 2009 WL 3724968, at *1 (requiring the production of the plaintiff's Facebook account); Romano v. Steelcase, Inc., 907 N.Y.S.2d 650, 657 (N.Y. Sup. Ct. Suffolk Co. 2010) (ordering the plaintiff to provide written authorizations for defendants to obtain her current and historical Facebook and MySpace pages and accounts, including all deleted information); McMillen v. Hummingbird Speedway, Inc., No. 113-2010 CD, 2010 WL 4403285 (Pa. Com. Pl. Sept. 9, 2010) (ordering the plaintiff to provide his Facebook and MySpace user names and passwords).
Nonetheless, some courts have determined that the discoverability of social networking site material should be narrow. In Mackelprang v. Fidelity National Title Agency of Nevada, the plaintiff sued the defendant for sexual harassment. No. 2:06-cv-00788-JCM-GWF, 2007 WL 119149, at *1 (D. Nev. 2007). The defendants sought to obtain email communications on two of the plaintiff's MySpace accounts. Id. at *2. The court denied the defendant's request, finding that he was "engaging in a fishing expedition since . . . it was nothing more than suspicion or speculation as to what information might be contained in the private messages." Id. The court noted, however, that there was nothing in its order that prevented the defendant from requesting messages that contained specific categories of information relevant to plaintiff's claim. Id. at *8.
For plaintiffs bringing personal-injury claims, postings can be particularly harmful to their cases. Social networking site users often post pictures after accidents for which they are bringing suit without fully understanding how such information could negatively impact their claims. In Romano v. Steelcase Inc., the plaintiff claimed to have sustained permanent injuries and that she was confined to her house and bed. 907 N.Y.S.2d at 654. A photo posted to the plaintiff's Facebook profile, however, showed her "smiling happily" outside of her home. One can easily see the defendants citing this photograph as proof that the plaintiff's claims are fraudulent or exaggerated. It may be that this picture was taken before the accident or during a few moments of a day that the plaintiff had hobbled out of her home to get some sunlight. Even if there are many circumstances that make the photograph consistent with the plaintiff's claims, the fact that she has to explain the photograph can damage her case.
The best course of action is to advise clients of the dangers posed by the use of social networking sites. A client may consider freezing social networking site accounts until the case is completed. Alternatively, users can prohibit others from posting to their profiles. And, of course, always warn clients to set their profiles to private and pay attention to the pictures and updates they post.
With the benefit of speedy communication has come the loss of privacy. Users should be wary of what information they share on these sites and cognizant of the possible consequences that dissemination of their private lives may entail. Even where users have limited their "friends" and made their profiles private, their postings, photos, and messages will most likely be discoverable, particularly if a defendant can show that they are relevant to a plaintiff's claims.
Keywords: litigation, mass torts, Facebook, MySpace, discoverability
—Ricardo M. Martínez-Cid, partner, Podhurst Orseck, Miami, Florida, co-chair of the Aviation and Space Law Subcommittee and the Aviation Subcommittee of the Mass Torts Litigation Committee
April 13, 2012
Judge Approves Computer-Assisted Review
It has long been recognized that an overwhelming majority of documents produced in complex litigations inevitably come from electronic sources. With today’s infinite volumes of electronically stored information (ESI) complicating the discovery process, the legal world has been forced to adapt and find reliable, efficient, and cost-effective methods of facilitating e-discovery. A growing number of attorneys have begun to utilize a relatively new technology known as a “predictive coding.” This technology, through the use of sophisticated computer programming and algorithms, enables a computer to predict the relevance of a large volume of documents by learning from a human reviewer’s classification of a small sample set. Andrew Peck, “Search, Forward: Will Manual Document Review and Keyword Searches Be Replaced by Computer Assisted Coding,” L. Tech. News, Oct. 2011.
Predictive coding has proven to increase efficiency and accuracy during the document-review process and reduce litigation costs. Maura R. Grossman & Gordon V. Cormack, “Technology-Assisted Review in E-Discovery Can Be More Effective and More Efficient Than Exhaustive Manual Review,” Rich. J. L. & Tech., Spring 2011, at 48. Despite these proven benefits, most lawyers have been reluctant to embrace computer-assisted review because of the difficultly in defending complicated discovery protocols and underlying technology that leaves attorneys and their clients exposed to harsh discovery sanctions. This unwillingness was further supported by the absence of judicial direction on the subject. Well, the wait is over. In a landmark judicial opinion, Magistrate Judge Andrew Peck of the Southern District of New York cleared a path for litigants across the country to adopt computer-assisted document-review protocols, such as predictive coding, to facilitate and expedite the costly and cumbersome e-discovery process in appropriate cases. Monique Da Silva Moore v. Publicis Groupe & MSL Group, No. 11 Civ. 1279, Dkt. No. 96 (slip op.) (S.D.N.Y. Feb. 24, 2012).
At issue in Monique Da Silva Moore v. Publicis Groupe & MSL Group was a discovery dispute arising in the context of a class-action suit filed on behalf of female employees of a multinational advertising conglomerate alleging claims of gender discrimination. During the discovery process, the defendants were faced with the challenge of reviewing more than three million documents. The parties were in agreement that some method of computer-assisted review was appropriate, but could not come to an agreement on the exact methodology. After reviewing all of the relevant submissions, Magistrate Judge Peck determined that computer-assisted review could be used during the discovery process. This decision marks the first time any court has approved the use of computer-assisted review in electronic data discovery.
Although Magistrate Judge Peck’s order stems from a discovery dispute in an employment-based class-action lawsuit, the effect of this decision is likely to have a broader reach, extending to a wide spectrum of practice areas, including traditionally document-intensive litigations such as pharmaceutical and medical-device litigations. In fact, Magistrate Judge Peck made no secret about the fact that he intended his opinion to resonate throughout the country, stating, “What the Bar should take away from this Opinion is that computer-assisted review is an available tool and should be seriously considered for use in large-data-volume cases where it may save the producing party (or both parties) significant amounts of legal fees in document review.”
While the ESI protocol adopted in Da Silva Moore is not a one-size fits all solution, it is instructive regarding the types of cases where computer-assisted discovery should be considered, and it provides a platform for the judiciary and future litigants to implement this type of efficient, cost-saving technology whenever appropriate. Anxiety over the ability to defend these types of protocols should be significantly reduced now that there is some legal support for the use of computer-assisted review. As a result, firms and their clients need to take steps to educate themselves about computer-assisted discovery protocols and evaluate whether the use of such protocols is appropriate for their respective cases.
Keywords: litigation, technology, computer-assisted review, electronic discovery
—Nicholas Weiss, Sedgwick LLP, Los Angeles, California
April 6, 2012
New York Appeals Court: Mold Case Can Go Forward
Toxic-tort related mold claims are on the rise throughout the country. In the personal-injury context, a plaintiff's main hurdle to recovery has been to overcome a causation-based Frye/Daubert challenge. This is because most courts find that the epidemiological evidence has not shown a causal connection between exposure to certain fungi and various respiratory ailments. However, a recent appellate court decision out of New York makes a mold-related personal-injury claim much easier to maintain in that state. In Cornell v. 360 West 51st Street, ___ A.D.3d ___, 2012 N.Y. App. Div. Lexis 1614 (March 6, 2012), the appellate division modified a lower court decision that precluded a plaintiff's mold expert from testifying as to these general causation issues and held that the science has sufficiently developed in the last two years to show such a connection.
In Cornell, the trial court held a Frye hearing on Dr. Eckhard Johanning's general and specific causation opinions. Dr. Johanning, a routinely used plaintiff's mold expert, opined that the plaintiff's upper-respiratory injuries, asthma, rash, and other conditions were caused by exposure to mold in her apartment. In rejecting Dr. Johanning's opinions, the trial court cited repeatedly to a recent 2008 appellate division decision, Fraser v. 301-52Townhouse Corp., 57 A.D.3d 416, 870 N.Y.S.2d 266 (1st Dep't 2008) where Dr. Johanning's general causation opinions as to mold exposure were soundly rejected as insufficient to constitute general acceptance in the scientific community under the standards of Frye. Specifically, the appellate-court decision in Fraser upon which the trial court in Cornell extensively relied found that the scientific literature, including a 2004 epidemiological study by the Institute of Medicine of the National Academies regarding exposure to mold, showed that there was, on the one hand, sufficient evidence to show an "association" between mold growth and certain respiratory ailments, but, on the other hand, there was insufficient evidence to establish a causal relationship between the two. The trial court in Cornell further found that Dr. Johanning's reliance on two studies that post-dated Fraser was insufficient to overcome the prior science and the Fraser ruling. See Cornell v. 360 West 51st St. Realty, LLC, 26 Misc.3d 1211, 906 N.Y.S.2d 778 (Sup. Ct. N.Y. Co. Dec. 18, 2009) (Friedman, J.).
In a 3–2 decision, the appellate division reversed the trial court, distinguished its own prior holding in Fraser, and plainly held that the two post-Fraser studies upon which Dr. Johanning relied "easily satisfied the test of scientific reliability set forth in Frye." Cornell, 2012 N.Y. App. Div. Lexis 1614, at *7. The appellate division's majority noted that the two new studies showed a "clear relationship between exposure to mold and respiratory" symptoms and also showed a "statistically significant" relationship between mold and claimed injuries. The two dissenters, however, stated that the two post-Fraser studies were insufficient to show that Dr. Johanning's opinions were generally accepted by the scientific community. The first study, the dissent noted, "plainly states that, ‘[t]he data reviewed here represent initial steps toward defining . . . effects of damp homes and associated excess mold growth.'" The second study was similarly insufficient because it was based on a "single office building," which "contains no evidence that the conclusions were adopted by the National Institute for Occupational Safety and Health."
Cantrell is significant for numerous reasons. From a New York perspective, it gives local plaintiffs' counsel and their experts a game plan for surviving summary judgment and, as such, it will reverberate throughout New York City. It is unclear whether the defendants will seek leave to appeal to New York's highest court. In this regard, the case law may not be developed enough for the court to address the issue. Outside of New York, the decision will also likely be cited in the ongoing legal debate over mold claims and the causation-based science. Defendants in Frye states faced with future lawsuits must stay abreast of the latest science in this area, which may provide further ammunition to arguments that the causation issues are not generally accepted. They should similarly keep track of other cases where Fryechallenges have been successful and cite to those cases as persuasive authority.
Keywords: litigation, mass torts, Frye, mold, causation, Daubert
—Andrew J. Scholz Esq., special counsel to Goldberg Segalla, LLP, and cochair of the Mass Torts Committee's Toxic Tort Subcommittee
Summary Judgment Granted in Pamidronate MDL
On January 30, 2012, the U.S. District Court for the Eastern District of New York granted summary judgment in favor of Sandoz, Inc.; APP Pharmaceuticals, Inc.; Ben Venue Laboratories, Inc.; Teva Parenteral Medicines, Inc.; and Hospira, Inc. with respect to all remaining plaintiffs in the generic pamidronate multidistrict litigation (MDL). In re Pamidronate Products Liab. Litig., No.1:09-MD-2120 (KAM), slip op. (E.D.N.Y. Jan. 30, 2012). Judge Kiyo Matsumoto found that all of the plaintiffs' claims were preempted by federal law under the Supreme Court's recent decision in Pliva, Inc. v. Mensing, 131 S. Ct. 2567 (2011).
The Pamidronate MDL was formed in December 2009 to address claims that the drug, the generic form of the bisphosphonate cancer treatment Aredia, causes osteonecrosis of the jaw. The MDL included claims by as many as 134 plaintiffs, who had sued some or all of the four manufacturers of generic pamidronate. The defendants had moved to dismiss the claims of the majority of plaintiffs based on their failure to identify which generic pamidronate product they had allegedly taken. Following the Supreme Court's ruling in Mensing, the court stayed further briefing and consideration of the pending product-identification motions to consider the impact of generic preemption. A number of plaintiffs agreed to voluntarily dismiss their claims with prejudice, and the defendants moved for summary judgment with respect to the remainder.
In her decision, Judge Matsumoto found that the plaintiffs' failure-to-warn claims were squarely preempted under Mensing and that this ruling extended to the plaintiffs' negligence and breach-of-express-warranty claims too, which are warnings-based claims. Judge Matsumoto further found the plaintiffs' design-defect claims preempted because the Supreme Court found that a generic drug's design, like its label, is subject to a "sameness" requirement with respect to the reference brand drug. Consequently, the court granted summary judgment with regard to all remaining claims.
Keywords: litigation, mass torts, multidistrict litigation, generic drugs
—Joe Hollingsworth, Hollingsworth LLP, Washington, D.C.
Fifth Circuit Immunizes FEMA from Toxic Shelter Claims
The U.S. Court of Appeals for the Fifth Circuit recently held that the Federal Emergency Management Agency (FEMA) is immune from suits arising out of FEMA's provision of temporary shelters to victims of Hurricanes Katrina and Rita that allegedly contained dangerous levels of formaldehyde.
The appeal, In re: Fema Trailer Formaldehyde Prods. Liab. Litig. [PDF], Nos. 10-30921, 10-30945 (5th Cir. Jan. 23, 2012), arose from a multidistrict litigation (MDA) in the U.S. District Court for the Eastern District of Louisiana. Two groups of plaintiffs—from Alabama and Mississippi—sued FEMA under the Federal Tort Claims Act (FTCA). The plaintiffs claimed that, in the aftermath of Katrina and Rita, FEMA knowingly provided the plaintiffs with temporary shelters containing dangerous levels of formaldehyde, failed to warn the plaintiffs that these shelters were unsafe, and ignored complaints of formaldehyde emissions in the shelters to avoid litigation exposure.
Following several rounds of dispositive motions and denial of class certification, the district court dismissed the plaintiffs' FTCA claims against FEMA for lack of subject-matter jurisdiction. On appeal, the Fifth Circuit affirmed, holding:
- No Jurisdiction to Sue the Government Without Consent. "The United States must consent to be sued, and that consent is a prerequisite to federal jurisdiction." In re FEMA, slip op. at 7.
- Explicit Statutory Waiver of Immunity Required. "A plaintiff may only sue the United States if a federal statute explicitly provides for a waiver of sovereign immunity." Id.
- Government Liability Cannot Exceed Private Liability. The FTCA waiver of sovereign immunity, 28 U.S.C. § 2674, "provides that the United States shall be liable in the same manner and to the same extent as a private individual under like circumstances." Id. at 7.
- No Jurisdiction Unless Private Party Would Be Liable under State Law. The FTCA jurisdictional grant, 28 U.S.C. § 1346, vests federal jurisdiction in suits against the government only where "a private person . . . would be liable to the claimant in accordance with the law of the place where the act or omission occurred"—a reference "exclusively to state law." Id. at 7–8. "Therefore, if a private person under ‘like circumstances' would be shielded from liability pursuant to a state statute, lower courts must decline to exercise subject-matter jurisdiction." Id. at 10.
- Alabama and Mississippi Law Bar Good-Samaritan Liability. By statute, both Mississippi and Alabama exculpate private actors from tort liability who "(1) voluntarily, (2) without compensation, (3) [allow their] property or premises to be used as shelter during or in recovery from a natural disaster." Id. at 11.
- The Shelters Were Free and FEMA Had No Obligation to Provide Them. FEMA was "under no contractual or legal obligation" to provide the shelters to victims and "did not receive compensation from the disaster victims from letting them use" the shelters. Id. at 12.
- As a Result, the Claims Are Barred. Because FEMA would be immune as a private actor under the Mississippi and Alabama statutes, it is immune from suit under the FTCA. Dismissal affirmed. Id. at 11–13.
Keywords: litigation, mass torts, Fifth Circuit, Federal Emergency Management Agency, subject-matter jurisdiction
—Douglas J. Pepe, partner, Gregory P. Joseph Law Offices, New York, New York. He is a chair of the Experts and Evidence Subcommittee.
February 1, 2012
Beginning of the End of the Conte Foreseeability Doctrine
The California Supreme Court recently issued an opinion in O'Neil v. Crane Co. [PDF], S177401, slip op. (Cal. Jan. 12, 2011), that may lay the groundwork for overturning Conte v. Wyeth, the controversial California Court of Appeals opinion that opened the door for plaintiffs to sue brand-name drug manufacturers for their failure to warn about the possible dangers of ingesting generic drugs.
O'Neil held that there is no equivalent nonmanufacturer liability claim in negligence. The California Supreme Court directly addresses "foreseeability" and its limits, applying the public-policy factors that Conte refused to address. "[I]n strict liability as in negligence, foreseeability alone is not sufficient to create an independent tort duty." O'Neil, slip op. at 29 (citation and quotation marks omitted, emphasis added). "Duty" in negligence "is not an immutable fact of nature but only an expression of the sum total of those considerations of policy which lead the law to say that the particular plaintiff is entitled to protection." Id. at 30–31.
Keywords: litigation, mass torts, California Supreme Court, Conte Foreseeability Doctrine
—David A. Lester, Jones, Walker, Waechter, Poitevent, Carrère & Denègre, LLP, Birmingham, Alabama
January 30, 2012
Chamber Vows to Fight Overregulation, Promote Tort Reform
On January 12, 2012, Thomas J. Donohue, president and chief executive officer of the U.S. Chamber of Commerce delivered the Chamber’s State of American Business address to its members.
In the address, Donohue outlined the Chamber’s American Jobs Growth Agenda for 2012, which includes efforts to fight overregulation and to continue tort reform. “The regulatory avalanche confronting our job creators is unprecedented,” Donohue explained. “The Labor Department has 100 rulemakings in the pipeline. Dodd-Frank requires 447 rules, 63 reports, and 59 studies. The health-care law established 159 new agencies, panels, commissions, and regulatory bodies. EPA has some 200 regulations in the works. And the business community must contend with a National Labor Relations Board that is clearly tilted toward the unions. This adds up to a big drag on our economy.” Donohue assured members that “when the need is there and the regulatory remedy makes sense, the Chamber will support it. But when we see regulatory activism that is based on bad data, dubious authority, or pure politics, we will oppose it.”
Donohue also touched on the U.S. Chamber’s involvement in the battle for tort reform. He explained that the “Institute for Legal Reform will continue to fight the expansion of excessive litigation that is sucking the vitality out of American businesses. We’re going to build on our successful work in the states and seek passage of additional state-level legal reforms. We’ll be engaged in a major effort this year to educate voters as they choose state Supreme Court justices and attorneys general. We’re also aiming to stop the alarming rise of third-party litigation financing.”
Keywords: litigation, mass torts, U.S. Chamber of Commerce, overregulation, tort reform
—David A. Lester, Jones, Walker, Waechter, Poitevent, Carrère & Denègre LLP, Birmingham, Alabama
January 24, 2012
The Learned Intermediary Rule in a Multi-Drug Context
In the decision of Wendell v. Johnson & Johnson, 2011 WL 6291792 (N.D. Cal. Dec. 15, 2011), a product liability case involving prescription drugs, the moving defendants all received summary judgment based on California’s learned intermediary rule. The decision is a good illustration of a court applying the learned intermediary rule in a circumstance where there were different warnings on a combination of different drugs, but the prescribing physician was aware of and informed the patient of the known risks. Wendell involved three drugs—mercaptopurine (6-MP), Remicaid, and Humira—and the interaction between their respective warnings.
Keywords: litigation, mass torts, learned intermediary rule, California, drug warnings
—James Beck, Dechert, LLP, Philadelphia, Pennsylvania
January 23, 2012
Philadelphia Court Makes Exception to Mensing
The Court of Common Pleas of Philadelphia County is the latest court to carve out exceptions to the U.S. Supreme Court's holding in Pliva, Inc. v. Mensing, 131 S.Ct. 2567 (2011). In In Re: Reglan/Metoclopramide Litigation, No. 1997, January Term, 2010 (Nov. 18, 2011), 2011 WL 6259558, Judge Sandra Mazer Moss overruled without prejudice generic manufacturer defendants' preliminary objections to the plaintiffs' state-court claims involving the generic drug metoclopramide, which is commonly used to treat digestive-tract problems and sold under the brand name Reglan. The defendants sought dismissal of approximately 2,000 plaintiffs' claims based on federal preemption and the Supremacy Clause of the U.S. Constitution pursuant to the Supreme Court's Mensing decision. Id. at 1.
In a 5–4 decision, the "'Supreme Court held in Mensing that federal drug regulations applicable to generic drug manufacturers directly conflicted with, and thus preempted, state law failure-to-warn claims for inadequate warning labels on generic drugs.'" Id. at 2 citing Hughes v. Mylan, Inc., 2011 U.S. Dist. LEXIS 123544 (E.D. Pa. Oct. 25, 2011) citing Mensing, 564 U.S. at 1.
The defendants argued that "the Supreme Court's Mensing decision completely forecloses any state law cause of action against generic prescription drug manufacturers" and that the "[p]laintiffs' allegations . . . mirror those in the Mensing complaint whose claims [the] Supreme Court held were preempted." Id. at 3. The defendants asserted that the plaintiffs' claims were preempted because they "ultimately sound in 'failure to warn' theories and seek to impose obligations different from federal rules and regulations established by the . . . FDA." Id.
The plaintiffs argued that the "Mensing Court foreclosed only claims requiring generic manufacturers to unilaterally change their drug's warning label to include information different from and additional to the brand manufacturer's approved FDA label." Id. at 4. The plaintiffs asserted, among other things, that "because their amended complaint asserts only theories not requiring label changes, Mensing does not affect their claims." Id.
After reviewing the case law nationwide since the Mensing decision, with some courts dismissing plaintiffs' claims in their entirety and others carving out varying exceptions to the Mensing holding, the court sided with the latter, finding that the defendants failed to sustain their "heavy burden . . . [to] show that [the] law would not recognize any of the claims asserted against them," and overruled the defendants' preliminary objections to the plaintiffs' claims. Id. at 4–5 citing Emplrs. Ins. of Wausau v. DOT, 581 Pa. 381, 389, n.5 (Pa. 2005).
Keywords: litigation, mass torts, federal preemption, Supremacy Clause
—Jackie M. McCreary, Stone Pigman Walther Wittmann L.L.C., New Orleans, Louisiana
December 7, 2011
Canadian Court Confirms Primacy of Arbitration Agreements over Proposed Class Proceedings
The enforceability of arbitration agreements in the face of proposed class proceedings has emerged as a hot issue both north and south of the 49th parallel. Mandatory arbitration and/or class action waiver clauses have generally been upheld in both Canada and the United States, although not without considerable judicial deliberation. That being said, the Supreme Court of Canada recently found such a clause to be inoperative where statutory language evidenced a legislative intention to have certain claims resolved in court as opposed to arbitration. In Seidel v. TELUS Communications Inc. (2011 SCC 15), a slim majority of the Court found that the provincial consumer protection legislation at issue intended to create a public interest remedy, the policy objectives of which were incompatible with the low-profile, private, and confidential nature of arbitration. Accordingly, the motion to certify the proposed class proceeding was allowed to continue in relation to those claims arising from the legislation.
The impact of the Seidel v. TELUS decision was most recently considered by the Federal Court of Canada in Murphy v. Compagnie Amway Canada (2011 FC 1341). An "independent business owner" commenced a proposed class proceeding against Amway, alleging that its business model and distribution system violated Canadian anti-trust legislation. The Competition Act, RSC 1985, c C-34. In response to a motion to certify the class, Amway moved to stay the proposed class proceeding and compel arbitration on the basis of an agreement to arbitrate clause contained in the initial registration agreement and a class action waiver clause in Amway's code of conduct. The code of conduct, by which the independent business owner had agreed to be bound, provided that independent business owners could not assert a claim as a class if their individual claims each exceeded $1,000.
The court granted Amway's motion to stay the proposed class proceeding and compel arbitration. In doing so, the court emphasized that the parties had freely entered into the agreement, which contained a clear, extensive, and detailed arbitration agreement. The court followed a long line of cases out of the Supreme Court of Canada, which have generally upheld the validity and enforceability of mandatory arbitration clauses in commercial agreements. The court described the arbitration agreement as a "jurisdictional choice" made by the parties, which they were obliged to honour and that could not be circumvented through a class proceeding. The court also refused to disregard the class action waiver. The court acknowledged Seidel v. TELUS and confirmed that the decision did not take exception to the accepted principal that it must give effect to parties' agreement to arbitrate absent clear legislative language to the contrary. In contrast to the result in Seidel v. TELUS, the court found no such language in the Competition Act.
The Federal Court of Canada's decision in Murphy v. Amway goes some way toward restoring Canada's reputation as an arbitration-friendly jurisdiction following Seidel v. TELUS. The decision confirms the general principle that while class proceedings may be an efficient procedural vehicle, their use neither modifies nor creates substantive rights. Accordingly, the prevailing position in Canada continues to be that in the absence of a clear legislative language prohibiting class action waivers, a proposed class proceeding cannot serve as a means to circumvent a clear and freely accepted arbitration agreement.
Keywords: arbitration agreement, class action waiver, motion to stay, motion to compel arbitration
—David Elman and Sean Murtha, Borden Ladner Gervais LLP, Toronto, Canada
November 1, 2011
Supreme Court to Determine Whether Corporations May Be Sued under the Alien Tort Statute
The Supreme Court recently granted certiorari in Kiobel v. Royal Dutch Petroleum to resolve the issue of whether a corporation may be sued in a United States federal court under the Alien Tort Statute. The Alien Tort Statute, 28 U.S.C. § 1350, is a federal statute that provides that "[t]he district courts shall have original jurisdiction of any civil action by an alien for a tort only, committed in violation of the law of nations or a treaty of the United States." This statute is notable for allowing United States courts to hear human rights cases brought by foreign citizens for conduct committed outside the United States.
The plaintiffs in Kiobel are Nigerian residents who filed a putative class action in the United States District Court for the Southern District of New York, alleging that Royal Dutch Petroleum Company and Shell Transport and Trading Company aided and abetted the Nigerian government in committing human rights violations, including murders, torture, and forced exile. The defendants moved to dismiss the case, arguing that corporations could not be held liable under the Alien Tort Statute. The district court agreed but certified its order for interlocutory review so that it could be reviewed by the Second Circuit.
In a 2–1 split, the Second Circuit affirmed the district court's dismissal. In doing so, the court explained that "international law, and not domestic law, governs the scope of liability for violations of customary international law under the ATS." The Second Circuit found that, under international law, liability for violations of international human rights laws rests with nation states and individuals—not corporations. The court noted that proposals to bring fictional persons like corporations under the jurisdiction of international tribunals have been repeatedly rejected because the moral authority underlying international human rights law rests on the responsibility of nation states and individuals for their own actions. As such, corporate liability is not a norm that is "specific, universal, and obligatory" enough to be a norm in the relations of states with one another.
Many courts outside the Second Circuit have disagreed with the Kiobel holding and have allowed Alien Tort Statute lawsuits to proceed against corporations. Kiobel will be argued with Mohammed v. Rajoub, a case in which the D.C. Circuit held that only natural persons could be sued under the Torture Victim Prevention Act.
—David Lester, Jones, Walker, Waechter, Poitevent, Carrère & Denègre LLP, Birmingham, AL
October 31, 2011
Second Circuit Affirms $1.2 Billion 9/11 Property Damage Settlement
The United States Court of Appeals for the Second Circuit recently approved a settlement resolving the bulk of the 9/11-related property damage and insurance subrogation claims against airlines and security companies for an aggregate settlement amount of $1.2 billion.
In its opinion, the Second Circuit held that the statute governing the 9/11 litigation—the Air Transportation Safety and System Stabilization Act of 2001, Pub. L. No. 107–42, 115 Stat. 230 (2001) (codified as amended at 49 U.S.C. § 40101, note) (ATSSSA)—does not preempt New York state law's "first-come, first-served" settlement rule; that the district court properly evaluated and approved the settlement; and that the full $1.2 billion settlement amount must be credited against the defendants' liability cap created by ATSSSA.
Background on ATSSSA
Congress passed ATSSSA in the immediate aftermath of 9/11. In addition to establishing the Victim's Compensation Fund for those killed or injured in the tragedy and their family members, ATSSSA contains several key provisions that governed all 9/11-related lawsuits throughout their history. Section 408(a) of ATSSSA statutorily capped the airlines' and security companies' tort exposure at the amount of their available liability insurance limits. Section 408(b) of ATSSSA created a new federal cause of action as the "exclusive remedy" for damages arising out of 9/11; vested original and exclusive jurisdiction over all 9/11 suits in United States District Court for the Southern District of New York; and mandated that the "substantive law" for the 9/11 suits "shall be derived" from state law "unless inconsistent with or preempted by Federal law."
The 9/11 Litigation
Following 9/11, a multitude of plaintiffs brought suit under ATSSSA against United Airlines, American Airlines, their security companies on 9/11, and others in the Southern District of New York. The plaintiffs fell into two general categories: (1) plaintiffs alleging personal injury or wrongful death that opted out of the Victim's Compensation Fund; and (2) property damage and business loss plaintiffs, including insurance companies who paid for 9/11-related damages and brought suit in subrogation. These cases were managed by the district court in two separate but coordinated tracks managed by court-appointed executive committees and liaison counsel.
After a period of extensive discovery, all but one of the personal injury/wrongful death cases had settled. The property damage claims were sent to mediation under the auspices of retired federal district court judge John S. Martin.
The Property Damage Settlement
After several months of mediation, in February 2010, 18 of the 21 plaintiffs in the property damage track reached a $1.2 billion global settlement with the aviation defendants and their insurers.
Following the settlement, a group of entities affiliated with developer Larry Silverstein objected—first, in the district court and then on appeal to the Second Circuit following the district court's approval of the settlement.
The Second Circuit's Approval
WTCP raised three principal grounds for objection. All were rejected by the Second Circuit.
No ATSSSA Preemption
First, the Second Circuit found that ATSSSA did not preempt the ordinary New York state law rule that allows a defendant or its insurer to settle "whenever and with whomever" they choose. The court held that ATSSSA's cap on the aviation defendants' tort exposure to the limits of their liability insurance was designed to protect the nation's air transportation system from "potentially ruinous tort liability in the wake of the attacks." The liability cap was not "intended to create a 'limited fund' from which plaintiffs . . . are entitled to an equitable share." As a consequence, the Second Circuit concluded, approval of a settlement involving some, but not all, of the 9/11 property damage claims was "neither inconsistent with ATSSSA" nor would it "stand as an obstacle to the accomplishment of Congress's objectives in enacting ATSSSA."
District Court's Evaluation Was Proper
Second, the court rejected the argument that the district court failed to properly evaluate the fairness of the settlement, and the objectors presented "no evidence of the bad faith necessary to draw into question the settlement." The Second Circuit endorsed both the process and the "lump sum payment" at issue in the settlement.
ATSSSA Cap Properly Credited
Finally, the Second Circuit held that the settlement amount was properly credited against the defendants' respective ATSSSA liability caps. The court was "not persuaded" that these settlement payments were not payments for "liability" within the meaning of ATSSSA, and held that "it makes better sense to read 'liability' to include the settlement payments made."
August 29, 2011
Mensing Plaintiffs Seek Rehearing
The plaintiffs in PLIVA, Inc. v. Mensing filed a petition for rehearing, asking the Supreme Court to revisit its ruling that state-law failure-to-warn claims against generic drug manufacturers are preempted by federal law.
In Mensing, the Supreme Court found that a conflict exists between state-law failure-to-warn claims and labeling provisions of the Hatch-Waxman Amendments to the Federal Food, Drug, and Cosmetics Act. Under Hatch-Waxman, a manufacturer seeking approval to produce a generic form for a brand-name drug must show that the drug it wishes to produce is equivalent to an already-produced brand-name drug and that the safety and efficacy labeling it proposes is the same as that already approved for the brand-name drug. Therefore, the Court reasoned, the generic drug manufacturers could not comply with the Hatch-Waxman Amendments and also provide the strengthened warnings that the plaintiffs contended were required, because the generic manufacturers had no unilateral ability to change their labels.
The plaintiffs contend that the Supreme Court overlooked an alternate theory of liability, arguing that "the Petitioner generic drug companies could have 'independently' complied with both state and federal law simply by suspending sales of generic metoclopramide with warnings that they knew or should have known were inadequate." Mensing Petition for Rehearing at 1.
Interestingly, the theory upon which plaintiffs seek rehearing has been rejected by the Restatement (Third) of Torts and 28 states, which all conclude that there is no common-law duty to initiate a product recall. See, e.g., Restatement (Third) of Torts, Products Liability § 11 (1998). Mensing's home state of Minnesota is among the 28 states that have expressly rejected a duty to recall. See Kladivo v. Sportsstuff, Inc., 2008 WL 4933951 at *5 (D. Minn. 2008). Moreover, the theory upon which the Mensing plaintiffs seek rehearing suffers from the same conflict between state and federal law that formed the basis for the original decision. In essence, for plaintiff's theory to prevail, the Supreme Court would have to hold that a state may order a product off the market after it has been approved by the Food and Drug Administration.
Most legal commentators agree that is very unlikely that the Mensing plaintiffs' petition for rehearing will be granted.
—David Lester, Jones, Walker, Waechter, Poitevent, Carrère & Denègre LLP, Birmingham, AL
June 23, 2011
Supreme Court Finds Preemption on Failure to Warn Claims Against Generic Drug Manufacturers
On June 23, 2011, the Supreme Court released its highly anticipated ruling in Pliva, Inc. v. Mensing, 564 U.S. (2011). In a 5–4 opinion, the Court held that state-law claims against generic drug manufacturers are preempted by federal law.
The plaintiffs in the underlying cases were prescribed metoclopramide, a generic form of the brand name drug Reglan. At the time the plaintiffs were initially prescribed metoclopramide, the warning label stated that “tardive dyskinesia . . . may develop in patients treated with metoclopramide,” and the drug’s package insert added that “[t]herapy for longer than 12 weeks has not been evaluated and cannot be recommended.” In 2004, the warning label was changed to read “[t]herapy should not exceed 12 weeks in duration.” The label was once again strengthened in 2009 when the United States Food and Drug Administration (FDA) ordered a black box warning stating that “[t]reatment with metoclopramide can cause tardive dyskinesia, a serious movement disorder that is often irreversible. . . . Treatment with metoclopramide for longer than 12 weeks should be avoided in all but rare cases.” After taking the drug as prescribed for several years, they developed tardive dyskinesia. The plaintiffs filed lawsuits against the generic manufacturers and the manufacturers of the brand name equivalents, alleging that the manufacturers failed to warn them of the effects of long-term use of metoclopramide.
—David Lester, Jones, Walker, Waechter, Poitevent, Carrère & Denègre LLP, Birmingham, AL
Injunction Against Seeking Recognition of an Ecuadorian Judgment
The long-running controversy over Ecuadorian claims of pollution of the Amazonian rain forest allegedly resulting from petroleum operations conducted between 1964 and 1992 recently took an interesting turn.
On March 7, 2011, the United States District Court for the Southern District of New York entered an order enjoining a set of "Lago Agrio" plaintiffs from seeking recognition and enforcement of an $18 billion Ecuadorian judgment in any court outside the Republic of Ecuador. Chevron Corp. v. Donziger, No. 11 Civ. 0691 (LAK), 2011 U.S. Dist. LEXIS 22729 (Mar. 7, 2011). By order dated April 6, 2011, the district court refused to grant the Lago Agrio plaintiffs a stay of the preliminary injunction pending appeal.
The district court's injunctive relief arose against the backdrop of allegations that the $18 billion judgment was obtained by fraud and that the Ecuadorian legal system does not provide impartial tribunals or procedures compatible with due process—both of which are generally grounds in U.S. courts for denying recognition of a foreign country judgment. See, e.g., Uniform Foreign Money-Judgments Recognition Act (UFMJRA) § 4. In addition, the Ecuadorian plaintiffs had loudly stated their intention to initiate simultaneous proceedings in multiple jurisdictions around the world for recognition and enforcement of the judgment, including their intention to seek ex parte attachments and seizures, as a strategy to exert pressure to compel a settlement. Consequently, even before the Lago Agrio judgment had been rendered, Chevron commenced an action that, among other things, sought a declaration as to the non-recognition of the judgment and made RICO claims against the plaintiffs' lawyer and others, based on their alleged participation in the corruption of Ecuadorian justice.
In issuing a preliminary injunction, the district court found that Chevron had established a likelihood of success on its claims of fraud in the procurement of the judgment—including the submission of forged expert reports and the ghostwriting of a supposedly independent damages assessment—and its claim that the Ecuadorian tribunals are flawed. (The district court acknowledged that the Ecuadorian judicial system "has been plagued by corruption and political interference for decades.") Chevron Corp., slip op. at 77–84.
The district court concluded that, under all the circumstances, the "balance of hardships tips decidedly toward Chevron" and therefore enjoined the Lago Agrio plaintiffs. Id. at 73.
The Ecuador controversy is somewhat unique in its scope, magnitude, and duration, and the breadth of the injunction is headline-grabbing; however, other cases involving such demonstrable fraud and corrupt judicial systems would just as likely fail under the UFMJRA and common law standards. On the other hand, it is not too difficult to envision future mass toxic tort cases being litigated against U.S. entities in foreign judicial systems that are not as corrupt but that are ill-equipped to handle mass tort cases and sophisticated toxic tort issues. Looking ahead, the evolution of foreign legal systems, the further development of international environmental standards, and the trend among U.S. courts not to permit claims for foreign environmental damages to proceed under the guise of an Alien Tort Statute cause of action might combine to give rise to an increase in such foreign mass toxic tort cases.
There will, no doubt, be closer questions in cases in which the facts are not as egregious as those present in the Ecuador controversy and in cases in which the foreign courts do not overreach. Of note, the National Conference of Commissioners on Uniform State Laws drafted a revised UFMJRA in 2005, which has now been adopted by 14 states. The revised act provides broader challenges to recognition by permitting a challenge to due process in the specific proceeding, rather than challenging the entire foreign judicial system. The revised UFMJRA, for example, allows challenges asserting a lack of judicial integrity in the particular proceeding. These sorts of challenges will be vital tools if foreign mass toxic tort judgments emerge.
In the most recent procedural turn in the Donziger action, the district court, by order dated April 15, 2011, bifurcated Chevron's cause of action for declaratory judgment on the recognition of the judgment from the other counts in the suit sounding in fraud and violations of RICO.
Keywords: recognition of judgment, foreign judgment, Ecuador
—Paul V. Majkowski Rivkin Radler LLP, Uniondale, NY
April 29, 2011
Ninth Circuit Holds That the Airline Deregulation Act Prevents States from Regulating Foreign Air Carriers
The Unites States Court of Appeals for the Ninth Circuit recently issued an opinion holding that the Airline Deregulation Act of 1978 (ADA) completely preempts state regulation of foreign air carriers. In re Korean Air Lines Co., Ltd., Antitrust Litigation, 2011 U.S. App. LEXIS 7887 (Apr. 18, 2011).
In the underlying case, a group of plaintiffs filed suit against Korean Air Lines Co., Ltd. (KAL) and Asiana Airlines, Inc. (Asiana) alleging that the defendants had conspired to impose an illegal surcharge on tickets purchased by the plaintiffs through travel agents and consolidators. Plaintiffs alleged that defendants' actions violated California's unfair competition and federal antitrust laws. Defendants moved to dismiss plaintiffs' complaint, arguing that the claims asserted by the plaintiffs under California state law were preempted by the ADA. Defendants further argued that the case management order prohibited plaintiffs from asserting federal claims. The district court agreed and dismissed the complaint.
On appeal, the plaintiffs argued that the preemptive force of the ADA does not apply to foreign air carriers. The ADA provides that a "[s]tate . . . may not enact or enforce a law, regulation, or other provision having the force and effect of law related to a price, route, or service of an air carrier that may provide air transportation." 49 U.S.C. § 417173(b)(1). The ADA defines the words "air carrier" and "foreign air carrier" as terms with different meanings. 49 U.S.C. §§ 40102(a)(2) and 40102(a)(21). Plaintiffs argued that Congress' use of the word "air carrier" in the preemption provision of the ADA indicated that Congress did not intend to preempt laws affecting "foreign air carriers." Defendants, on the other hand, argued that the term "air carrier" encompasses all air carriers, whether foreign or domestic.
The Ninth Circuit affirmed the district court's dismissal of plaintiffs' state law claims, holding as a matter of first impression that the "Airline Deregulation Act of 1978, 49 U.S.C. § 41713, preempts state regulation of foreign air carriers." In doing so, the court analyzed Congress's use of the term "air carrier" in the ADA and determined that its use did not always correspond with the term's statutory definition. In fact, the court found that the term "'air carrier' was sometimes used to refer generally to both domestic and foreign airlines." See, e.g., 49 U.S.C. §§ 40129(f); 44901(i); 44940(a)(2). Because the term "air carrier" is subject to at least two different meanings as used in the ADA, the Ninth Circuit analyzed the manner in which the term was used in the preemption provision and determined that such context resolved the dispute. The court explained that Congress's modification of the word "air carrier" with the phrase "that may provide air transportation" indicated that Congress intended for the preemption provision to apply to both foreign and domestic air carriers. The court noted that its interpretation was supported by the ADA's legislative history, which indicates that Congress "intended to preserve its authority to regulate the airline industry by prohibiting states from regulating all air carriers, both domestic and foreign." The court further found that pragmatic concerns supported its holding, because allowing individual states to regulate foreign air carriers would impose unfair burdens upon foreign air carriers flying internationally from the United States. Nevertheless, the Ninth Circuit found that the district court abused its discretion in dismissing the plaintiffs' federal antitrust claims on the grounds that such claims were barred by the case management order. Accordingly, the case was remanded to the district court for further evaluation of plaintiffs' state law claims.
The Ninth Circuit's decision is consistent with other courts' indirect application of the ADA's preemption provision to foreign air carriers. See, e.g., Morales, 504 U.S. at 383–85 (concluding that state law claims were preempted with respect to all respondents, including foreign air carriers); Buck v. Am. Airlines, Inc., 476 F.3d 29, 36 (1st Cir. 2007) (concluding that preemption prevented state law claims against six foreign air carriers); Read-Rite Corp. v. Burlington Air Express, Ltd., 186 F.3d 1190, 1197 (9th Cir. 1999) (concluding state law claim for cargo damage preempted against foreign air carrier). Therefore, it appears to be well settled that the ADA preempts state regulation of foreign air carriers, even though the plain language of the ADA does not make that explicitly clear.
—David A. Lester, Jones, Walker, Waechter, Poitevent, Carrere & Denegre, Birmingham, AL
March 29, 2011
Pennsylvania Court Prevents Disclosure of Hundreds of Confidential Settlement Agreements
In a scrimmage over the legality of settlement agreements relating to only one drug, the U.S. District Court for the Eastern District of Pennsylvania in FTC v. Cephalon provided what may be considered a win-win scenario for much of the pharmaceutical industry and for the Federal Trade Commission (FTC). The court is allowing the FTC to cite its report, which compiles data from hundreds of settlement agreements, while simultaneously ruling against the disclosure of those settlement agreements for one pharmaceutical company to examine. See FTC v. Cephalon, No. 08-2141 (E.D. Pa. Feb. 28, 2011).
The case involves an FTC challenge to Cephalon's settlements in patent-infringement cases for the drug Provigil (modafinil). The FTC cited two studies in support of its contentions that the Provigil settlement agreements were illegal "pay-for-delay"-type agreements, including the FTC studies entitled "Generic Drug Entry Prior to Patent Expiration: An FTC Study" and "Pay for Delay: How Drug Company Pay-Offs Cost Consumers Billions." These FTC studies compiled data from hundreds of settlement agreements on other unrelated drugs. The FTC stipulated that it did not intend to offer the studies into evidence and had not provided the underlying agreements (except the Provigil agreements) to its experts. Nonetheless, the FTC's citation of its studies prompted Cephalon to file a motion to compel the production of the underlying documents. Had the motion been granted, the unrelated settlement agreements—which involve much of the pharmaceutical industry—would have been disclosed to Cephalon's outside counsel.
Cephalon's motion caused opposition from the FTC and incited some third-party pharmaceutical companies to file a motion for a protective order to prevent disclosure of their own confidential unrelated settlement agreements. See Mem. of Law in Supp. of Third-Party Pharm. Cos.' Mot. for Protective Order, D.I. 88-1. The Motion for a Protective Order was denied as moot in light of the court's decision. In their motion, the third-party pharmaceutical companies emphasized (1) that disclosure of the settlement agreements was contrary to the confidentiality provisions of both the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (Pub. L. No. 108-173, 117 Stat. 2006 (2003)) and the Federal Trade Commission Act (15 U.S.C. § 41 et seq.), and (2) that disclosure of the settlement agreements to outside counsel, who repeatedly represent pharmaceutical companies, would put at risk highly proprietary information of many companies not involved in the Provigil dispute.
The court was ultimately swayed by the arguments of both the third-party pharmaceutical companies and the FTC. Its order denies Cephalon's motion to compel the production of hundreds of unrelated settlement agreements—but, it still allows the FTC to cite its report.
September 16 , 2010
New BP Class Action Complaint Filed
A class action lawsuit filed on August 20th in U.S. District Court in New Orleans appears to be the first to address the issue of punitive damages in connection with the BP oil spill. The case could initiate a long legal battle over the application of the Supreme Court's 2008 decision in Exxon v. Baker. The complaint, filed by Corliss Gallo, a landowner on Grand Terre Island, alleges that his property suffered environmental damage due to the oil spill and related cleanup effort. His complaint alleges that the "outrageous conduct" by BP, Transocean, Cameron International, and Halliburton represents a "common thread of gross negligence and willful, wanton and reckless indifference for the rights of others."
In Exxon, the Supreme Court limited punitive damages related to the Exxon Valdez oil spill to a one-to-one ratio of punitive to compensatory damages, characterizing the ratio as a "fair upper limit" in maritime cases. The court's decision reduced punitive damages awarded in that case from $5 billion to $507.5 million. However, the Supreme Court left open the possibility that punitive damages could be as much as three times actual damages in cases of reckless profiteering. The court further noted that the behavior of the Valdez captain, who was fatigued and possibly drunk, was "worse than negligent but less than malicious." The court articulated that a three-to-one punitive damages ratio might be warranted in a wide variety of cases involving egregious conduct, including malicious behavior and dangerous activity carried on for the purpose of increasing a defendant's financial gain.
Gallo's attorney believes that the BP oil spill qualifies as an exception to the rule. The suit relies on results of the Coast Guard investigation as well as the congressional hearing on the Deep Water Horizon explosion and resulting oil spill to characterize the defendants as companies that knowingly took risks and failed to properly maintain their equipment because of their overriding desire to maximize profits.
The case is expected to be incorporated under the multi-district litigation before Judge Carl Barbier, who may subdivide the cases into different tracks based on the nature of the claims.
August 16 , 2010
Transfer Order Issued on BP Deepwater Horizon Cases
On August 10, 2010, the Judicial Panel on Multidistrict Litigation (JPML) entered an order consolidating and transferring 154 oil-spill related cases to the United States District Court for the Eastern District of Louisiana. In doing so, the JPML panel noted that all defendants had moved to consolidate the actions in the Southern District of Texas, while the plaintiffs had set forth various arguments for the cases to be consolidated in the Northern District of Alabama, the Southern District of Alabama, the Northern District of Florida, the Middle District of Florida, the Eastern District of Louisiana, the Western District of Louisiana, the Southern District of Mississippi, the Southern District of Texas, and the District of South Carolina. The JPML explained that the Eastern District of Louisiana was the geographic and psychological "center of gravity" of the oil spill claims.
June 24, 2010
No Implied Preemption When a Statute Contains an Express Preemption Clause
The Hart v. The Boing Co. case arose from an accident involving a Continental Airlines flight that veered off the runway during takeoff at Denver International Airport, landed in a ravine, and burst into flames. Hart v. The Boeing Co., 2009 WL 4250122 (D. Colo. Nov. 23, 2009). Plaintiffs sued Boeing for injuries sustained in the accident and asserted negligence and strict product liability claims related to the design and manufacture of the aircraft's directional control and stabilization system.
Boeing moved to dismiss the complaint on the ground that the state law claims were impliedly preempted by the Federal Aviation Act (49 U.S.C. § 40101), which sets the only applicable standard of care for airline safety. The complaint, however, failed to plead a violation of a federal standard of care under the Act and its regulations. Relying on Tenth Circuit precedent, Cleveland v. Piper Aircraft Corp., 985 F.2d 1438 (10th Cir.), cert. denied, 510 US 908 (1993), the court denied the motion to dismiss. In Cleveland, the court of appeals pointed to the FAA's savings clause, which preserved remedies at common law, as evidence that the FAA did not impliedly preempt state laws implicating aircraft safety. Cleveland also found that implied preemption is generally not found when a statute (like the FAA) contains an express preemption clause. While the Hart court recognized that a subsequent Supreme Court case has undermined, in part, the logic in Cleveland, this dicta was not sufficient to overcome the precedent in Cleveland. The court rejected defendant's preemption argument.
Court Adopts "Nerve Center" Test for Federal Diversity Jurisdiction Cases
In February 2010, the Supreme Court unanimously held that, with respect to federal diversity jurisdiction, a corporation's "principal place of business" is where the corporation's high-level officers direct, control, and coordinate the corporation's activities." Hertz Corp. v. Friend, 559 U.S. ___ (2010).
In Hertz, the plaintiff brought an employment class action consisting of California residents under California law, in California state court. Hertz, headquartered in New Jersey, removed the case to federal court based on federal diversity jurisdiction. Many federal courts followed the "nerve center" test to determine principal place of business, but California did not. The Ninth Circuit followed a different rule that let the plaintiff treat Hertz as having its principal place of business in California because that was the location of most of its retail care locations and employees.
The decision in Hertz finally provides predictability and uniformity in the determination of a company's "principal place of business" for diversity purposes. "[A] company's principal place of business] should normally be the place where the corporation maintains its headquarters—provided that the headquarters is the actual center of direction, control, and coordination, i.e. the 'nerve center,'" provided Justice Breyer.
— Orla M. Brady, Kreindler & Kreindler LLP, New York, NY
World Trade Center Disaster Recovery Workers' Claims Questioned in Litigation
On May 29, 2008, Judge Alvin K. Hellerstein of the Southern District of New York held a status conference in the World Trade Center Disaster Site litigation, Master Docket number 21 MC 100. The plaintiffs in the mass tort action, firefighters, police officers, construction workers and other individuals, claim they sustained respiratory injuries while participating in emergency response activities at Ground Zero in the aftermath of September 11th. They seek to recover damages from the city of New York and its contractors, including the $1,000,000,000 in insurance that they maintain.
Prior to the status conference, Judge Hellerstein had consolidated the more than 10,800 plaintiffs' cases for pre-trial discovery purposes. He had also ordered them to file short form complaints that listed their injuries and to produce all of their medical records from 1995 forward. At the conference, counsel for the city of New York and its contractors advised the court that many of the plaintiffs did not sustain any of the injuries that the media had previously alleged they had, and that, in fact, some plaintiffs did not sustain any injuries at all. Specifically, counsel represented that "the severity of plaintiffs' cases, taken in the composite, has been grossly overestimated and is routinely overestimated in the press and in other places." He further stated that the city's "conclusion . . . from what is in front of us now is that the number of plaintiffs who are both seriously injured and are able to link that injury to anything having to do with the World Trade Center and 9/11 will be an extremely small percentage of what is now an overly expansive pool that is the result of virtually no screening of cases before they were taken in and filed."
The city revealed that as many as 30 percent of the plaintiffs had nothing more than nominal injuries such as a runny nose. It further revealed that a significant number of their alleged injuries (e.g., multiple sclerosis and hernias) could not be causally related to their exposure to the World Trade Center debris. The city also uncovered the previously unknown fact that many of the plaintiffs not only filed suit without having been diagnosed with any injury, but did so only because the unions that represent them recommended that they do so. The city further reported that, based on a sample study of 500 plaintiffs' medical records, a significant number of plaintiffs had preexisting medical conditions, which could easily have been the cause of their alleged respiratory illnesses. For example, 78 percent had been diagnosed as obese or morbidly obese, both of which conditions are known to cause respiratory impairment. Moreover, 37 percent admitted that they are former or current smokers. Furthermore, plaintiffs' medical records reveal that as many as 30 percent of them have not sustained any injuries at all. Lastly, the city reported to the court that it could not complete its analysis of plaintiffs' claims because they had failed to produce all of their medical records, from 1995 forward, pursuant to the court's prior order.
In response, plaintiffs argued that the city's analysis is deeply flawed and that the evidence that they will offer will prove that the many of the workers suffered from serious respiratory related injuries, such as lung cancer, which were caused by their exposure to the World Trade Center debris. After hearing the parties' arguments, the court ordered the plaintiffs to produce all of their medical records from 1995 to date.
It remains to be seen how the court will address the city's arguments after the plaintiffs produce the necessary medical records. Future significant developments regarding this mass torts claim will be reported here.
— Andrew J. Scholz, Esq., Flemming Zulack Williamson Zauderer LLP, New York, NY