Home › Products Liability › News & Developments

News & Developments

April 19, 2013

A Progress Report on the New Rule 26(b)(4)(C)

 

The 2010 amendments to Federal Rule of Civil Procedure 26 significantly altered the landscape of expert material discoverability. The pre-amendment rule required disclosure of a wide array of expert information, causing careful litigators to minimize communications with their own testifying experts to avoid exposing those statements in discovery. This chilling effect led to broad support for expansion of the work-product protections ensconced in the 2010 amendment to Rule 26(b)(4). Two years have passed since the change, and an increasing number of courts have been presented with disputes addressing the new rule.  The resulting case law demonstrates that caution is still necessary when communicating with expert witnesses.

Protections given to attorney-expert communications in the new Rule 26(b)(4)(C)(ii) explicitly exempt the “facts or data that the party’s attorney provided and that the expert considered in forming the opinions to be expressed.” The attention upon “facts or data” (not “data or other information” as phrased in the 1993 version of the rule) was intended by the advisory committee to “limit disclosure to material of a factual nature by excluding theories or mental impressions of counsel” while still requiring the disclosure of materials “from whatever source, that contains factual ingredients.”  As a threshold matter, an expert must receive and consider the materials for disclosure to be required.  Innovative Sonic Ltd. v. Research in Motion, Ltd. (N.D. Tex. March 1, 2013). The analysis then shifts to whether the material, even communications from an attorney, consists of “facts or data.”

In Citizens Insurance Company of the Midwest v. LG Electronics, USA, 2013 WL 416005, at *2 (S.D. Ind. Feb. 1, 2013), the court was confronted with a motion seeking the production of questions prepared by an expert for use by his attorney to prepare for the deposition of an opposing engineer, as well as text messages between that counsel and expert during the deposition.  The court refused production, reasoning that the information did not “fall within the category of information required to be disclosed” by Rule 26(b)(4).  A similar result was reached in International Aloe Science Council, Inc. v. Fruit of the Earth, Inc., 2012 WL 1900536 (D. Md. May 23, 2012), where an expert created notes at the request of counsel to assist in counsel’s preparation for an opposing expert’s deposition.  The court prevented disclosure after concluding that those notes were not “facts or data” considered by the expert in the development of his opinion.

Where “facts or data” are communicated, courts have reached the opposite conclusion. In Fialkowski v. Perry, 2012 WL 2527020 (E.D. Pa. June 29, 2012), plaintiff sought to withhold production of spreadsheets and analyses of her law firm’s financial records created for her retained certified public accountant in a financial dispute with her law partners. Plaintiff argued that the materials were prepared to assist her attorney in understanding the firm’s financial records. If the transmission of documents stopped there, the attorney-client privilege would prevent their disclosure. However, the attorney transmitted those documents to the expert and the court concluded that the 2010 amendments did nothing to alter the explicit discoverability of all “facts or data” considered by the expert, from whatever source, and ordered disclosure. A similar conclusion was reached in In re Asbestos Products Liability Litigation (No. VI), 2011 WL 6181334, at *7 (E.D. Pa. Dec. 13, 2011), when a lawyer wrote to a medical expert with information regarding the plaintiffs’ medical and smoking history. No protection applied where the lawyer “specifically identif[ied] ‘facts or data’ for the expert to consider in forming opinions.”

The recent case of Apple, Inc. v. Amazon.com, Inc., 2013 WL 1320760, at *2 (N.D. Cal. Apr. 1, 2013) provides a useful analysis. There, two technical assistants conducted initial survey work as non-testifying consultants for Apple and subsequently worked for Apple’s retained expert.  Apple argued that the assistants’ survey work was not provided to or considered by its expert, and therefore did not need to be produced.  The court disagreed, and accepted the argument that these assistants might have carried knowledge from their initial survey into their work for the testifying expert that influenced or informed the testifying expert’s opinion.  Limited depositions of the two assistants were ordered to ferret out the independence of the initial work, and whether or not the expert was “exposed in some manner, perhaps even unknowingly, to the initial survey work given the proximity in time of the two work projects and the dependent nature of [the assistants’ and expert’s] working relationship.”

The “bright-line” rule favoring production of documents between expert and attorney contained in the 1993 amendments, while relatively easy to administer, was problematic. The amended Rule 26(b)(4) gives attorneys greater liberty to work with retained experts but opens the door to arguments that a particular communication provides “facts or data” requiring disclosure.  Conversely, the potential for abuse arises if an attorney acts as an archivist for an expert’s notes or as a facilitator for communications with third parties in order to shroud those communications in the protections of Rule 26. Stay tuned, as courts provide greater clarity on new Rule 26(b)(4).

Keywords: litigation, products liability, Rule 26(b)(4)(C), expert material, discoverability, attorney-expert communication, facts, data, work-product protections

—Marie E. Chafe, Esq.  Cornell & Gollub, Boston, MA

April 18, 2013

Get Your "FACTS" Straight

 

The U.S. House of Representatives Subcommittee on Regulatory Reform, Commercial and Antitrust Law is considering legislation that for the first time would require asbestos bankruptcy trusts to submit to bankruptcy courts quarterly reports containing information about claimants to the trust. Testimony in support of and in opposition to the bill was heard on March 13, 2013.

The Furthering Asbestos Claim Transparency Act of 2013 (FACT), H.R. 982, will obligate each of the current approximately 60 bankruptcy trusts to file quarterly reports that “describe[] each demand the trust received from, including the name and exposure history of, a claimant and the basis for any payment from the trust made to such claimant.” See Furthering Asbestos Claim Transparency Act of 2013, H.R. 982, 113th Cong. (2013). If passed, these quarterly reports will be made available to the public on the court’s docket.  Id.

Of interest to asbestos state court litigants, this proposed legislation will also obligate trusts to timely disclose to parties in cases involving asbestos exposure “any information related to payment from, and demands for payment from, such trust.” Id.

While the purpose of this legislation is aimed at curbing fraud and preventing claimants from recovering from multiple bankrupt trusts for the same exposure and injury, its effects are certain to be more widespread. Peggy L. Abelman, a retired state court jurist who handled an asbestos docket in Delaware, which has already implemented a similar state law that requires plaintiffs to disclose claim materials as part of the discovery process, testified about the need for reform in this area:

Proponents also contend that this bill is needed now more than ever, particularly as asbestos plaintiffs shift their focus from bankrupt product manufacturers to solvent product and premises owner defendants, such as chemical manufacturers.  As Marc Scarcella, an economic consultant of Bates White, LLC, testified:

Opponents of the bill are concerned that these new reporting requirements will delay the processing of bankruptcy claims and delay the compensation of claimants. Elihu Inselbuch, a member of Caplin & Drysdale, expressed the additional concern that “the bill is intended to help defendants skirt state laws regarding rules of discovery and joint and several liability.”   Inselbuch further argued that because claimants typically only receive from the bankruptcy trusts a small percentage of the value of their injuries, the current system leaves little concern for fraudulent, multiple recoveries for the same injury.   

Attorneys that litigate products and premises liability suits involving asbestos exposure should keep abreast of this proposed legislation. Should this legislation pass through Congress, those defending cases in states that do not currently mandate bankruptcy trust disclosures as part of the discovery process will have access to this new and valuable litigation tool. Less certain is whether the implementation of this law will lead to the discovery of any fraud in the bankruptcy claim process. Todd Brown, a Professor at the State University of New York, Buffalo Law School opined that until such disclosure is made, neither party “has access to sufficient information across trusts to reach the extreme conclusions that are commonly advanced—that fraud is nonexistent, on the one hand, or rampant, on the other.”

Keywords: litigation, products liability, asbestos, transparency, bankruptcy trust, FACT 2013, federal legislation

—Michelle Molinaro Burke, Porzio, Bromberg & Newman, P.C., Morristown, NJ

April 11, 2013

Analyzing the Seeds of Pom Wonderful

 

It has been nearly a year since the Ninth Circuit issued its opinion in Pom Wonderful LLC v. Coca-Cola Co, 679 F. 3d 1170 (9th Cir. 2012). We reflect on whether the decision has lived up to its hype. Has it staunched the onslaught of food-advertising litigation by consumers as defendants had hoped? 

Pom Wonderful v. Coca-Cola

In 2008, Pom Wonderful sued Coca-Cola under the Lanham Act, California’s Unfair Competition Law (B&PC §17200) (UCL) and California’s False Advertising Law (B&PC 17500) (FAL). Pom challenged the name and label of Minute Maid’s “Pomegranate Blueberry” juice blend, and asserted that the name and label misled consumers because Pomegranate and Blueberry juice comprised only 0.3 percent and 0.2 percent, respectively, of the total juice blend.

The Ninth Circuit affirmed the dismissal of Pom’s Lanham Act claims. The court began by highlighting a tension between the Food, Drug and Cosmetic Act (FDCA), which entrusts to the FDA the interpretation and enforcement of laws relating to food labeling, and the Lanham Act, which gives a right of action to those damaged by false advertising.  While the court declined to establish any blanket rule, and stressed that cases must be evaluated individually, it concluded that the FDCA barred Pom’s Lanham Act claims.  The court also found that FDA regulations specifically permitted the naming of juices after nondominant ingredients.  The court did not, however, opine on the deceptiveness of Coca-Cola’s label. Although the court refused to hold that Coca-Cola’s label is nondeceptive, it accepted that “Coca-Cola’s label presumptively complies with the relevant FDA regulations” and “declin[ed] to allow the FDA’s judgment to be disturbed.”

The court remanded Pom’s UCL and FAL claims for a determination whether Pom had statutory standing, and whether the FDCA preempts state law claims based on violations of California’s Sherman Food, Drug and Cosmetic Law or provides a defense under California’s “safe harbor” doctrine.

Post-Pom World

Pom certainly has not put an end to food-advertising litigation, but it has given defendants some useful tools.

In several cases, defendants have broadly invoked Pom to argue that the FDCA preempts state law claims directed at conduct regulated by FDA.  See, e.g., Lanovaz v. Twinings North America, 2013 WL 675929 (N.D. Cal. Feb 25, 2013); Kashin v. The Hershey Company, 2012 WL 5471153 (N.D. Cal. Nov. 9, 2012); Delacruz v. Cytosport, Inc., 2012 WL 2563857 (N.D. Cal. June 28, 2012). These arguments have gone nowhere. District courts have noted that Pom did not find state law claims preempted, while noting that the California Supreme Court has specifically held that the FDCA does not preempt state rights of action premised on violations of California’s Sherman Law where such provisions mirror federal law. See In re Farm Raised Salmon Cases, 425 Cal. 4th 1077 (2008).

On the other hand, where plaintiffs base their UCL/FAL claims on conduct approved by the FDCA or FDA regulation, district courts will find such claims preempted.  See, e.g., Ivie v. Kraft Foods Global, 2013 WL 685372, *9-*11 (N.D. Cal. Feb. 25, 2013).  These rulings owe more to general principles of preemption than to Pom, but Pom supports the primacy of FDA’s interpretation of the FDCA in assessing whether conflicts exist. See, e.g., Veal v. Citrus World, 2013 WL 120761, at **9-10 (N.D. Ala, Jan. 8, 2013).

Further, where it is unclear if state and federal law conflict, Pom cautions district courts not to set federal law and policy.  See, e.g., Astiana v. Hain Celestial Group, 2012 WL 5873585 (N.D. Cal., Nov. 19, 2012).  For example, in Ivie, supra, the court stated: “where the FDA has yet to speak on whether a particular label or claim on a consumer product is unlawful or misleading, it may be appropriate to dismiss … under the primary jurisdiction doctrine.” Id at *7 (dismissing one claim based on conduct subject to current FDA rulemaking).

Finally, while no court has yet evaluated whether the FDCA/ FDA regulations support a defense under California’s “safe harbor” doctrine, Pom at 1179, the policy considerations articulated in Pom argue in its favor.

Keywords: litigation, products liability, food advertising, FDA regulations, FDCA, safe harbor doctrine, Lanham Act, Pom Wonderful LLC v. Coca-Cola Co

—Karen Woodward and Anthony Anscombe, Sedgwick Law, Los Angeles, CA and Chicago, IL, respectively

April 11, 2013

Recent Developments in Benzene Litigation

 

A recent study finding an association between exposure to benzene and certain distinct blood cancers may foreshadow a shifting focus in future benzene litigation.

Benzene has been used in numerous industrial applications for more than a century, and today it is one of the most widely used industrial chemicals.  Benzene is a ubiquitous chemical which is formed through natural processes like volcanoes and forest fires, as well as through industrial processes.  It can be found at low levels in crude oil, gasoline, diesel exhaust, urban air, cigarette smoke, and even in some foods. 

Benzene is recognized and classified by public health agencies as a known human carcinogen. The International Agency for Research on Cancer (IARC), a part of the World Health Organization, classifies benzene as Group 1, carcinogenic to humans. The U.S. National Toxicology Program classifies benzene as “known to be a human carcinogen based on sufficient evidence of carcinogenicity from studies in humans.” The U.S. EPA classifies benzene as a Group A, human carcinogen.

The historical driver for the classification of benzene as a known human carcinogen has been epidemiology studies of worker cohorts which found that high levels of exposure to benzene can cause a specific type of leukemia, acute myeloid leukemia or acute myelogenous leukemia (AML). Benzene litigation has typically focused on this link between high exposures to benzene and AML. However, recent scientific studies have focused on a possible link between benzene exposure and myelodysplastic syndrome (MDS), certain distinct blood cancers which sometimes can precede and evolve into AML. 

MDS is a collection of various hematological malignancies that involve poor production of the myeloid blood cells by the bone marrow. Myeloid cells are the precursors to production of red blood cells, platelets, and some white blood cells. MDS is a common illness in older adults. According to the National Cancer Institute, there are slightly more than 10,000 new cases of MDS diagnosed in the United States each year. Most of these cases are found in people over age 60.

 Until a few decades ago, MDS was not classified as a distinct illness, and instead it was thought to be simply a period of anemia and poor blood cell production which preceded AML.  Consequently, MDS was often referred to as “smoldering leukemia” or “preleukemia.” This delay in the recognition of MDS as a distinct disease may have contributed to possible misclassifications of MDS as either aplastic anemia, leukemia, or other diseases in early epidemiology studies. 

However, recent scientific studies have focused attention on the possible link between benzene exposure and MDS. The most notable of these studies is the recently published Schnatter, Glass, Tang, Irons, and Rushton, Myelodysplastic Syndrome and Benzene Exposure Among Petroleum Workers: An International Pooled Analysis,  J Nat’l Cancer Inst (2012) 104 (22): 1724-1737 (published on line October 30, 2012).  This study pooled and examined data from three prior epidemiology studies of cancers among petroleum distribution workers that were conducted in Australia, Canada, and the United Kingdom.  By pooling the data from these prior studies, the researchers were able to specifically examine a possible link between benzene exposure and MDS as well as several other hematological cancers, including AML.

Schnatter, et al. found a statistically significant dose-response relationship between MDS and exposure to benzene at exposure levels which the authors describe as “relatively low-level exposure.” Interestingly, the study did not find an association between benzene exposure and AML, the type of leukemia usually associated with exposure to benzene. The authors suggest two possible interpretations of their findings. First, they suggest that MDS may actually be “the most relevant outcome for benzene exposure” and previous studies which relied on vital records in eras when MDS was not yet well defined could have reported excesses of AML or other diseases instead of MDS. Second, the authors suggest that perhaps benzene may cause MDS at lower exposures, while higher exposures are necessary to develop AML. 

Schnatter, et al. poses more questions than answers about the reasons for its somewhat surprising finding of an association between exposure to benzene and MDS, but not AML. The authors state that further studies are needed to clarify the relationship between lower benzene exposures and both MDS and AML. However, the study suggests that “MDS may be the more relevant health risk for lower exposures” to benzene, a suggestion which will certainly receive attention in future litigation concerning exposures to benzene. 

Keywords: litigation, products liability, benzene, myelodysplastic syndrome (MDS), human carcinogen, Schnatter

—Jonathan Shoebotham, Thompson & Knight, Houston, TX

March 1, 2013

CPSC Enforcement: What Will 2013 Bring?

 

The Consumer Product Safety Commission (CPSC) increased its enforcement efforts in 2012 and appears poised to take even stronger action in 2013. If last year is any indication of what this year will bring, 2013 will be a challenging time for consumer-product businesses regulated by the CPSC.

The commission has signaled that it wants to emphasize its enforcement mission in 2013 through the following:

All of these point to the implementation of a stricter CPSC enforcement policy for 2013.

The CPSC spent much of 2009 through 2011 developing regulations that implement the landmark Consumer Product Safety Improvement Act of 2008 (CPSIA). In 2012, the commission’s emphasis began to focus increasingly on enforcement of this new regulatory regime. To that end, the CPSC took various instruments out of its enforcement toolbox, using some for the first time and others for the first time in years.

In 2012, the CPSC increased its enforcement activities at major U.S. ports. CPSC inspectors joined with Customs and Border Protection (CBP) agents to target and seize high-risk imports that violate safety standards. The CPSC and CBP seized over 2 million units of problematic toys in fiscal 2012. The commission believes that stopping unsafe products at the borders before they enter the country is more effective than a recall of a product that has already been distributed in the chain of commerce. Continued and increased CPSC enforcement at the borders can be expected for 2013.

Over the last several years, virtually all CPSC recalls were “voluntary.” Companies jointly recalled products in cooperation with the CPSC. In 2012, however, the commission staff began to file suits seeking mandatory recalls when the CPSC could not reach agreement on the continued distribution of the questioned products. These administrative complaints mainly involved small rare earth magnets linked to accidental ingestion by children. The CPSC filed three such administrative complaints against companies involved in the sale of high-powered magnets. The commission took this unusual action even though the companies had recalled the products and strengthened product warnings in cooperation with the CPSC. The commission recently filed another administrative complaint—this time against a manufacturer of infant recliners when “… discussions with the company … failed to result in an adequate voluntary recall plan.”

Just as with the rare earth magnets, the CPSC applied enforcement pressure on the manufacturer of the infant recliners by persuading major retailers to voluntarily stop selling the infant recliners. When the commission took similar action in the case of the sale of rare earth magnets, the resulting economic pressure caused the importers of these magnets to capitulate and discontinue their import of the magnets. The commission will likely be encouraged by these results and use administrative complaints and pressure on retailers to obtain the kind of recall compliance it desires.

The CPSC is also likely in 2013 to significantly increase civil penalties for late reporting. The 2008 CPSIA dramatically increased the range of civil penalties—up to $ 15 million for a series of violations. To date, most late-reporting penalties have involved cases where the failure to report occurred prior to the increased CPSIA penalty limits, but these “grandfathered” late-reporting cases are becoming a thing of the past. In 2013, the commission will likely view newer violations as governed by the enhanced CPSIA penalty amounts. One commissioner has already publically called for increased civil penalties. Further, the CPSC chairman Inez M. Tenenbaum  stated that she expects future enforcement actions will include penalty amounts that maximize deterrence. We can anticipate very large “marquee” penalties in 2013.

Finally, political factors point to enhanced CPSC enforcement. The commission is composed of a Democratic majority. This has been the case during recent years, and with the reelection of Barack Obama, the Democratic majority will remain. Democratic commissioners have historically held a more stringent view of how consumer-product safety laws should be enforced. This will not change in 2013. Instead, businesses should expect a CPSC in 2013 that enforces consumer-product safety rules even more strictly and more stringently.

Keywords: litigation, products liability, Consumer Product Safety Commission, Consumer Product Safety Improvement Act of 2008, enforcement, civil penalties

—Charles E. Joern Jr., Joern Law Firm, Oak Brook, IL

February 28, 2013

Retroactive Elimination of Private Action Upheld

 

The Federal Circuit Court of Appeals recently determined that the retroactive elimination of a private qui tam action for false patent marking did not violate the due process or intellectual property clauses of the U.S. Constitution. Brooks v. Dunlop Mfg. Inc., No. 2012-1164 (Fed. Cir., decided December 13, 2012).

Brooks brought a false-marking lawsuit in September 2010 against Dunlap for allegedly marking a guitar string winder with an expired and invalidated patent number. Under 35 U.S.C. § 292(a), it is unlawful for any person to engage in specified acts of false patent marking, such as affixing a mark to a product that falsely asserts it is patented, with the intent to deceive. Prior to the amendment at issue, § 292(b) authorized private parties (relators) to bring a qui tamor informer’s suit for violations of § 292(a). The case was stayed pending resolu­tion of another case raising an issue similar to one raised by the defendant and, in the interim, Congress enacted the Leahy-Smith America Invents Act, Pub. L. No. 112-29, 125 Stat. 284 (2011) (AIA).

Recognizing a “surge of vexatious litigation [that posed] a risk of grossly dispro­portionate penalties for false marking,” Congress included in the AIA a provision allowing only the United States or a person suffering competitive injury to bring a cause of action against someone who affixes to a product a mark that falsely asserts that the item is patented. AIA § 16(b).  Previously, the law allowed any person to sue for the statutory penalty. Amendments under AIA were expressly retroactive, applying “to all cases, without exception, that are pending on, or commenced on or after, the date of the enactment of this Act.” Id.

Dunlop thereafter sought to dismiss the case, arguing that Brooks no longer had standing “because he can no longer recover a statutory penalty and has not alleged any right to damages for competitive injury.” Brooks raised challenges to the new law under both the takings clause and due process clause, both of which the district court rejected.

On appeal Brooks asserted that the elimination of the qui tam provision violated the due process and intellectual property Clauses. He contended that the retroactive elimination of his right to sue was arbitrary and irrational and constituted an unlawful repudiation of a binding contract between him and the United States. The court disagreed. It found that Congress had legitimate concerns with respect to the cost and constitutionality of pending qui tamactions. The court found that reigning in perceived abusive and inefficient private actions had rational legislative purpose.

The court also found that it was rational for Congress to eliminate the qui tam provision in response to questions about its constitutionality. The court rejected Brooks’s assertion that by filing a lawsuit against Dunlop, he had a binding contract with the United States. Neither the language of the pre-amendment statute nor legislative history indicated that the intent was to create a unilateral contract with the qui tam relator.  Lastly, the court found that eliminating the qui tam provision of § 292 was a rational means of pursuing a legitimate legislative purpose—effectuating and maintaining a patent system—and therefore Congress did not violate the intellectual property clause.

Keywords: litigation, products liability, qui tam, America Invents Act, Brooks v. Dunlop, intellectual property clause, due process clause, U.S. Constitution, patents, false marketing

—Chris A. Johnson, Shook, Hardy & Bacon L.L.P., San Francisco, CA

News & Developments

February 15, 2013

New Liability Twist for Drugs Under 2012 Amendments

 

In July 2012, Congress helped the pharmaceutical plaintiff’s bar with the creation of a new reporting obligation for problems with marketed drugs. The Food and Drug Administration Safety and Innovation Act (FDASIA) triggers the tort doctrine of “negligence per se.” That classic doctrine allows recovery of damages where the defendant violated the terms of a penal statute, which had protected persons like the plaintiff through criminal or civil penalties. By showing defendant’s noncompliance with the law, the plaintiff has shown enough presumptively negligent conduct to win compensation in those state tort systems that permit plaintiffs to assert this cause of action. The penal provisions of the FDASIA compel a duty to report. Triggering the duty will be information that the drug’s “use” in the United States “may result in serious injury or death.” (21 U.S.C. §568(a)(1), added by Pub. L. 112-xxx §715 (2012)). A drug wholesaler, importer, or manufacturer must report information that its drug “may” pose a serious injury risk, or that the drug has been found to be counterfeit. The company must disclose facts about the injury risk facts to FDA, under its current rules for approved new drugs, but the reporting duty is now a statutory mandate.

Many plaintiffs’ counsel in drug cases will learn that their client was not the only patient harmed by a particular prescription drug. They may now hone in on the new reporting duty: When did the unlabeled “serious” injury occur? When did the company learn of the risk? When did the company report this drug’s particular causal connection to a “serious” injury? When did the defendant drug maker or distributor (who made the drug, imported it, or shipped it to a local pharmacy from its central or regional warehouse) notify FDA, after reports showed that this drug’s use “may” (not “will”) result in serious injury? The law shields the actual pharmacy delivering the drug to the patient or consumer “exclusively for retail sale,” but others in the drug supply chain now have an express reporting duty. The 2012 FDASIA will make more drug firms vulnerable to negligence per se claims, bringing a new twist to drug-liability cases.

Keywords: litigation, products liability, Food and Drug Administration Safety and Innovation Act, negligence per se claims, duty to report, drug liability

—Professor James T. O’Reilly, University of Cincinnati College of Law, Cincinnati, Ohio

February 14, 2013

Hospital Devices Confront Malware Doomsday

 

Will the rapid progress of interlinked hospital medical devices and electronic health records save your doctor from making diagnostic or treatment errors? The billions of stimulus dollars that have been invested in the electronic conversion of health records is premised on the ability to cross-check the inpatient and outpatient records for the hospitalized person, allowing all of the proper cautions to be taken. A new system is functioning in many older medical venues—avoiding paper and pen errors, correcting the mistakes of transfers among manila folders or losses of memo notes, and streamlining the hand off of patients to the next shift of nurses.

Then, along comes the realization that vulnerability to the penetration of computer systems, usually attributed to Mafia-style hacking to steal bank accounts, extends to medical images and records being shared constantly with other electronic participants in hospital settings. Dig more deeply into that perceived vulnerability and you find the reality: Malware attacks can slip through a medical system that is linked together with obsolete software like Windows XP.

The 2012 Seattle annual meeting of the Regulatory Affairs Professionals Society assembled some of the best and brightest among computer-savvy experts to address health-care systems’ vulnerability—foremost among them former MIT computer whiz Kevin Fu, now a professor at the University of Massachusetts. On October 29, Dr. Fu laid out for the nation’s FDA experts the ways in which 660 interlinked medical devices inside a prominent Boston hospital were vulnerable to attack. His chilling message was that by being linked with an older Windows XP platform, for which security patches and protections will end after 2013, the hospital devices are the newest and most ripe targets of hackers and malware invaders. He urged audience members operating in health care to quickly revisit assumptions that “This could never happen for our patients” or “Nobody would ever shut down life support equipment on our cardiac wing.” Vulnerable software looms larger as the date on which obsolete Windows XP stops being updated and patched to prevent unauthorized manipulation by malware.

The law firms of the readers of this newsletter represent excellent medical device providers, astute health-care chains, and savvy software firms in the health-care space. Have they budgeted to force IT conversions in 2013? Assume we fast forward to 2014, and Microsoft has finally walked away from patching XP as it has warned it will do. A local hospital’s pediatric wing hums busily with monitors, desktops showing air and blood flow readings, laptops and tablets in the hands of caregivers, and all of a sudden “poof,” the equipment stops communicating and the caregivers are blinded. A frantic call to IT brings the computer-repair person on duty, but the problem is too large for one tech and the intensive care unit’s alarms are sounding a discordant note in the hallways.

Fu’s warning and those of others puts the health-care community on notice. Does state product-liability law have a role in forcing hospitals to update their protection against malware and hacking?

The software-platform sellers enjoy all the immunity that shrink-wrapped license conditions may provide them under state laws. A small local cable installer or electrician followed instructions from the employees in actually connecting the various devices. The hospital’s counsel will have ready arguments on why the health-care entity is shielded by state law or has acted prudently in reliance on its vendors. The medical device and diagnostic-equipment makers will assert that page six of their instructions for installation had cautioned about interconnected monitoring and about remotely controlled operations. The doctors on duty assert that they never made a decision about the software; it is already in place when they arrive and leave each day, so they are not negligent.

Parents holding photos of their dead babies make for dramatic courthouse-steps video for the group of defendants to face. The malware perpetrators in Ukraine or Nigeria escape accountability, and the tort law of the state may seem quite inadequate to the task of allocating liabilities. Some lawyers will dust off their Y2K liability memos from January 1, 2000 and reconsider where the 2014 hospital harms can be attributed among those in denial of the foreseeable vulnerabilities. Fu’s warning to a large audience of savvy regulatory-affairs managers chills the spine of hospital veterans, and the astute defense counsel will have a chat soon with the client’s IT management team about obscure issues like malware patches, security updates, and their response to the world after XP expires.   

Keywords: litigation, products liability, malware, electronic health records, Regulatory Affairs Professionals Society, hacking, hospital devices, Windows XP platform

—Professor James T. O’Reilly, University of Cincinnati College of Law, Cincinnati, Ohio

February 14, 2013

New Jersey Rejects Lack-of-Prior-Substantiation Claim

 

Lawsuits alleging that food labeling or advertising contain deceptive health-benefit claims have been on the rise for several years. In many of these cases, plaintiffs attempt to use the doctrine of “prior-substantiation” to establish liability under state consumer-protection statutes, which generally prohibit deceptive or misleading acts or practices.

Plaintiffs use the prior-substantiation doctrine in an effort to shift the burden of proof to the defendants by arguing that the defendant did not have adequate substantiation to support the challenged advertising claim at the time the claim was made, thereby rendering the claim deceptive under state law. The difference between a prior-substantiation claim and a typical claim that a product label or advertisement is misleading is subtle but important. Under a prior-substantiation theory, the question is whether the defendant possessed adequate proof of the claim, and the inquiry focuses on the defendant’s ability to come forward with the requisite proof. Absent a lack-of-prior-substantiation claim, the plaintiff must demonstrate that the challenged claim is false or otherwise misleading. 

Because it alters the traditional burdens of pleading and proof, a prior-substantiation claim is available only to the government, although that has not prevented private plaintiffs from asserting this theory. In an important 2012 decision, Scheuerman, et al. v. Nestlé Healthcare Nutrition, Inc., CIV. 10-3684 FSH PS, 2012 WL 2916827 (D.N.J. July 17, 2012), the District of New Jersey confirmed that a lack of prior substantiation claim is not available to a private plaintiff asserting a claim under both California and New Jersey state law. In Scheuerman, plaintiff challenged Nestlé’s marketing campaign for BOOST Kid Essentials drink supplement, alleging that Nestlé made both express and implied health-benefit claims that the drink supplement strengthened the immune system and protected against the common cold.

Granting summary judgment to Nestlé, the court held that it was not sufficient for plaintiffs to claim that the advertising was not adequately substantiated or lacked strong scientific support. Rather, a private plaintiff has the burden to present affirmative evidence that demonstrates the falsity of the marketing claims at issue. Thus, even though plaintiffs’ experts criticized Nestlé’s scientific studies as allegedly offering only “limited support” for the claims, that criticism was not enough to meet plaintiff’s burden of demonstrating that the claims were false or misleading.

The district court confirmed that state consumer fraud acts, including New Jersey’s Consumer Fraud Act and California’s Unfair Competition Law, do not allow private plaintiffs to bring actions based on lack of substantiation. Private plaintiffs cannot, therefore, simply “piggyback” on the enforcement investigations of governmental agencies like the FTC to establish liability on the part of food and beverage manufacturers. Private plaintiffs must instead shoulder the burden of proving that the challenged claims are false or misleading.

Keywords: litigation, products liability, prior substantiation, advertising claims, burden of proof, Nestlé

—Scott Elder, Alston & Bird LLP, Atlanta, Georgia

February 11, 2013

Illinois Supreme Court Returns Forum Shopper to Mississippi

 

In Fennell v. Illinois Central Railroad Company, the Illinois Supreme Court dismissed an asbestos case on forum non conveniens grounds, cautioning lower courts to consider all public and private interest factors when analyzing a plaintiff’s forum selection and to discount Illinois forum selections by nonresident plaintiffs. No. 113812, ___ N.E.2d ___ , 2012 IL 113812 (Ill. Dec. 28, 2012). The Fennell decision may go a long way in combatting forum shopping by plaintiffs seeking the comfort of an Illinois court.

In October 2002, plaintiff brought an action under the Federal Employers’ Liability Act (FELA) against defendant Illinois Central Railroad Company in the Circuit Court of Jefferson County, Mississippi. Plaintiff sought recovery for personal injuries he allegedly sustained as a result of exposure to “asbestos and asbestos-containing products” while employed by defendant. Plaintiff resided in Hazlehurst, Mississippi, and, since 1970, was employed by defendant as a brakeman, conductor, and engineer. Plaintiff stated that he was exposed to asbestos by working in defendant’s Mississippi facilities, and by working around and riding in defendant's diesel engines, box cars, and cabooses. Plaintiff’s claims were dismissed without prejudice by the Mississippi court.  In January 2009, plaintiff filed a similar complaint in the circuit court of St. Clair County, Illinois.  In May 2010, defendant filed a motion to dismiss the action pursuant to the doctrine of forum non conveniens. Defendant contended that Mississippi and not Illinois was the most convenient forum to try the case. The circuit court denied defendant’s motion to dismiss. The appellate court affirmed, and defendant appealed to the Illinois Supreme Court.

After reviewing the law applying to forum non conveniens motions and restating Illinois’ aversion to forum shopping in general, the court held that the circuit court erred by failing to discount plaintiff’s selection of Illinois on the ground that it was his second choice of forum.  The court reasoned that because plaintiff originally filed the action in Mississippi, he could hardly argue that Mississippi is less convenient than Illinois. Further, because plaintiff does not reside in Illinois, “plaintiff’s choice of an Illinois forum is entitled to less deference” and “[n]othing in the record suggest[ed] that the parties’ ability to conduct discovery and engage in other pretrial matters was unduly hampered by proceeding in the Mississippi circuit court.” 

Turning to the private forum non conveniens factors, the court held that the circuit court failed to appropriately consider the relative convenience of a Mississippi proceeding for several witnesses. Specifically, the court called the circuit court’s finding that two of defendant’s witnesses might not be able to testify live if the case went back to Mississippi “unreasonable,” as those witnesses are defendant’s employees and “it is unlikely that plaintiff would have difficulty in securing the attendance of these witnesses at a trial in Mississippi.”  The court also found that the circuit court gave “undue weight” to the fact that plaintiff’s expert resides in Illinois because, as an expert witness, he would be compensated for his travel and inconvenience. All other workplace and medical witnesses—who would not be available through compulsory process—were located in Mississippi.  The court also accorded little weight to documents held by defendant’s law firm near the Illinois courthouse because the ease of accessing such documents “in the modern age of Internet, email, telefax, copying machines, and worldwide delivery services . . . does not outweigh the substantial inconvenience of requiring distant witnesses to travel to Illinois.” Further, given that the alleged exposures occurred in Mississippi, the court also believed that the possibility of allowing the jury to view of the premises at issue “is an important consideration in ruling on a forum non conveniens motion.”  Ultimately, the court held that private interest factors weighed heavily in favor of a Mississippi forum over an Illinois forum.

The court also held that the circuit court abused its discretion in balancing public forum non conveniensfactors.  The court pointed out that choosing an Illinois forum would not only require a jury of Illinois citizens to sit for the trial of an out-of-state matter, but also require Illinois taxpayers to fund those jury fees and the costs of providing court personnel and facilities during trial and on appeal. The court gave little consideration to plaintiff’s reliance on the fact that the offices of counsel for both parties were located in Illinois or plaintiff's contention that the defendant did business in Illinois. As to the latter point, the court explained that while Illinois may be a proper forum because the defendant does business there, it is assumed on a forum non conveniensmotion that the chosen forum is also a proper venue. Where a defendant conducts its business is among the criteria considered in determining appropriate venue, which focuses on the legal propriety of the selected court, but would not itself affect the forum non conveniens analysis, which focuses on the equitable convenience that court.

Chief Justice Kilbride dissented, noting that a circuit court’s decision on a forum non conveniens motion should be left undisturbed unless the defendant can show that “no reasonable person could take the view adopted by the trial court.” 

Keywords: litigation, products liability, forum non conveniens, forum shopping, asbestos

—Jeremy L. Ross is an associate at Perkins Coie in Seattle, Washington.

February 1, 2013

A Novel Approach to Novel Expert Opinions

 

On June 29, 2012, the Maryland Court of Special Appeals issued an opinion in Dixon v. Ford Motor Company, 206 Md.App. 180, 47 A.3d 1038 (Md.App. 2012), a case in which Ford challenged on appeal the plaintiff’s novel expert opinions on scientific and legal causation under Rule 702 on the basis of unreliability of the expert’s opinions, including the methodology the expert employed in reaching her opinion. While most challenges to the admissibility of expert testimony focus upon the qualifications of a witness to provide certain testimony or the methodology and reliability of the opinions and the application thereof to the facts of a case, including various Daubert or Frye factors, in this case, the court approached the analysis from a different, and more novel, perspective.

Plaintiff Joan Dixon died of mesothelioma in 2009 and alleged secondary exposure to asbestos through her husband Bernard Dixon as a result of working with, inter alia, asbestos-containing automobile parts. The plaintiffs proffered the testimony of Dr. Laurel Welch as an expert in asbestos epidemiology and causation. Ford did not dispute Welch’s qualifications on the issue of epidemiology, but launched an attack on the methodology and substance of her causation opinion. The lower court denied Ford’s motion to exclude. Welch opined at trial that mesothelioma is a dose-response disease, though she was unable to quantify what dose was sufficient to develop the disease, that every increasing asbestos dose increases the likelihood of developing such disease, even if only infinitesimally, and that every exposure to asbestos is a “substantial contributing cause” of mesothelioma, though she could not quantify any particular exposure or the total exposure that the plaintiff may have had. The jury found for the plaintiff and Ford appealed.

Ford argued on appeal that Welch’s methodology was flawed in contravention of Frye (Maryland is one of 10 jurisdictions to apply the Frye standard for scientific reliability. Frye jurisdictions include California, Florida, Illinois, Kansas, Maryland, Minnesota, New Jersey, New York, Pennsylvania, and Washington.) and the Frye-Reed standard, the applicable standard in Maryland, which is largely similar to the Daubert standard in most states.  “Before a scientific opinion will be received as evidence at trial, the basis of that opinion must be shown to be generally accepted as reliable within the expert’s particular scientific field.” Reed v. State, 283 Md. 374 (1978). “Where an expert derives an untested hypothesis from generally accepted theories and research methods, the trial court must weigh the analytical gap, between the established theories and methods on one figurative side, and the expert’s opinion on the other.” Blackwell v. Wyeth, 408 Md. 575 (2009). “Generally accepted methodology, therefore, must be coupled with generally accepted analysis in order to avoid the pitfalls of an “analytical gap.” Id.

In Dixon, the court did not reach the Frye analysis, because “it [was] primarily Dr. Welch’s conclusion [that each exposure to asbestos is a substantial contributing cause of mesothelioma], and not her methodology, with which [the court took] issue.” Dixon, 206 Md.App. at 197.  Rather than focus on her methodology, the court examined her testimony and found that most of her opinions were not scientific conclusions, but rather her unsupported, untested and unreliable personal opinions.  The court found that Dr. Welch’s conclusions did not and could not “assist the trier of fact to understand the evidence or to determine a fact in issue.”

Thus, Welch’s testimony was not admissible according to Maryland Rule of Evidence 5-702. Md. R. Evid. 5-702 (substantially similar to Fed. R. Evid. 702). Maryland Rule 5-702 states:

The court focused on the difference between scientific causation, that is, scientifically testable or provable data relating to elevated relative risk of disease, and legal causation, which is the responsibility of a particular tortfeasor in damages. Welch’s opinion that every exposure to asbestos is a substantial contributing factor “merely implied that there was some non-zero probability that Dixon was exposed to asbestos from Ford’s products and that this resulted in some non-zero increase in her risk of contracting mesothelioma.” She could not quantify this risk at all. Therefore, Welch’s conclusion that “the risk and probability of causation were ‘substantial’ provided the jury with nothing more than her subjective opinion of ‘responsibility’ not scientific evidence of causation.” Because Welch had no information to offer regarding scientific causation, her opinion regarding legal causation was not helpful to the jury.

In examining the practical realities of the lack of quantification, the court noted,  “[p]ractical and statistical limitations” might prevent Dr. Welch from providing actual estimates of Ms. Dixon’s relative risk or “from opining with any reasonable certainty that the probability of causation was enough that a reasonable person would consider it substantial”, “lack of epidemiological data does not give an expert license to state his or her belief that exposure and risk – however low they are – are ‘ substantial.’”  The court held: “Dr. Welch's conclusion that the exposure and risk in this case were ‘substantial’ simply was not a scientific conclusion, and without it her testimony did not provide information for the jury to use in reaching its conclusion as to substantial factor causation.”

The moral of the story is that if an expert cannot opine to a reasonable degree of certainty that there is some dose (even if precise figures are unknown) above which the relative risk of developing a disease becomes significant, and make some comparison of that level to a plaintiff’s dose (even if only in broadly qualitative terms, such as “high” “intermediate” or “low”), then there is simply no way that any such testimony on the issue of causation is helpful to the jury, as evidence of scientific causation from which the jury must decide legal causation would be lacking.  An expert’s opinion that exposure to a particular defendant’s product was a substantial contributing factor in the development of a disease, without any particularized analysis of general causation, individual exposures, frequency, regularity, intensity, as well as cumulative dose, relative risk, and other factors, is not helpful to the jury in arriving at their decision of legal causation or legal responsibility. Thus, in addition to the qualifications necessary and all of the reliability requirements, expert testimony must also assist the trier of fact in order to be admissible. 

Keywords: litigation, products liability, Rule 702, reliability of opinion, expert testimony, asbestos exposure, Ford, causation, standard for scientific reliability

—Knight S. Anderson and Arun J. Kottha are with Tucker Ellis, LLP, in Cleveland, OH.

January 18, 2013

Court Endorses a Cause of Action for Innovator Liability

On Friday, January 11, 2013, in a surprising 8-1 decision, the Supreme Court of Alabama became the first state high court to endorse a cause of action for innovator liability. In Wyeth, Inc. v. Weeks, the Supreme Court of Alabama addressed a certified question from the U.S. District Court for the Middle District and held that, under Alabama law, a brand-name drug company may be held liable for fraud or misrepresentation, based on statements it made or omitted in the labeling of a brand-name prescription drug, by a plaintiff claiming physical injury caused by a generic drug manufactured by a different company. 

In reaching that conclusion, the Supreme Court of Alabama joined the California Court of Appeals—in Conte v. Wyeth, Inc., 168 Cal. App. 4th 89 (Cal. App. 2008)—and the U.S. District Court for the District of Vermont—in Kellogg v. Wyeth, Inc., 762 F. Supp. 2d 694 (D. Vt. 2010)—as one of the few courts to adopt this minority view. It is unclear whether Weeks is merely an outlier or a harbinger of how other courts may begin to view innovator liability claims in the wake of PLIVA, Inc. v. Mensing, 131 S.Ct. 2567 (2011), in which the U.S Supreme Court held that failure-to-warn claims against generic-drug manufacturers are preempted by federal law.

In 2010, Danny and Vicki Weeks sued three brand-name manufacturers and two generic manufacturers for injuries Mr. Weeks allegedly suffered as a result of his long-term use of the prescription drug metoclopramide, which is the generic form of the brand-name drug Reglan.  The lawsuit was filed in the U.S. District Court for the Middle District of Alabama. The Weekses conceded that Mr. Weeks ingested generic metoclopramide rather than Reglan. Nevertheless, they asserted that the brand-name manufacturers were liable for Mr. Weeks’s injuries based upon fraud, misrepresentation, and/or suppression theories of liability, contending that the brand-name defendants either misrepresented or failed to adequately warn Mr. Weeks or his physician about the risks of using Reglan (or its generic equivalent) long term. 

Because no appellate court in Alabama had addressed innovator liability and because of a split among the federal district courts in Alabama, the court agreed to certify the following question to the Supreme Court of Alabama:

The Supreme Court of Alabama, relying on the fact that generic substitutions are allowed in all 50 states and on the conclusion in Mensing that generic drug manufacturers have a duty under federal law to keep the labels for their generic drugs the same as the brand-name manufacturer’s labels, held that a “brand-name manufacturer could reasonably foresee that a physician prescribing a brand-name drug (or a generic drug) to a patient would rely on the warning drafted by the brand-name manufacturer even if the patient ultimately consumed the generic version of the drug.” 

The court then held that the lack of a duty to warn by the brand-name manufacturer directly to the generic-using consumer is irrelevant because, under the learned intermediary doctrine, the manufacturer’s duty to warn runs to the physician. Thus, if the warning to the physician is inadequate or misrepresents the risk, the court concluded that the brand-name manufacturer remains liable for the injuries sustained by the patient, even if the patient ultimately ingests a generic version of the drug, so long as the patient can show that, “but for the false representation made in the warning, the prescribing physician would not have prescribed the medication to his patient.”

Thus, the Supreme Court of Alabama concluded that:

Accordingly, the court held that, under Alabama law, a brand-name defendant could be held liable for fraud or misrepresentation, by misstatement or omission, even when the plaintiff claims an injury caused by the ingestion or use of a generic drug manufactured by a different company. 

Keywords: litigation, products liability, innovator liability, brand-name drug, generic drug, fraud, misrepresentation, Mensing, Conte, Weeks

—James C. Barton, Jr., Alan D. Mathis, and Don B. Long III are with Johnston Barton Proctor & Rose LLP, in Birmingham, AL.

 

January 18, 2013

Pharmaceutical Drug Shortages: Legal Implications

Pharmaceutical drug shortages have been an ongoing issue for years, caused by alleged manufacturing/quality violations, facility shutdowns, production delays, shipping problems, ingredient shortages, and discontinuations. Action by the federal government and litigation relating to this topic has highlighted the issue recently.

In 2011, there were 251 drug shortages reported the U.S. Food and Drug Administration (FDA), and the number of drug shortages continues to rise, with the most critical shortages in drugs that treat cancer, nutrition and electrolyte-imbalances, neuromuscular conditions, and pain. In an attempt to address such shortages, on October 31, 2011, President Obama issued executive order 13588, requiring pharmaceutical companies to provide FDA adequate advance notice of manufacturing discontinuances that could lead to shortages of certain drugs. The executive order also gave FDA additional authority to help to avoid or mitigate existing or potential drug shortages.

On July 9, 2012, the president signed the Food and Drug Administration Safety and Innovation Act (FDASIA) of 2012. FDASIA requires all manufacturers (as opposed to sole manufacturers) of certain drugs to notify FDA of potential discontinuances, regardless of whether they intend to discontinue the product permanently or are facing only a temporary interruption of supply. FDA will issue noncompliance letters to manufacturers who fail to comply with the notification requirements and will make the letter and the manufacturer’s response to the letter available to the public. FDASIA also permits FDA to conduct expedited review of certain applications and inspections and requires FDA to evaluate the risks and benefits to patients of an enforcement action and any potential shortage it could create prior to issuing an enforcement action. Finally, FDASIA requires FDA to establish a task force to develop and implement a strategic plan for enhancing its response to drug shortages.

The recent executive order, FDASIA, and FDA’s renewed focus on pharmaceutical drug shortages coincide with two recent suits against pharmaceutical manufacturers, seeking damages for injuries related to drug shortages:

Products liability attorneys should monitor these suits as their outcome has the potential to either spur or discourage future similar suits, and potentially establish a new area of liability for manufacturers. Attorneys should also watch for developments and new policy from FDA’s drug shortage task force as it works to attempt to reduce and mitigate drug shortages. 

Keywords: litigation, products liability, drug shortages, FDA, FDASIA, Executive Order 13588

—Marcella C. Ducca is with Greenberg Traurig, LLP, in Atlanta, GA.

 

January 18, 2013

Consumer-Fraud Class Action Challenging "Natural" Claim Is Dismissed

Consumer-fraud class actions challenging claims that a product is "natural" continue to arise frequently, particularly with respect to foods and beverages. These lawsuits often allege that the term natural is deceptive if a product contains processed ingredients that can be linked to artificial sources. To date, the Food and Drug Administration (FDA) has declined to define natural in a formal policy statement.

Despite the FDA’s inaction, courts are beginning to recognize that this issue is best decided by the FDA, because courts lack the ability to develop consistent rules defining proper natural claims. In other words, the issue lies within the primary jurisdiction of the relevant agency, which should apply its expertise and articulate a rule that both courts and litigants can apply.

In a decision late last year, Astiana v. The Hain Celestial Group, Inc., the Northern District of California relied on the primary jurisdiction doctrine in dismissing a consumer-fraud class action challenging a natural claim. Although the case did not involve foods or beverages, the court’s rationale would apply to any case involving a product within the FDA’s jurisdiction.  In Astiana, the plaintiffs argued thatall natural” and “pure natural” labels on defendant’s toothpaste and deodorant products were deceptive because the products allegedly contained synthetic chemicals. The plaintiffs asserted the standard list of claims for violation of California’s Unfair Competition Law, False Advertising Law, Consumer Legal Remedies Act, and common law fraud.

Citing the FDA’s “expert judgments and authority” in refusing to define natural, the court declined to define a false and misleading use of the term natural without further guidance from the agency. The court noted that although it had the authority to decide whether particular conduct was false or misleading, it would not undertake that analysis if its decision would undercut “FDA’s considered judgments.”

The court relied on the factors the Ninth Circuit set out in Syntek establishing when to apply the primary jurisdiction doctrine: when there is “(1) the need to resolve an issue that (2) has been placed by Congress within the jurisdiction of an administrative body having regulatory authority (3) pursuant to a statute that subjects an industry or activity to a comprehensive regulatory authority that (4) requires expertise or uniformity in administration.” The court found each of the Syntek factors present and therefore declined to reach an “independent determination of whether defendants' use of ‘natural’ was false or misleading.”

As other suits challenging natural claims have survived motions to dismiss, Astiana is unlikely to be the last word on this topic. Until the FDA articulates a rule, the question of whether such claims should move forward in the absence of FDA action will continue to be contested, and plaintiffs and defendants alike will be following these decisions closely.

Keywords: litigation, products liability, primary jurisdiction, natural claims, consumer fraud, class actions, FDA

—Scott A. Elder is a partner and Aliyya Z. Haque is an associate in the Products Liability Group at Alston & Bird LLP in Atlanta, Georgia.

 

January 18, 2013

Recent Developments in False Claims Act Litigation

Government False Claims Act prosecutions continue to rise, and the pharmaceutical industry continues to be a primary target. In March, the federal government announced that in fiscal year 2011, there were 1,100 new criminal health-care fraud cases and 1,000 new civil cases. In the same time period, the federal government recouped $2.4 billion in False Claims Act prosecutions for health-care fraud, and $1.3 billion in forfeitures and fines under the Food, Drug and Cosmetic Act.

Subsequent reports indicate settlements in 2012 are up over 2011, and three of the four largest involved pharmaceutical companies: GlaxoSmithKline (GSK), Abbott Laboratories, and Merck (The fourth—and third largest—was a $1 billion settlement with Bank of America for mortgage and bank fraud. See Press Release, Department of Justice, (Feb. 9. 2012) http://www.justice.gov/opa/pr/2012/February/12-ag-186.html).  See also http://www.corporatecrimereporter.com/wp-content/uploads/2012/10/taf.pdf.Nevertheless, in the last year, several courts have dismissed cases for failure to adequately state a claim for fraud.

U.S. ex rel. Arlene Tessitore v. Infomedics, Inc. et al., 847 F. Supp. 2d 256 (D. Mass. 2012) 
Infomedics operated an informational hotline for GSK’s antidepressant drug Paxil. Arlene Tessitore, who worked the hotline for Infomedics, filed a qui tam case alleging that Infomedics and GSK concealed from the FDA information received through the hotline. Tessitore estimated that approximately 7,000 adverse events were reported to the hotline, but not passed along to GSK or the FDA. Her complaint alleged that this practice led to underreporting of adverse events to the FDA, which amounted to a violation of the False Claims Act. She also alleged that payment to physicians for patient participation in the hotline amounted to illegal kickbacks.  GSK moved to dismiss, and the court agreed, holding that the relator had failed to meet the pleading standard for fraud. Noting that a relator must prove the “who, what, when, where, and how” of the alleged fraud, the court concluded that Tessitore had not demonstrated any connection between patient participation in the hotline and prescriptions for Paxil or identified any false statements regarding adverse event reporting.  Because Tessitore had “neither connected the purported concealment scheme to a false reimbursement claim or a materially false statement, nor shown that the defendants intended to defraud the government,” the court dismissed the case. 

U.S. ex rel. Streck v. Allergan, et al.,_F. Supp. 2d_,  2012 WL 2593791 (E.D. Pa. July 3, 2012)
Ronald Streck filed a qui tam action against eight pharmaceutical manufacturers, alleging that they had improperly calculated average manufacturer prices. In the face of regulatory ambiguity about how the prices should be calculated, the court concluded that the relator could not establish the requisite state of mind for a fraud claim. The court dismissed Streck’s complaint, noting that Streck failed to plead facts to show that defendants’ interpretation of the applicable regulations was unreasonable, let alone that defendants had acted knowingly or recklessly. 

U.S. ex rel. Simpson v. Bayer Healthcare,_F. Supp. 2d_, 2012 WL 5358333 (D. Minn. July 19, 2012)
Laurie Simpson filed a qui tam action against Bayer alleging deceptive marketing practices, kickbacks, and misbranding of the pharmaceutical drug Baycol, which was withdrawn from the market in 2001. After two amendments, her complaint failed to provide any specific allegations of fraudulent conduct. Specifically, Simpson failed to identify false information in claims submitted to the government for payment, and failed to provide a link between alleged fraud and the government’s decision to pay for Baycol. The U.S. District Court for the District of Minnesota dismissed the case under Rule 9(b), reaffirming that “particularized allegations of representative false claims are required to properly assert a claim under the FCA.” 

U.S. v. Kernan Hospital, _F. Supp. 2d_, 2012 WL 3088210 (D. Md. July 30, 2012)
In Kernan Hospital, the government intervened in a False Claims Act case which alleged that the hospital systematically added diagnoses to patient charts to make the cases appear more severe.  The government failed to link this alleged fraud to any claims that the hospital submitted for reimbursement. The District of Maryland dismissed the government’s complaint, noting that “the False Claims Act does not punish a system that might allow false claims to be sent to the government—instead, it punishes actual claims containing objective falsehoods.” 

Although the number and size of recent settlements demonstrate that False Claims Act prosecutions are an increasingly important enforcement tool, potential targets of such actions can take some comfort in the recent cases applying appropriate scrutiny to the claims.

Keywords: litigation, products liability, False Claims Act, FDA, Fraud, Litigation, qui tam, Product Liability

— Tamar B. Kelber and Caroline L. Schiff, are with Sidley Austin LLP, in Chicago, Illinois.

 

November 14, 2012

Failure to Warn Claims Face Preemption

On August 9, 2012, the New Jersey Supreme Court issued its opinion in Cornett et al. v. Johnson and Johnson et al., 211 N.J. 362, 48 A.3d 1041 (2012). Cornett involved multi-plaintiff (49) claims concerning “approved and off-label uses of” a Cypher® stent, a Class III medical device that received pre-market approval under the Food and Drug Administration’s Premarket Approval Application (PMA) process. After dismissing Cornett’s individual claims as time-barred, the court considered: (1) the extent to which the remaining plaintiffs’ failure to warn claims might be preempted, and (2) the extent to which the remaining plaintiffs’ express warranty claims might be preempted.

Preemption Review
The court began its preemption analysis with a review of related preemption law. The court observed that the Medical Device Amendments of 1976 (MDA) expressly preempt state law claims when the FDA has imposed requirements specific to the device, and the claims are based on requirements “different from or in addition to” the federal requirements. To avoid express preemption, the state law claims must be merely “parallel to” the “federal requirements.”

The court also observed that state law claims of fraud on the FDA “based on intentional misrepresentations to the FDA during or after the PMA process,” and those that depend on a “violation of a federal requirement,” are impliedly preempted. However, when the claim is based upon a “deliberate non-disclosure of material information or deliberate misrepresentations of known facts,” where “proof of fraud on the FDA is not an element” to the cause of action, “the claim may not be preempted.”

Analysis of Claims for Preemption
Preemption of Plaintiffs’ Failure to Warn Claims
The Cornett court next analyzed the extent to which the failure to warn claims of the remaining 48 plaintiffs might be preempted. It first determined that “the Cypher® stent underwent the rigorous and individualized PMA process for Class III medical devices,” and the FDA approval amounted to “a specific federal requirement.” As to each type of failure to warn claim, the court decided as summarized in the table below:

Description of Failure to Warn Claim	Preemption Decision
For approved uses, claims relating to the need and “duration of post-implantation anti-platelet therapy and the lack of comparative studies of the Cypher® stent and alternate devices.”	Expressly preempted by MDA, citing Riegel v. Medtronic, Inc., 552 U.S. 312, 128 S.Ct. 999, 169 L.Ed.2d 892 (2008).
“[T]o the extent plaintiffs’ failure to warn claim is based solely on a contention that defendants obtained FDA approval for the device only after submitting fraudulent representations to or withholding material information form the FDA ***.”	Impliedly preempted, citing Buckman Co., v. Plaintiffs’ Legal Comm., 531 U.S. 341 (2001). Note that Buckman, as the court indicated, may preempt certain civil claims, but would not affect the government’s ability to bring enforcement actions.
“[T]o the extent plaintiffs’ *** claim is based on other allegations of wrong-doing apart from defendants’ failure to comply with FDA disclosure requirements.”	Not preempted. “[F]raud on the FDA is not an element of the claim and it can be proven by evidence other than by evidence of fraud on the FDA.”
“To the extent plaintiffs’ *** claim is founded on promotion by defendants of off-label uses of the device beyond the [MDA Class III device] safe harbor” at 21 U.S.C.A. §§360aaa, 360aaa-1 for disseminating off-label information.	Not preempted. Preemption is reserved for off-label promotion that falls within the safe harbor.

The court reminded the parties that it was reading the complaint “indulgently” as it must when considering an early motion to dismiss, but added:

Although the court left the door open for theoretical claims that could potentially survive preemption, it seemed suspect as to whether discovery would reveal such claims that could do so as a practical matter.

Preemption of Plaintiffs’ Breach of Express Warranty Claims
Finally, the court analyzed the plaintiffs’ breach of express warranty claims. It concluded that, if to succeed on their claims that “plaintiffs must show that the labeling provides inaccurate or insufficient information in spite of FDA approval following the rigorous PMA process,” then the state law claims would be preempted as imposing “greater requirements than those already established by the MDA.” “On the other hand, to the extent the plaintiffs allege defendants have deviated from the labeling and instructions for use through voluntary statements to third parties in the course of its marketing efforts, this claim is not preempted.”

The court recognized that “[t]he manufacturer may not change the label, even to add warnings, until it submits the proposed change as part of a supplement PMA application and obtains FDA approval,” citing 21 U.S.C.A. §360e(d)(6) and Riegel v. Medtronic, Inc., 552 U.S. 312,  319, 128 S.Ct. 999, 1005, 169 L.Ed.2d 892, 900 (2008) at 211 N.J. 362, 381, 48 A.3d 1041, 1052.  It is interesting to note the absence of any further discussion in the court’s opinion of the potential implications of preemption on a mislabeling claim, and the emergency label changes precluded for medical devices , but authorized for drugs (free of the MDA’s express preemption) under Wyeth v. Levine, 173 L.Ed. 2d 51 (2009), and PLIVA, Inc. v. Messing, 180 L.Ed 2d 580 (2011).

Lessons from Cornett
Even in the face of the express preemption clause of the MDA, there are potential viable product claims that must be protected against. These include, but may not be limited to: (1) Attorney General actions by or through the FDA; (2) common law fraud or other claims not dependent upon FDA regulations; (3) warranty claims outside of the FDA labeling or instructions and beyond the MDA safe harbor; and (4) private contractual obligations, such as contractual indemnification, not discussed in Cornett. A manufacturer or seller must understand this potential liability and carefully plan insurance coverage and review contractual drafting to limit exposure. Of course, the first line of defense is quality control that prevents design, manufacturing or warning defects, and effective product monitoring in the field to discover and neutralize post-sale problems.

Keywords: litigation, products liability, Food and Drug Administration, FDA, failure to warn, Premarket Approval Application, PMA, Medical Device Amendments of 1976, MDA, preemption

—Steven A. Karg and William A. Dreier are with Norris McLaughlin & Marcus, PA, in Bridgewater, NJ.

November 14, 2012

To Reuse or Not Reuse

Discussions have been ongoing since the early 1980s regarding whether pacemakers retrieved from U.S. patients—either from those who receive an upgraded device or from deceased patients—may be reused in developing countries. Most recently, researchers at the Hospital of the University of Pennsylvania in Philadelphia found that of 334 autopsies performed at the facility between February 2009 and July 2011, 27 pacemakers and implantable cardioverter-defibrillators (ICDs) were recovered, with eight of the 27 devices having at least four years of remaining battery life.

While pacemaker reuse is banned in the U.S., countries such as India and the Philippines gladly accept donated pacemakers from funeral homes and hospitals for use in heart patients who could not otherwise afford the device. Patients in these countries likely would not have access to pacemakers had these donations not been made.

The concept of reusing pacemakers is gaining momentum. Doctors at the University of Michigan Health System founded Project My Heart–Your Heart to study the battery life of devices removed by Michigan funeral directors with the ultimate goal of obtaining Food and Drug Admiminstration approval to conduct a clinical trial to determine how best to reuse and recycle pacemakers. Likewise, the nonprofit organization Heartbeat International provides donated recycled pacemakers from the U.S. to patients in 14 countries.

Despite the undeniable benefits of reuse outside of the U.S., device manufacturers do not support pacemaker recycling. Manufacturers are concerned with cleanliness and sterilization, as well as the integrity and performance of devices originally manufactured for single use. To be sure, a number of manufacturers regularly donate new, unused devices to developing countries, but the demand for the devices easily surpasses the supply. The challenge then becomes how to temper humanitarian efforts with the potential for worldwide exposure.

Similarly, the FDA has approved pacemakers and ICDs only as single-use devices. The FDA, in its Cardiovascular Compliance Policy Guide Sec. 310.100, deems pacemaker reuse an “objectionable practice” and questions whether these devices may be properly sterilized following initial implantation due to the possibility of bodily fluids entering the terminal leads of the pacemaker. Single-use devices can be approved for reuse, though, if the “safety and effectiveness” of the device can be demonstrated after reprocessing.

Project My Heart–Your Heart’s goal is to demonstrate to the FDA that pacemakers may be sterilized for safe and effective recycling. The group is currently awaiting FDA approval to export more than 9,000 collected devices to patients overseas. To date, no pacemakers or ICDs have been approved by the FDA for reuse, and no timeline has been established for FDA review and/or approval for export.

Keywords: litigation, products liability, Food and Drug Administration, FDA, pacemaker, implantable cardioverter-defibrillator, ICD, Cardiovascular Compliance Policy Guide, Project My Heart–Your Heart, Heartbeat International

—Sarah E. Lovequist is with Litigation Management, Inc. in Cleveland, OH.

 

October 12, 2012

OSHA Issues Final Rules on Whistleblower Protection

On July 10, 2012, the Occupational Safety and Health Administration (OSHA) issued final rules governing the whistleblower protection contained in the Consumer Product Safety Improvement Act of 2008 (CPSIA). The rules, which went into immediate effect, established the procedures and time frames for handling CPSIA retaliation complaints.

Although overshadowed by new restrictions and enforcement mechanisms mandated by the CPSIA, vital protections for whistleblowers against employer retaliation were included. Specifically, Section 219 of the CPSIA prohibits employers from retaliating against an employee who provides to the employer, the Federal Government, or the attorney general of a state, information relating to any violation of any provision of any act enforced by the Consumer Product Safety Commission (CPSC).

Enforced by OSHA, CPSIA whistleblower protections apply to manufacturers, private labelers, distributors, and retailers of consumer products. These entities are prohibited from discharging or otherwise discriminating against employees with regard to compensation, terms, conditions or privileges of employment because they participated in any of following protected activities:

 

Complaints and Investigations
Employees who believe they have been retaliated against in violation of the CPSIA must file a complaint with OSHA within 180 days of the date of the alleged violation occurs, or the date from which the employee is aware—or reasonably should be aware—of the employer’s retaliatory decision.

OSHA then must notify the employer of the filing, and a preliminary investigation involving input from the employee and employer is conducted. The employee must make an initial prima facie showing that the protected activity was a contributing factor in the adverse action alleged in the compliant. This burden can be satisfied by showing that the adverse action took place shortly after the protected activity, giving rise to the inference that the protected activity was a contributing factor. If the employee does not make a prima facie showing, the investigation must be discontinued and the complaint dismissed. If the prima facie showing is made, OSHA will issue written findings on whether there is reasonable cause to believe the employer retaliated against the employee in violation of the CPSIA. If reasonable cause is found, the assistant secretary will issue a preliminary order providing appropriate relief to the employee which may include, where appropriate, preliminary reinstatement, back pay with interest, compensatory damages, and attorneys’ fees and other expenses reasonably incurred in bringing the complaint.

Upon such a finding, there is an opportunity to object and request a de novo hearing before an administrative law judge (ALJ). The ALJ will make a determination that a violation has occurred only if the employee demonstrates by a preponderance of the evidence that a protected activity was a contributing factor in the adverse action alleged in the complaint. An employer may rebut such a showing only by demonstrating through clear and convincing evidence that, absent the protected activity, it would have taken the same adverse action.

If the ALJ concludes the employer has violated the law, an order requiring appropriate remedial action will be issued, which may include reinstatement, back pay and interest, compensatory damages and attorneys’ fees and expenses reasonably incurred. Likewise, the ALJ may award the employer reasonable attorneys’ fees—not to exceed $1,000—if the complaint was frivolous or brought in bad faith.

Upon the issuance of the ALJ’s decision, the parties have 14 days within which to petition the Administrative Review Board (ARB) for review of that decision, or it becomes final and is not subject to judicial review. If a timely petition for review is filed, the decision of the ALJ will become the final order of the U.S. Secretary of Labor unless the ARB accepts the petition within 30 days of its filing. If accepted for review, the final decision of the ARB must be issued within 120 days of the conclusion of the hearing.

Court Action and Settlements
An employee can file an original de novo action in the U.S. District Court if no final decision has been issued within 90 days after receiving written determination of the assistant secretary, or within 210 days of the filing of the complaint.

At any time prior to the filing of objections to OSHA’s findings and/or preliminary order, an employee may withdraw a complaint. If the complaint is withdrawn because of settlement, the settlement must be submitted for approval by the assistant secretary. Any settlement proposed after the filing of objections to OSHA’s findings and/or preliminary order must be approved by either the ALJ or the ARB, depending on which body it is before at the time of settlement.

Conclusion
The CPSIA whistleblower provision is just one of 21 federal whistleblower statutes enforced by OSHA. To ensure compliance with the CPSIA, it is critical that employers implement and enforce compliance policies and procedures, and make sure employees receive the necessary training to ensure compliance.

Keywords: litigation, product liability, Occupational Safety and Health Administration, OSHA, Consumer Product Safety Improvement Act, CPSIA, Consumer Product Safety Commission, CPSC, whistleblower protection, whistleblower retaliation, Secretary of Labor

—Josh Johanningmeier is with Godfrey & Kahn S.C. in Madison, WI.

 

September 17, 2012

Proliferating Food Label Fraud Class Actions Claims

Consumer fraud class actions against food and beverage companies for product labeling practices continue to be a particularly active area of litigation. To date, the plaintiffs’ bar has primarily focused on two main topics for such lawsuits.

The first topic is “all natural” claims. In these lawsuits, plaintiffs generally allege that the company has made false claims regarding the product being “natural.” For example, companies who make fiber bars have been targeted for alleging that the fibers are natural, when the plaintiffs allege they are processed. Other examples include claims against food manufacturers who use high fructose corn syrup or genetically engineered ingredients, as well as claims against manufacturers whose products are perceived to undergo excessive processing.

The second hotbed of litigation in this area is over so-called “health claims” made by food companies. For instance, a company may claim that their product improves a child’s immunity, prevents flu, or increases attentiveness. Plaintiffs seek to attack the scientific basis for these statements.

To defend against these claims, food and beverage companies have primarily relied upon the following defenses:

Actions by the Federal Trade Commission or the U.S. Food and Drug Administration are often a precursor to these class action lawsuits. Accordingly, both the plaintiffs’ and defense bar should watch closely for such action.

A particular concern for companies that are targets of this type of lawsuit is insurance coverage. These consumer fraud class action lawsuits sometimes result in coverage disputes with a company’s insurer. Companies that are facing product labeling claims should always put their insurers on notice of any litigation as soon as it is filed.

Keywords: litigation, product liability, class action, puffery, FDA, FTC, Food and Drug Administration, Federal Trade Commission

—Jessalyn H. Zeigler is with Bass, Berry & Sims PLC in Nashville,TN.

 

September 5, 2012

FDA Ordered to Issue Guidance on Internet Promotion

As part of the Food and Drug Administration Safety and Innovation Act signed into law July 9, 2012, Congress has instructed the FDA to issue final “guidance that describes Food and Drug Administration policy regarding the promotion, using the Internet {including social media), of” drugs and devices, both on- and off-label. Food and Drug Administration Safety and Innovation Act, Section 1121. The FDA issued a set of draft guidelines on responding to requests for off-label information in December last year, giving the industry a preview of the more complete guidance sought by Congress.

Although drug and device companies are prohibited from promoting off-label uses of drugs and devices, doctors may exercise professional judgment in the practice of medicine and may prescribe off label. But if drug and device companies are prohibited from promoting off-label uses for drugs and devices, how are doctors and patients to obtain accurate information about the risks and benefits associated with them? It has long been the case that doctors could call or write to a pharmaceutical company and simply ask. The FDA does not prohibit a company from responding to requests for medical information “in a truthful, non-misleading, and accurate manner . . . even if responding to the request requires a firm to provide information on unapproved or uncleared indications or conditions of use.” FDA, Guidance for Industry Responding to Unsolicited Requests for Off-Label Information About Prescription Drugs and Medical Devices (Draft Guidance), December 2011. Such a response was traditionally a private reply to a private question, and in the FDA’s view, it did not constitute promotion or marketing.

The advent of ubiquitous social media has complicated matters. In the past, a doctor or patient would have asked their questions and received their responses in private from the company. Now, however, they might turn to Facebook, Twitter, or a blog for the same purpose. If a company responds in the same forum and posts public information regarding an off-label use, is that prohibited marketing?

It is, according to the FDA’s recently issued draft guidance on the subject.

In its December draft guidelines, the FDA stated that if a request for information regarding an off-label use is truly unsolicited, then the company may respond in the same forum that the request was made. The permissible content of the response, however, depends on whether the request is public or private. For private requests for information, —an individual e-mails the medical information staff at a pharmaceutical firm seeking information about an off-label use of a drug, for example—the FDA advises that the response should: (1) be limited to the person making the request; (2) only answer the question asked; (3) be truthful, non-misleading, accurate, and balanced; (4) be scientific in nature; and (5) be generated by medical or scientific personnel independent from sales or marketing departments. The FDA also recommends that the response be accompanied by other information, such as FDA-approved labeling, and that records of the communication be kept.

The FDA articulated a very different view regarding public responses to public requests for information related to off-label uses. For such public requests, such as an individual posting a question about off-label use of a specific product on a website, the FDA advises that the firm should respond only when the request pertains specifically to its own named product, and more important, the response should be limited to conveying that the question pertains to an unapproved or uncleared use of the product, and to providing the contact information for the firm’s medical or scientific department. In addition, the public response should not include any off-label information. If the individual subsequently contacts the firm, this effectively converts the public request into a private request, and the response to which should follow the guidance for private responses discussed above and further detailed in the draft guidance.

The FDA’s December 2011 draft guidance is not as detailed as it could be, is limited in scope, and is still in draft form. Fortunately, more guidance is coming—a result of the Safety and Innovation Act. The FDA has until July 2014 to provide the final guidance ordered by Congress.

Keywords: litigation, product liability, FDA, Safety and Innovation Act, off-label, draft guidance
 

—Michelle A. Childers and Nathan D. Cardozo are with Drinker Biddle & Reath LLP in San Francisco, CA.

 

August 22, 2012

General Jurisdiction: Round Two

Fewer than nine months after its first opinion in 25 years on general jurisdiction, the U.S. Supreme Court is being asked for a second time to delve into its complexities. In Goodyear Dunlop Tires Corporation, S.A. v. Brown, 131 S. Ct. 2846 (2011), the Court held that for a court to exercise general jurisdiction over a business entity, the entity must be “essentially at home” in the forum. Although the Court failed to define what it means to be “essentially at home,” examples were provided of conduct that might result in the appropriate exercise of general jurisdiction: place of incorporation, principal place of business, and a physical presence in the forum state.

In a belated effort to wrest victory from the jaws of defeat, the respondents in Goodyear asked the Court for the first time on appeal to decide whether the U.S.-based parent corporation and three of its foreign subsidiaries could be considered a single enterprise. Justice Ginsberg, delivering a unanimous opinion, noted that the record was insufficient for the Court to make such a determination, leaving the question for another day of how a parent/subsidiary relationship plays into a determination of general jurisdiction. That day is now on the horizon.

In Bauman v. DaimlerChrysler Corporation, 644 F.3rd 909 (9th Cir. 2011), the Court of Appeals for the Ninth Circuit was asked whether DaimlerChrysler Aktiengesellschaft (DCAG), a German company, could be sued in the Northern District of California for acts committed exclusively in Argentina by its Argentinian subsidiary, Mercedes-Benz Argentina (MBA). The plaintiffs, Argentinian nationals, brought suit against DCAG under the Alien Tort Statute, 28 U.S.C. § 1350, and the Torture Victims Protection Act of 1991, 28 U.S.C. § 1350, alleging that MBA collaborated with the Argentine government to kidnap, torture, or kill MBA employees during Argentina’s “Dirty War.” The plaintiffs contended that the federal court in California had general jurisdiction over DCAG because its American subsidiary, Mercedes Benz USA LLC (MBUSA)—a distributor of DCAG-manufactured vehicles to dealerships in California—was DCAG’s “agent.”

After permitting jurisdictional discovery, the district court dismissed the plaintiffs’ cause of action based on its lack of personal jurisdiction over DCAG. The Ninth Circuit initially affirmed the district court in a 2–1 decision, but vacated its original opinion nine months later, and without reargument, issued a new opinion authored by Judge Reinhardt that reversed the district court. In concluding that the exercise of general jurisdiction over DCAG was appropriate, Judge Reinhardt found first that the services provided by MBUSA to DCAG were sufficiently important so that if MBUSA went out of business, DCAG would perform the same services on its own or through another representative.

Judge Reinhardt then concluded that under its General Distributor Agreement, DCAG had the right to control MBUSA, although evidence of actual control was not necessary to warrant the exercise of general jurisdiction. Speaking for the minority, Judge O’Scannlain characterized the majority opinion as “an affront to due process” and extending “the reach of general jurisdiction far beyond its breaking point.” 676 F.3d 774, 775.

On February 12, 2012, DCAG filed a petition for a writ of certiorari with the U.S. Supreme Court. In its petition, DCAG echoed the dissenters’ observation that the Ninth Circuit’s opinion “represents a breathtaking expansion of general personal jurisdiction, which is unwarranted in light of Supreme Court precedent, the precedent of our sister circuits, and our own [Ninth Circuit] precedents.” 676 F.3d 774, 779. DCAG argued that in the Fourth, Fifth, Sixth, Seventh, and Eighth Circuits, if given similar facts, the plaintiffs’ complaint would have been dismissed “out of hand” because there were no allegations that DCAG and MBUSA were alter egos of one another, and that both parent and subsidiary failed to adhere to the requirements of their corporate separateness.

Because the Ninth Circuit did not limit its decision to the human rights arena, the Bauman decision could have far-reaching impact on products liability cases in which a foreign parent has U.S.-based subsidiaries, or vice versa. As DCAG argued in its petition, the Ninth Circuit’s broad concept of general jurisdiction—if left intact—could provide foreign corporations with an incentive to limit their commercial ties to the United States or pull out of American markets altogether. The Ninth Circuit’s holding could also result in the retaliatory and similarly expansive exercise of personal jurisdiction over American corporations abroad.

The Supreme Court will hopefully seize the opportunity presented by Bauman to provide clear guidelines concerning the exercise of general personal jurisdiction over parent companies and their subsidiaries.

Keywords: products liability litigation, personal jurisdiction, general jurisdiction

—Pamela D. Tarr is with Jackson Kelly PLLC in Charleston, West Virginia.

 

July 25, 2012

Recent Changes to the OSHA Hazard Communication Standard

OSHA implemented the Hazard Communication Standard (HCS) in 1983 to provide standardized guidance to business owners regarding hazardous substances. In the first quarter of 2012, OSHA updated the HCS to “improve the quality and consistency of hazard information, making it safer for workers to do their jobs and easier for employers to stay competitive.” Occupational Safety & Health Administration, Hazard Communication, (last visited July 5, 2012) (quoting United States Secretary of Labor Hilda Solis); Hazard Communication, 77 Fed. Reg. 58 (Mar. 26, 2012) (to be codified at 29 C.F.R. 1910).

By changing how hazards are classified and labeled, the HCS now aligns with the United Nations Globally Harmonized System of Classification and Labeling of Chemicals (GHS). OSHA asserts that this change will increase workplace safety by improving the quality and uniformity of the information presented on hazard warning labels, thus making reading and understanding the warnings easier for workers who handle and use hazardous materials. While the changes will make the HCS more user-friendly, they will also impose some new training obligations on employers.

The HCS now requires specific criteria for classifying chemicals in accordance with their hazardous effects. The old system provided evaluation parameters—but not concrete criteria—which required the evaluator to determine if a hazard existed. The new system now supplies the specific criteria and provides detailed instructions for determining the existence of a hazard. Unlike the old system, the new system does not require additional testing, but rather allows reliance on already available data. The new system will allow an evaluator to classify hazards more uniformly and to more easily implement work-environment precautions. By eliminating subjectivity in classifying hazards, the new hazard criteria should standardize hazard classification resulting in a safer work-environment.

The labeling requirement of the revised HCS will likely enable employees handling chemicals to more quickly and easily become aware of the hazard presented by a chemical. A highly visible pictogram will allow easy recognition of the label and at-a-glance identification of the hazard posed by a chemical. The labels will indicate the severity of the hazard through signal words such as “Danger” and “Warning” alongside a statement of why the product is hazardous. Finally, the new labeling standard provides quick reference information to enable employees to mitigate harmful effects of exposure and prevent dangerous handling and storage of the chemical. Additional information can be found on the reformatted safety data sheet if more detailed hazard information is required.

The new safety-data sheet, while containing roughly the same information as the old version, improves uniformity and handler familiarity by dividing the sheet into 16 sections. Together, the labeling and safety-data changes should help reduce hazardous threats by making information more readily available and easier to understand; the new standard’s simplicity also promotes compliance by eliminating potential confusion.

As part of the phase-in plan, OSHA has mandated that companies train employees on the new labeling and safety data sheet formats no later than December 1, 2013. The requirement includes mandatory training both upon an employee’s initial assignment to a work area and when an employer introduces a new chemical hazard to the work area. In addition to instruction regarding the hazard-communication program, the training must include procedures for detecting the presence of a hazard, an explanation of the physical or health hazard posed, and information regarding how employees may safeguard themselves. This training should increase employee awareness of potential hazards and decrease the number of chemical hazard-related accidents.

By giving guidance to business owners, the new standard should help reduce potential liability from workplace injuries by improving employee knowledge and reducing accidents. OSHA estimates that the revisions of the hazard communication standard will annually prevent 43 fatalities and 585 injuries and illnesses, while saving an estimated $250 million. OSHA HCS (last visited July 6, 2012). If true, not only will this revision help to reduce litigation by preventing injuries, it also will make work-place compliance easier.

Keywords: hazard communication, OSHA, HCS

—Jacob M. Tubbs, Lightfoot, Franklin & White, LLC, Birmingham, AL; Clint Speegle, Cumberland School of Law, Class of 2013.

 

 

 

July 12, 2012

Punitive Damages Limits for Government-Approved Products

A new Arizona law, Ariz. Rev. Stat. § 12-689, provides an exemption from punitive damages in Arizona product liability cases for virtually any kind of product that was government-approved or that complied with government regulations.  Section 12-689 takes effect on August 1, 2012.

Section 12-689 safeguards product manufacturers and sellers from punitive damages as a matter of law where the product at issue was manufactured according to the terms of a government agency approval, or if the product complied with all regulatory requirements when it left the control of the manufacturer. Specifically, product manufacturers and sellers are not liable for punitive damages if: the product was designed/manufactured/sold according to the terms of government approval, or the product complied with all state or U.S. government regulations when the product left the control of the manufacturer/seller, or the act or transaction forming the basis of the claim involves practices authorized by or in compliance with government regulations.

The exemption from punitive damages does not apply in certain circumstances.  It does not apply if the product was sold after the government ordered the product removed from market or withdrew or substantially altered its approval, or if the government later found the manufacturer/seller knowingly violated applicable regulations requiring reporting of risks of harm.  It does not apply if illegal payments were made to the government to gain approval, or if the manufacturer/seller intentionally and in violation of regulations withheld from or misrepresented relevant information to the government. 

“Product” has an expansive definition under the law.  It means “any object possessing intrinsic value, capable of delivery either as an assembled whole or as a component part or parts and produced for introduction into trade or commerce.”  “Seller” includes any person who distributes, rents, blends, packages, labels or places a product in the stream of commerce.  Compliance with “regulations” means government-mandated regulations, not merely industry regulations or guidelines. 

The Arizona legislature based § 12-689 on a parallel statute, Ariz. Rev. Stat. § 12-701 which, since 1989, has limited punitive damages against drug manufacturers in Arizona cases if the drug was manufactured and labeled in accordance with FDA regulations and was approved by the FDA.  That statute has been analyzed and upheld by Arizona’s federal court.  Kobar ex rel. Kobar v. Novartis Corp., 378 F. Supp. 2d 1166 (D. Ariz. 2005).  A handful of states (New Jersey, Ohio and Oregon) have similar laws that limit punitive damages against drug or device manufacturers.  Arizona’s new law expands this exemption to all kinds of products. 

This is a different type of limit than those in Texas, Wisconsin, Utah, Alaska, and Virginia, which have set monetary limits or caps on the amount of punitive damages that can be recovered.  Certain other states (Washington, Michigan, Nebraska and South Carolina) generally do not allow punitive damages in product liability cases.  By contrast, many states have no restrictions or caps on punitive damages.

Keywords: punitive damages, Arizona, products, compliance

—Kelly W. MacHenry, Snell & Wilmer LLP, Phoenix

 

 

June 17, 2012

N.J. Appellate Court Reverses; Allows Treating Physicians as Defense Experts

The New Jersey Superior Court Appellate Division recently reversed a controversial pretrial order prohibiting mass tort pelvic mesh defendants from consulting or retaining any physician who, at any time, treated any plaintiff alleging injury from surgically implanted pelvic mesh medical devices used to treat pelvic organ prolapse and stress urinary incontinence. In dissolving the order, the Appellate Division held that defendants may employ qualified treating physicians as experts in cases against plaintiffs other than their own current or past patients. In Re Pelvic Mesh/Gynecare Litig., --- A.3d ---, 2012 WL 1957932 (N.J. Super. Ct. App. Div. June 1, 2012).

Defendants Johnson & Johnson and Ethicon, Inc., along with the Product Liability Advisory Council as amicus curiae, argued on appeal that the trial court’s pretrial order significantly impaired their ability to retain experts in approximately 450 pelvic mesh cases by disqualifying approximately 1,300 physicians as defense experts. In addition to severely limiting the pool of available experts, the order placed defendants in the untenable position of consulting with and preparing experts that might later be disqualified as new plaintiffs are added to the litigation (as had already happened with two defense experts).

The trial court reasoned that the defendants’ retention of a physician that has treated even one plaintiff in the coordinated litigation could undermine the trust between plaintiffs and their doctors, despite defendants’ agreement that a treating physician would have no communication with the defense about his or her own patient-plaintiff and would not be used as an expert witness in the patient-plaintiff’s own case. The trial court concluded that its order was necessary to preserve a physician’s obligation to ensure the continuing trust of a patient who has brought a lawsuit.

The appeals court found that the trial court’s concerns were overblown, reasoning that trust between physicians and their former patients cannot erode when the treatment has concluded. Further, the Appellate Division noted that in many personal injury cases, physicians are allowed to testify for or consult with defense counsel despite the fact some of their patients have filed lawsuits. This has never been grounds for disqualification, and any risk that the treating physician might reveal privileged patient information can be readily addressed by a protective order. Characterizing the trial court’s ruling as a “mistaken exercise of authority to manage th[e] litigation,” the Appellate Division flatly rejected the finding that a physician has a duty to support his or her patient’s claims or defenses on the stand. As a witness, the physician’s duty is limited to telling the truth and providing accurate information.

The court also pointed out the disparate impact of the trial court’s ruling on the parties’ ability to retain experts in this litigation. While the order limits defendants’ ability to retain qualified physicians as experts, plaintiffs have unfettered access to the qualified physician of their choice. As the Appellate Division put it, plaintiffs’ unilateral decision to file suit in New Jersey and take advantage of the state’s joint case management procedures “should not affect the availability of relevant evidence to both sides.”

Though the court allowed defendants to retain or consult with current or former treating physicians, it also held that detailed protocol must be implemented to prevent misuse of a treating physician’s service as a defense expert. As part of this protocol, which defendants proposed, defendants are obligated to: (1) monitor whether the physician-expert has treated any plaintiff, (2) refrain from communicating with the physician-expert about any of his patients who are plaintiffs or are likely to become plaintiffs, (3) refrain from retaining a treating physician as an expert in any case brought by a patient of the physician and (4) provide the physician-expert with a copy of the protocol and require the physician-expert sign an acknowledgement that he/she has read a “memorandum to physicians” reinforcing the fact that he or she is still bound by the patient-physician privilege. In addition, plaintiffs’ counsel must identify all past or present treating or consulting physicians for new plaintiffs as they are added, and defense counsel must notify plaintiffs’ counsel of their intent to contact any past or current treating or consulting physician.

Keywords: Johnson & Johnson, Ethicon, pelvic mesh, New Jersey Appellate Court

— William R. Stuart, Sills Cummis & Gross PC, Newark, NJ

 

 

June 11, 2012

FDA Proposes Elimination of Certain Drug Pedigree Requirements

 

The U.S. Food and Drug Administration (FDA) has proposed removing a section of the Prescription Drug Marketing Act (PDMA) (21 U.S.C § 353(e)(1)(A)) regulations that requires certain wholesale distributors of prescription drugs to provide to the purchaser a pedigree setting forth a given drug’s chain of custody from the manufacturer to the point of dispensing. 76 Fed. Reg. 41,434 (proposed July 14, 2011) (to be codified at 21 C.F.R. pt. 203).

Enacted in 1988, the PDMA established minimum federal pedigree requirements to trace the ownership of prescription drugs through the supply chain. The principal goal of the PDMA was to further secure the nation’s drug supply from counterfeit and substandard prescription drugs. The law establishes two types of distributors: “Authorized distributor[s] of record” or ADRs; and “Unauthorized distributor[s],” such as wholesalers. 21 C.F.R. § 203.3(b), (bb). ADRs are defined as those that have “an ongoing relationship to distribute [a] manufacturer’s products” (21 C.F.R. § 203.3(b)); such a relationship may be evidenced by a “written agreement in which the manufacturer authorizes the distributor to distribute some or all of its products for a period of time or for a number of shipments.” 64. Fed. Reg. 67,720, 67,728 (Dec. 3, 1999).

In 1999, the FDA implemented 21 C.F.R. § 203.50(a), requiring any unauthorized distributor to provide to the purchaser an “identifying statement” or pedigree setting forth each prior sale, purchase, or trade of the drug. The pedigree also had to include the proprietary and established name of the drug; dosage; container size; number of containers; the lot or control numbers of the drug being distributed; the business name and address of all parties to each prior transaction involving the drug, starting with the manufacturer; and the date of each previous transaction.

Industry objections to the pedigree requirement in section 203.50(a) caused a series of stays by the FDA and delayed the effective date of the regulation from December 4, 2000, to December 1, 2006. Industry representatives of unauthorized distributors claimed that they could not obtain the required pedigree showing all prior sales of the drugs they purchased because a large portion of these drugs were purchased from ADRs who were not required to provide pedigrees and who were unwilling to provide them voluntarily. In addition, industry representatives contended the pedigree requirement could prevent thousands of smaller, unauthorized distributors from distributing many drugs to their customers, which would effectively put them out of business.

In 2006, a group of unauthorized wholesalers of prescription drugs brought suit against the FDA and moved for a preliminary injunction against the implementation of section 203.50. The U.S. District Court for the Eastern District of New York issued a preliminary injunction enjoining the FDA from implementing section 203.50(a). RxUSA Wholesale, Inc. v. Dep’t of Health & Human Servs., 467 F. Supp. 2d 285 (E.D.N.Y. 2006). The court’s order was affirmed by the U.S. Court of Appeals for the Second Circuit. Dep’t of Health & Human Servs. v. RxUSA Wholesale, Inc., 285 F. App’x 809 (2d Cir. 2008).

Citing “serious ongoing concerns about the effect that full implementation of the statutory pedigree requirements . . . in § 203.50(a) . . . would have on the nation’s drug supply and on wholesaler distributors,” the FDA has proposed eliminating the regulation. The proposed rule would require unauthorized distributors to document the pedigree only back to the last ADR, and it would remove the requirement that the pedigree include certain information, for example, proprietary and established name, dosage, container size, the drug’s lot or control numbers.

According to the proposed rule, the FDA “intend[s] to exercise enforcement discretion” regarding section 203.50(a) while the rulemaking is pending but will “not initiate an enforcement action against any wholesalers” with respect to section 203.50(a) or related section of the PDMA for failing to provide a pedigree that goes back to the manufacturer or for failing to include the specific information listed in the regulation, as long as the pedigree identifies the last ADR that handled the drugs and the associated dates of the transactions and the names and addresses of all unauthorized distributors that handled the drug after the last ADR and the corresponding dates of those transactions. In addition, the proposed rule states that the FDA “encourages wholesalers to include the drug, dosage, container size, number of containers, and the drug’s lot or control number(s) in the pedigree.”

The deadline for submitting comments on the proposed rule was September 12, 2011.

Keywords: FDA, PDMA, pedigree, wholesalers

— Cassandre L. Charles is with Chadbourne & Parke LLP, New York City

 

 

June 11, 2012

Fire in the Hole!

 

In 2008, Anne Danaher sued Karen Kenney, alleging that Kenney negligently injured her during an ear candling. Danaher also sued Wild Oats Markets, alleging that the ear candle it had sold her was defective.

I guess I should stop for a second and make sure you know what ear candling is. It's basically what the name implies: the sticking of candle A into ear B, followed by the lighting of said candle, generally while the candle-ee lies on his or her side. Because this was a negligence case, you might be thinking that this was an unintentional candling, but you would be wrong. In fact, Danaher requested it. Why? Good question.

Advocates of ear candling (sometimes called "ear coning" because of the shape of the candle) say that the process helps remove ear-wax blockages through the combination of the heat of the flame and the suction created by hot air rising up through the candle, which, I should have mentioned, is hollow. Detractors like me say that makes absolutely no sense at all because ear wax is not going to magically travel up the inside of a hollow candle no matter how much hot air said candle generates. In fact, it seems much more likely that hot melted candle wax is going to come down. And indeed it does.

One of the points illustrated by this case is the fact that even intelligent people may believe some ridiculous things.

For example, I emailed a friend of mine about this case, a man who is an attorney and personally known by me to be an intelligent person. (I'll call him David, because that's his name.) To my surprise, David wrote back to offer a slightly sheepish defense of the procedure, saying he had actually performed it on his wife (also smart), and though he admitted he found it somewhat "creepy," they believed it had worked.

I asked David how he thought it worked, and he said this:

(1) I am not a doctor; (2) I am not a scientist; (3) I really don't know, but will tell you how I think it works: You light the large end of the cone. I believe the cone dynamic (again, the actual physics are way beyond me) then results in heat transmitting down the cone, which has the effect of softening the wax. I believe the heat also creates some kind of pressure dynamic which draws the softened wax into the tip of the cone.

I responded:

I am not a doctor, but I am enough of a scientist to call you out on your novel "cone dynamic" theory. In theory, the flame could create the pressure dynamic you refer to by heating air, causing it to rise out of the hollow cone and (if the ear seal was air-tight, which does not seem likely) creating an area of low pressure inside the cone that could cause air from inside the ear to be drawn into it. Rising hot air is one thing; but I don't see how it could bring melted ear wax along with it.

I am not trying to talk you out of ear-candling your wife, if that is something the two of you enjoy. I'm just saying I'm skeptical of the value of thermal-auricular therapy.

That's what some people apparently call it: thermal-auricular therapy, something that is more impressive-sounding than "the hot-ear treatment" but no more effective. Ear candling has been said to offer benefits ranging from clearing the sinuses to aligning the chakras, but actual studies examining the practice have found no evidence at all that it does these things. In fact, one study found that the pressure needed to get ear wax to come out would probably rupture the eardrum, which I assume is not part of the plan. True, these studies actually have found wax inside ear candles after the procedure in a number of cases. Can you guess what kind? (Hint: It is the kind of wax commonly used to make candles.)

Anne Danaher does not seem to have researched the procedure much, if at all, before buying two ear candles at Wild Oats Markets in Kansas City in 2003. The candles sat unused until 2006, when Danaher hired Kenney, an employee at a different health-food store, to come over and candle her. In the course of that procedure, Danaher alleged, she suffered a burn to her right inner ear that resulted in hearing loss. She sued the candle's manufacturers and the retailer for selling her an allegedly defective candle, and she sued the candler for negligent candling.

Danaher's defect claim suffered from a number of problems, chief among them being that she needed to find a qualified expert witness who knew something about ear candling. And because the sentence you just read is probably the only one that's ever included both "qualified expert" and "ear candling" (except for this one), it may not be surprising that she was unable to do this.

She did find a qualified otolaryngologist, who was prepared to testify that "ear candles and the practice of ear candling are of no use or benefit in the treatment of any condition or illness involving the human ear" (or, presumably, any other part of the body). But the court found that Federal Rule 702 was not satisfied because the doctor simply had no experience with ear candles. He had never inspected one, had never been involved in any research involving them, and certainly had "no formal training in terms of classes or education in the design, manufacture or construction of ear candles," if there is such a thing. His testimony on ear candles was therefore excluded.

Not surprisingly, given this result, the defendants all filed summary judgment motions. Kenney argued that with no expert testimony Danaher could not demonstrate the proper duty of care, which, she argued, was not ordinary care but rather "that degree of learning and skill ordinarily possessed and used by members of the ear candling profession and that school of ear candling in the community in which [the defendant] practiced, or in similar communities, and under like standards." Problem: There is no school of ear candling, and ear candling is not a profession. Kenney really did not claim otherwise, as the court pointed out:

Kenney does not consider herself an expert on ear candling . . . . Having reviewed the summary judgment record, the Court finds there is no evidence that Kenney has a career in ear candling, that she is a professional ear candler, or that she otherwise has any specialized knowledge in ear candling . . . . Kenney's only guidance on how to perform the ear candling procedure came from her mother, an employee of The Herb Garden [health-food store], and an instruction pamphlet handed out at The Herb Garden. The Court concludes that this evidence falls far from demonstrating that Kenney is a professional [ear candler].

The instruction pamphlet is worth a mention. According to the court, it was titled "A History of Ear Candles" and purported to be merely telling the story of how the "ancients" used these devices. "These authentic reproductions of the ancient so-called 'ear candles' are sold as novelty items only," the pamphlet read. "They make amusing birthday candles. The user is fully responsible for the use of the product, which is harmless when properly handled [on birthdays]." Did the ancients have any safety procedures that they would have wanted future pamphlet-writers to pass on to their descendants? Turns out they did:

Users kept water handy, because hot ash or sparks could fly from the top of the cone, which is one reason an assistant would observe while the cone burned. It was safer to lay the head on a table, or to lie down on a hard surface rather than on a bed or carpet, while using the cones . . . . Ear candles were handled with the same care and common sense people used with any candle or flame.

It's not clear which sensible ancient people are being referred to here. For some reason, the Hopi tribe is frequently cited as being the source of the practice itself, but for the record, they have flatly denied this. In any event, if Kenney hoped to benefit from the received wisdom of the ancient ear-candlers, she was going to have to explain it to the jury at trial.

The other defendants argued that the plaintiff could not succeed against them because she could not establish that ear candles are defective. Basically, the court agreed that Danaher did not have any evidence to support a design-defect claim, but the court held that she could get to a jury on failure to warn. This seems to have been because discovery had shown that the manufacturer did in fact prepare written warnings and instructions that it included with its ear candles. These "direct[ed] the user to keep the head upright during the ear candling procedure, with the ear candle basically parallel to the ground and at a slightly upward angle," rather than having the user on his or her side with the candle raised to the vertical. While upright candling would seem to reduce if not eliminate the risk, it also seems to eliminate the (theoretical) benefit, while also making it much more likely that someone will see you with a burning candle in your ear. As far as a failure-to-warn claim was concerned, though, Danaher's testimony that these instructions had not been included with the candles she bought persuaded the judge that this claim could go to a jury.

It got to trial, anyway, but never actually got to the jury. Danaher in fact testified at trial only that she "could not recall" whether the warnings above or any others had been provided at the time of purchase, and (likely because the plaintiff in a failure-to-warn case has the burden to prove that someone failed to warn her) the judge held that was not good enough. Her claims also failed because the evidence showed at most that the proximate cause of the injury was the conduct of the ear-candler, not the candle itself. The court therefore granted Wild Oats's motion for judgment as a matter of law, and the docket shows that candler and candle-ee settled shortly thereafter.

So, what have you learned during the otherwise billable time you spent reading this? I think there are a number of lessons:

• Ear candling doesn't work and may be risky, depending on how it's done.

• The risk that you will look ridiculous during the procedure is 100 percent. Doesn't matter how it's done.

• There are not likely to be any professional ear-candlers, which will make finding an expert witness difficult.

• On the other hand, expert testimony may not be necessary in such a case.

• Finally, never stick a novelty item in your ear, especially if it is on fire.

Keywords: ear candling, tort litigation, expert testimony

— Kevin Underhill is with Shook, Hardy & Bacon LLP, San Francisco.

 

June 1, 2012

Agencies Increase Port Surveillance of Consumer Products

 

The U.S. Consumer Product Safety Commission (CPSC) is increasing its efforts to prevent consumer products that violate U.S. safety rules from entering the country. The agency recently announced enhanced efforts to screen imported products for safety violations. CPSC investigators are working jointly with U.S. Customs and Border Protection (CBP) agents at 15 major ports of entry to inspect goods and prevent the entry of products that fail to meet CPSC rules.

In the first quarter of fiscal year 2012, CPSC investigators prevented over 500,000 units of “violative and hazardous imported products from entering the country,” according to an April 5, 2012, CPSC news release, During the past fiscal year, the agency inspected more than 9,900 product shipments at ports nationwide and prevented almost 4.5 million units of such products from entering U.S. stores and homes.

Nineteen CPSC investigators are now coordinating with CBP port personnel. CPSC and CBP agents are screening consumer products at ports using, among other techniques, “use and abuse” testing and X-ray fluorescence analyzers. As a result, children’s products that violate federal lead limits, present a choking hazard, or include banned phthalates are being seized. The primary focus of the CPSC’s efforts is children’s products, but a significant percentage of products seized are general use products.

Background
The CPSC has been screening imported consumer goods for decades. Its port surveillance began when it was founded in 1973, and the emphasis on inspection of products at the U.S. borders has continually increased. In 2007, the CPSC began to place full-time investigators at key ports of entry, and it created its own Import Surveillance Division in 2008. In 2010, the CPSC and the CBP created the interagency Import Safety Commercial Targeting and Analysis Center (CTAC), located in Washington, DC, and overseen by the CBP.

CPSC personnel now have access to CBP commercial automated systems, which provide live data feeds for use in targeting specific shipments for port inspections. Two CPSC international trade specialists are designated to work with CBP personnel at CTAC to identify high-risk imports likely to violate safety standards. The CPSC can thus employ CBP’s extensive trade database to conduct import screening analysis and safety risk assessments of goods entering U.S. ports.

Detention
Using CBP data, CPSC investigators may now issue their own Notices of Detention for imported goods that appear to violate CPSC rules. The CPSC’s power to detain imported products is inherent under CPSC’s statutory authority to sample and inspect goods (15 U.S.C. § 2066, 15 U.S.C. § 1273). A typical notice describes the suspected violation, the statute governing the violation, and the contact information for the CPSC officer that issued the notice. A CPSC notice is issued to the importer with copies to the customs broker and CBP.

Suspected violators of CPSC safety rules must deal directly with CPSC, but the detained merchandise remains under CBP custody until the matter is resolved. The CBP may also issue its own detention notices for other, non-CPSC violations (e.g., intellectual property violations). A shipment can, therefore, be subject to both CBP and CPSC notices. If a shipment is detained by both CBP and CPSC for separate violations, both the CPSC and the CBP send their own notices of detention. CBP detention is always resolved first. However, if the CBP seizes a product, CPSC detention ends and the CBP process takes precedence, although the CPSC may still issue a Letter of Advice to the importer regarding the CPSC violation. Alternatively, if the CBP determines there is no violation and releases the product from detention, the product is still not released to the importer until the CPSC detention is resolved.

Conclusion
The goal of enhanced CBP/CPSC port surveillance is to enforce consumer safety laws more effectively by focusing on the beginning of the chain of commerce rather than the end. The CPSC is determined to stop violative products at the border instead of relying on recalls, which are notoriously ineffective due to the difficulty in locating and retrieving products that have already been sold. With the CPSC’s dedication of additional resources to the U.S. borders, importers of all products should take heed.

Keywords: CPSC, imports, surveillance, CBP, customs

— Charles E. Joern Jr., Joern Law Firm, Oak Brook, IL.

 

 

June 1, 2012

Pay-to-Delay OK Says 11th Circuit

The Eleventh Circuit Court of Appeals has dismissed an antitrust action filed by the Federal Trade Commission (FTC) against a name-brand prescription drug manufacturer (the patent holder) and a generic drug company that entered into a pay-for-delay agreement to settle patent infringement claims filed against the generic drug company.

FTC v. Watson Pharm., Inc., No. 10-12729 (11th Cir., decided April 25, 2012). According to the court, The FTC failed to state a claim on which relief could be granted because it alleged simply that the patent holder was “not likely to prevail” in the underlying infringement action. Under Eleventh Circuit precedent, the FTC should have alleged that the settlement violated antitrust law because it “imposes an exclusion greater than that contained in the patent at issue.”

Generic drug makers may obtain Food and Drug Administration approval to market a product that is chemically identical to a “pioneer drug” already approved and many do so by certifying that the “pioneer drug’s patent is invalid or will not be infringed by the manufacture, use, or sale of the new drug.” Thereafter, the patent holder has the opportunity to file an infringement action against the generic drug maker.

Under a pay-for-delay agreement, used to settle an infringement action, the patent holder “pays an allegedly infringing generic drug company to delay entering the market until a specified date, thereby protecting the patent monopoly against a judgment that the patent is invalid or would not be infringed by the generic competitor.” FTC has long maintained that these agreements, which it refers to as “reverse payment settlements,” unfairly restrain trade in violation of federal antitrust laws in that they are tools the manufacturers use to protect monopoly profits “that the companies divvied up by means of payments from the patent holder to the generic manufacturers.” FTC also contends that reverse payment settlements cost consumers some $3.5 billion annually due to higher drug prices.

Key to the Eleventh Circuit’s approach is that a patent gives the holder a monopoly, and thus, an anticompetitive effect is already present. Without a court declaration that a patent is invalid or that a generic drug maker has not infringed the patent, the patent has “potential exclusionary power,” and a reverse settlement of patent litigation is immune from an antitrust attack unless the agreement excludes more competition than the patent has the potential to exclude. This would occur, for example, when a generic manufacturer agrees to refrain from ever marketing a generic version of the patented drug.

In this case, the generic drug companies agreed not to market a gel used to treat the symptoms of low testosterone in men until 2015, i.e., five years before the patent expired, or unless another manufacturer launched a generic version before then. The generic drug companies also agreed to promote the branded drug to separate, specific markets. In return, the patent holder agreed to pay one generic drug maker $10 million per year for six years and an additional $2 million per year for backup manufacturing assistance. The patent holder also agreed to share some of its profits with another generic drug maker through September 2015, projecting payments between $19 million and $30 million per year. The drug had produced $1.8 billion in revenue from sales in the United States between 2000 and 2007, and it was projected that the generic version, if sold for 25 percent of the price of the branded drug, would cut the patent holder’s profits by $125 million per year.

The court refused the FTC’s invitation to adopt a rule “that an exclusion payment is unlawful if, viewing the situation objectively as of the time of the settlement, it is more likely than not that the patent would not have blocked generic entry earlier than the agreed-upon entry date.” According to the court, this approach “equates a likely result (failure of an infringement claim) with an actual result.” In the court’s view, “it is simply not true than an infringement claim that is ‘likely’ to fail actually will fail. . . . Rational parties settle to cap the cost of litigation and to avoid the chance of losing. Those motives exist not only for the side that is likely to lose but also for the side that is likely, but only likely, to win.”

The court also rejected the FTC’s approach because it would “impose heavy burdens on the parties and courts. . . . In this case, assaying the infringement claim ‘as of the time of settlement’ would have required mining through mountains of evidence—when the lawsuit settled, more than 40 depositions had been taken and one side alone had produced more than 350,000 pages of documents. The settlement made that unnecessary, but the FTC’s approach would put that burden back on the parties and the court, undo much of the benefit of settling patent litigation, and discourage settlements. Our legal system can ill afford that.”

Further, because Congress has given the Federal Circuit Court of Appeals exclusive jurisdiction over appeals in patent cases, the court noted that the Eleventh and other non-specialized circuit courts “have no expertise or experience in the area. We are ill-equipped to make a judgment about the merits of a patent infringement claim, which is what we would have to do in order to decide how likely the claim was to prevail if it had been pursued to the end. The FTC’s approach is in tension with Congress’ decision to have appeals involving patent issues decided by the Federal Circuit.”

Keywords: Intellectual Properties, Generics, Antitrust

—Chris A. Johnson – Shook, Hardy & Bacon L.L.P., San Francisco. (The author would like to thank Dale Walker for her research assistance on this piece.)

 

April 20, 2012

Court Imposes Issue Preclusion as Sanctions against Michelin

 

Products liability cases are especially prone to heated discovery disputes because oftentimes, any evidence that would tend to prove that a product was defective and unreasonably dangerous is solely in the hands of the defendant who manufactured the product. If the plaintiff does not have this evidence early in the case, the claims are more likely to be dismissed on a motion for summary judgment. When a defendant fails to produce documents critical to the case, a plaintiff may seek the court’s intervention for alleged discovery abuses by a defendant. In such cases, a substantive sanction may be appropriate and, if ordered, is a game-changer.

Such a sanction was recently imposed in the case of Bates v. Michelin North America, Inc., 1:09-CV-03280-AT, 2012 WL 453233 (N.D. Ga. Jan. 13, 2012). Plaintiffs alleged that defendant’s defective tire failed, resulting in a car accident that caused serious injuries to the plaintiff. In a lengthy and detailed opinion analyzing Michelin’s various discovery misdeeds, the district court concluded that, despite imposition of a prior monetary sanction of $17,000 and a prior warning, Michelin had “engaged in a pattern of subterfuge and withholding relevant and responsive documents” that forced the plaintiffs to seek court intervention. The court continued that Michelin’s “evasive, hair-splitting and inaccurate representations to the Court . . . demonstrate Michelin's bad faith,” which warranted “a serious, substantive sanction.” The court therefore issued an order finding that the subject tire was defective and unreasonably dangerous as a sanction for Michelin’s abuse of the discovery process.

According to the court, Michelin’s discovery abuses included: (1) defying the court’s previous orders to produce documents; (2) adopting an extremely narrow, unjustified interpretation of the court’s orders in order to limit, or altogether avoid, producing relevant and useful documents in response to plaintiffs’ discovery requests; (3) producing information in a format that was indecipherable and misrepresenting to the court that documents were produced as they are maintained in the regular course of business; (4) making misrepresentations to the court that all documents had been produced when in fact they had not; and (5) failing to correct misrepresentations to the court. The court reasoned that while one of these actions alone would not warrant substantive sanctions, taken together they established Michelin’s bad faith. But because Michelin improperly withheld or delayed producing documents that specifically related to plaintiffs’ defect claim, an order establishing that the subject tire was defective and unreasonably dangerous as manufactured and sold to plaintiffs was narrowly tailored to remedy Michelin’s violations and therefore appropriate under Fed. R. Civ. P. 37(b). The parties have since settled the case.

In light of Michelin’s corrective production, the court stopped short of extending its issue preclusion order to proximate causation, i.e., a finding that the tire failed as a result of its defective and unreasonably dangerous condition. That step, the court reasoned, “would be the death knell of any Michelin defense to liability.” Yet even with this display of temperance, the Michelin court’s sanction goes far beyond any other recent federal sanctions cases, which have generally focused sanctions orders on preclusion of evidence. See, e.g., Musick v. Dorel Juvenile Group, Inc., 1:11CV00005, 2011 WL 5241692 (W.D. Va. Nov. 1, 2011) (overruling objection to magistrate judge's order granting a discovery sanction that precluded defendant from offering evidence as to why it chose not to add foam to the head area side wings of the child car seat that was the alleged defective product).

Whether Michelin’s refusal to timely produce relevant documents was a result of misunderstanding, strategy, or mere gamesmanship, the Michelin court made clear that federal courts will not tolerate overly aggressive discovery defense, particularly when such behavior continues in the face of prior court orders. In such cases, litigants would be well advised to tread lightly or risk entry of a potentially ruinous order.

 

Keywords: discovery, sanctions, issue preclusion, defective and unreasonably dangerous

— Kinika Young, Bass, Berry & Sims, PLC, Nashville.

 

April 12, 2012

FDA Denies Petition to Ban BPA in Food and Beverage Packaging

 

On March 30, 2012, the U.S Food and Drug Administration (FDA) announced that it was denying a petition to ban the use of Bisphenol A (BPA) in food and beverage packaging. BPA is used to make polycarbonate plastics and epoxy resins that are often used in containers that store food and beverages. The resins are used to protect food by coating the inside of metal products such as food cans.

The FDA denied the petition and stated, in part, that the information provided and currently available is not sufficient to institute a ban of BPA. In addition, the FDA’s decision states that the agency will review all new evidence regarding the safety of BPA and will continue to study BPA. Also on March 30, the FDA issued a Consumer Update on the agency’s continued study of BPA.

The citizen petition, filed in October 2008 by the Natural Resources Defense Council (NRDC), requested that the FDA issue a regulation prohibiting the use of BPA in human food and packaging. The petition also sought the revocation of all regulations permitting the use of any food additive that may result in BPA becoming a component of food. In August 2011, the NRDC filed a lawsuit against the FDA in the U.S. District Court for the Southern District of New York to force the agency to respond to the petition to ban BPA. The March 30 denial came one day before the court-imposed deadline for the FDA to respond to the NRDC’s 2008 petition.

FDA spokesman Douglas Karas stated, “The FDA denied the NRDC petition because it did not have the scientific data needed for the FDA to change current regulations, which allows the use of BPA in food packaging.”

Prior to the FDA’s decision to deny the petition, some major food manufacturers had already begun to phase out the use of BPA in their food packing.
The full text of the FDA’s letter to the NRDC denying the petition can be seen here.

Keywords: BPA, Bisphenol A, FDA, NRDC, packaging, plastic, ban, citizen’s petition

 

— Angela T. Puentes-Leon, Carlton Fields, P.A., Miami .

February 17, 2012

EPA Classifies Trichloroethylene as Carcinogenic to Humans

 

IOn September 28, 2011, the U.S. Environmental Protection Agency (EPA) listed trichloroethylene (TCE) in the EPA Integrated Risk Information System (IRIS) database and classified it as carcinogenic to humans by all routes of exposure. It previously had been classified by the EPA only as a “possible” human carcinogen. Many public comment submissions took issue with the EPA draft conclusions, stating that the best evidence currently available on TCE was at most limited or only supported a classification as “suggestive of an association” between TCE and cancer. This same debate occurs and will assuredly continue to occur in the context of toxic tort cases alleging that exposure to TCE caused cancer in a plaintiff and in environmental cases in which the contamination is at issue.

The EPA’s methodology and process were heavily criticized during the comment period and immediately upon its decision, as were the data it relied upon. Many of the comments and criticisms of the EPA draft risk assessment were related to the EPA’s interpretation of and reliance upon findings from specific scientific studies or groups of studies (e.g. animal studies, “weight of the evidence” methodology, assumptions, extrapolation, conservative modeling). Many others criticized the EPA’s classification of TCE as a carcinogen in general, stating that the conclusion did not meet the requirements established by EPA itself (US EPA, (2005), Guidelines for Carcinogenic Risk Assessment).

Those guidelines require that a designation of “cancerous to humans” must demonstrate strong epidemiological evidence of a causal association in humans. The criteria include strong evidence of an association between human exposure and cancer (or precursors to cancer), significant levels of evidence of carcinogenicity in animals, Mode of Actions for carcinogenicity and precursor events identified for animals, and supporting evidence that precursor events in animals also occur in humans.

Many comments regarding the draft guidelines indicated that the TCE studies show only small observed effects—findings of small effects in tumors with high background rates that can be attributed to other known or unknown factors—and that studies with positive results also have limitations (i.e. study power, design, or conduct) that diminish support for their conclusions. Some also suggested that any stronger classification of TCE would defy the available epidemiology, which other bodies (International Agency for Research on Cancer, NTP Board of Scientific Counselors, Agency for Toxic Substances and Disease Registry,and American Conference of Governmental Industrial Hygienists have reviewed and found constitute at most “limited evidence” for the carcinogenicity, and may in fact support a conclusion that TCE is “not suspected as a human carcinogen.” The EPA risk assessment does not mention these conclusions, much less distinguish them.

TCE is a colorless chemical that has been widely used as an industrial solvent for many years in the United States. It is the solvent of choice for many applications because of its stability, high boiling point, and low flammability. For some applications, no viable substitute exists. Many put forth evidence to demonstrate that TCE presents no risk of harm to humans or the environment when handled safely and in conformance with regulations. In recent years, persons living in areas with TCE contamination of groundwater have become concerned, but TCE has been comprehensively regulated under the Safe Drinking Water Act, the Resource Conservation and Recovery Act, and the Clean Air Act for years.

Further, the fact that a regulatory agency has classified an agent as a carcinogen or determined a regulated level of that agent does not necessarily establish that opinion or conclusion as “reliable” or exposures above that level as “dangerous” for purposes of admissibility. There is a profound difference between the regulatory process and the classifications that result from them and the scientific method, causation analysis, and the adjudicative process in a court of law. As such, the determinations and conclusions of a regulatory agency do not and should not necessarily control. Any evidence offered to support such a claim must be reliable and admissible, in and of itself, notwithstanding whether it is consistent with any regulatory agency conclusion or whether it uses the same methodology.

Keywords: EPA, trichloroethylene, carcinogen

 

—Knight S. Anderson, Hill Fulwider McDowell Funk & Matthews, Indianapolis.

February 6, 2012

California Court Refuses to Hold Manufacturers Liable for Third Parties' Replacement Parts

 

In O'Neil v. Crane Co., No. S177401, 2012 WL 88533, P.3d (Cal. Jan. 12, 2012), the Supreme Court of California unanimously held that manufacturers of products used in U.S. Navy warships could not be held liable for harm caused by third parties' asbestos-containing parts added to the products post-sale. The court reasoned that any design defect in defendants' products was not a legal cause of the alleged injury, and defendants had no duty to warn of risks arising from other manufacturers' products. Id. at *5.

The O'Neil decision precluded a potential avenue of recovery for plaintiffs in products liability cases. A decision in favor of the plaintiffs potentially could have greatly expanded strict liability and raised far-reaching implications about a manufacturer's duty to warn and duty of care.

 

—Cassandre L. Charles is with Chadbourne & Parke LLP, New York, NY.

 

» Read the Case Note 

February 2, 2012

FDA Guidance on Social Media: A Piecemeal Rollout?

On December 27, 2011, the FDA released for public comment its Draft Guidance for Industry on “Responding to Unsolicited Requests for Off-Label Information About Prescription Drugs and Medical Devices.” The new document includes the FDA’s first thoughts on industry’s use of electronic social media, but falls far short of an earlier promise to publish guidance on the “promotion of prescription drug products using social media tools.” With respect to social media, these proposed guidelines contemplate a very limited set of circumstances leaving many questions unanswered.

 As consumers and health care professionals increasingly turn to online resources for information about prescription drugs, manufacturers have waited—and with increasing urgency, advocated—for a comprehensive framework for the dissemination of prescription drug information via social media. The FDA responded with a two-day public hearing in November 2009, at which it solicited input on a broad range of issues, including adverse event reporting, parameters for the use of hyperlinks, and the ability of manufacturers to post corrective information on discussion forums. Following the 2009 hearing, the FDA Center for Drug Evaluation and Research (CDER) indicated that it would publish proposed guidelines. The year came and went without publication, and observers took note when the proposed document was omitted from CDER’s 2011 Guidance Agenda. Instead, CDER listed a planned guidance called “Responding to Unsolicited Requests for Prescription Drug and Medical Device Information, Including Those Encountered on the Internet.”

Even that limited document was ultimately scaled back. Published in the Federal Register on the last business day of 2011, the draft guidance has been narrowed to address only unsolicited off-label information requests. Far from a comprehensive guide for dealing with social media, the draft guidance discusses social media issues solely within the confines of existing policies regarding off-label communications.

For example, in defining the distinction between “solicited” and “unsolicited” requests for information, in addition to traditional means of requesting information, the FDA considers a scenario in which a firm “asks or otherwise encourages users to post videos about their own uses of its product on third-party video-sharing sites.” Information requests triggered by such a posting, according to the draft, would be considered solicited requests. Other activities that could lead to solicited requests about off-label use include encouraging bloggers to write about off-label uses of a product; announcing results of a study over Twitter “suggest[ing] that an off-label use...is safe and effective”; or maintaining a website that enables users to peruse a company’s standard responses concerning off-label uses.

Perhaps most interesting—and least satisfying—is the FDA’s advice regarding information requests posted to public online forums. While acknowledging that “it can be in the best interest of public health for a firm to respond to unsolicited requests for [off-label] information...that are made in public forums,” such interests appear secondary to the FDA’s reservations about making off-label information “available to a broad audience and for an indefinite period of time.” Accordingly, the draft guidance directs that substantive responses to publicly posted off-label information requests—if the manufacturer should choose to respond at all—should be provided “only to the specific individual who requested the information as a private, one-on-one communication.” (emphasis added). A company may issue a public response on the online forum, but it “should be limited to providing the firm’s contact information and should not include any off-label information.” (emphasis in original). Any public response should also disclose the company’s involvement, convey that the question pertains to an unapproved use, and refer to the current FDA labeling. The current guidelines make no distinction among the diverse forums where prescription drug products might be discussed, whether on a site targeted specifically to health-care professionals or a patient- or consumer-oriented website. 

 Also unanswered by the draft guidance is the need for parameters governing public correction of online misinformation. The draft guidance governs responses only to “requests” or “questions,” not affirmative statements. A company seeking to correct online statements about off-label uses would appear to be left unguided. Faced with online testimonials pertaining to off-label uses of its product, a company would be rightfully concerned about the FDA’s reaction to any public response on the one hand, and a potential increase of liability in the absence of one on the other.

It is unclear whether the FDA still intends to produce a more comprehensive document on social media, or if the issues under consideration since 2009 will continue to be addressed in a slow, piecemeal fashion. FDA is accepting public comment on the draft guidance until March 29, 2012.

Keywords: FDA, social media, internet, promotion, off-label, draft guidance, information request, unsolicited, liability

—Lori B. Leskin and Nicholas C. Friedman, Kaye Scholer LLP

December 16, 2011

CPSC Issues New Third-Party Testing Requirements

On October 19, 2011, by a vote of 3–2, the Consumer Product Safety Commission (CPSC) adopted final rules requiring toys and other children’s products to undergo independent, third-party testing and certification before they reach consumers. The commissioners, sharply divided along party lines, have characterized the adoption of the rule as either “a monumental day for the safety of America’s children,” or “an overreaching testing and certification regime that will drive up costs for consumers and deprive them of choices while adding only nominally to consumer safety.” The new rule, 16 CFR 1107, which becomes effective on February 8, 2013, applies to products designed for children age 12 and under manufactured after that date. The final rule implements sections 14(a)(2) and (i) of the Consumer Product Safety Act (CPSA), as amended by section 102(b) of the Consumer Product Safety Improvement Act of 2008.

The new rule requires manufacturers or importers of children’s products to certify that the product at issue complies with the CPSC’s children’s product safety rules. This certification must be based on the assessment of the product by a “third party conformity assessment body” that has been accredited by the CPSC.

To ensure continued compliance, the rule mandates periodic retesting of children’s products at least annually, although manufacturers may implement “reasonable testing programs,” which could extend the time between required testing. Additionally, the rule requires a toy or children’s product to be retested and recertified if there is a material change to the product, including but not limited to a change in the product design, the manufacturing process, or the source of component parts. The rule also directs each manufacturer of children’s products to establish a remedial action plan that sets forth procedures to follow to investigate and remediate any products that fail to comply.

Manufacturers and importers are already required to conduct initial testing on certain children’s products, including those containing lead paint, those with small parts, cribs, pacifiers, and children’s metal jewelry. The final rule will require manufacturers to retest these products periodically to ensure continued compliance.

To safeguard against the potential for undue influence by a manufacturer or importer on a third-party testing facility, the rule also requires manufacturers to establish procedures to help eliminate such potential. These procedures must include a written policy against the exercise of undue influence, training for appropriate staff on avoiding undue influence, and informing employees how they can report allegations of undue influence confidentially to the CPSC.

In an effort to reduce the burden on manufacturers, the rule provides that a manufacturer may rely on component-part testing, as described in section 16 CFR 1109, conducted by suppliers to satisfy the testing and certification requirements, “if the component part . . . is sufficient to determine compliance for the finished product.” Section 16 CFR 1109, which sets forth the requirements and conditions for relying on component-part testing, went in to effect on December 8, 2011

Finally, the rule allows manufacturers to label products that comply with the law as “Meets CPSC Safety Requirements.”

Keywords: CPSC, testing, children’s product

—Patricia L. Wheeler, Godfrey & Kahn, S.C.

November 4, 2011

Consumer Groups Seek to Unseal Anonymous Lawsuit Challenging the CPSC’s Public Database

Enacted on August 14, 2008, the Consumer Product Safety Improvement Act of 2008 (CPSIA) requires, among other things, the Consumer Product Safety Commission (CPSC) to maintain a public database for consumers to submit “reports of harm” or the “risk of harm” from consumer products regulated by the CPSC. It has been reported that on October 17, 2011, an anonymous product manufacturer filed the first lawsuit against the CPSC in federal court in Maryland challenging aspects of the database, seeking to prevent the CPSC from publishing a report of harm involving an injury to a child on the CPSC’s public database. Apparently, “Company Doe” also filed a motion to seal the proceedings and requested the court to grant it anonymity in the case, contending that disclosing its name and the nature of the action would be tantamount to allowing the report to be published on the public database. Additionally, reports indicate that on October 31, 2011, three consumer groups—Public Citizen, Consumer Federation of America, and Consumers Union—requested the court to deny Company Doe’s motion to seal the action. They supposedly contend that if the company were to prevail in enjoining the publication of the report, the existence of the CPSC’s database could be jeopardized. It has also been reported that the CPSC is planning to move to unseal the proceedings.

The CPSC is mandated to review all submitted reports of harm. Assuming the report of harm includes all the information required by the CPSIA for publication on the database, the CPSC has five business days in which to transmit the report to the manufacturer or private labeler identified in the report. See 16 C.F.R. § § 1102.20(a), (c). Manufacturers and private labelers may respond in three ways: (1) provide a general comment; (2) request that portions of the report be designated as confidential information; and (3) request that the report or portions of such report be excluded from the database or corrected by the CPSC because it contains “materially inaccurate information” (an MII claim). See 16 C.F.R. § § 1102.12(a), 1102.24(b), 1102.26(b). Companies may submit multiple responses to a report of harm; they may, for example, submit MII claims and general comments in response to the same report. Within 10 business days after the company has been provided notice of the report, unless the CPSC completely accepts the company’s MII claim or determines that the report contains confidential information, the CPSC will publish the full report and the company’s comments (if requested by the company) on the public database. See 16 C.F.R. § § 1102.12(c), 1102.24(g), 1102.26(g)(1), 1102.28(a). If, however, the CPSC determines that the report contains confidential information, it will redact such information and publish the report without it. See 16 C.F.R. § 1102.24(f).

Since the law’s inception, and particularly since the launch of the public database, SaferProducts.gov, in March 2011, some industry representatives have raised concerns regarding who is eligible to submit reports of harm. In addition to consumers, various persons and entities can file reports, including consumers’ attorneys, government agencies, health care professionals, child care providers, and public safety entities. See 16 C.F.R. § 1102.10(a). Significantly, these persons and entities are not required to have firsthand knowledge of the alleged injury or potential defect that could lead to an injury. Consequently, industry representatives also have questioned the accuracy of the reports of harm, noting that false or misleading postings could deceive consumers and damage a company’s reputation. Indeed, there is a disclaimer on the website stating that the CPSC does not guarantee the accuracy of posted reports. Further, according to an October 2011 report by the U.S. Government Accountability Office, of the 1,847 reports of harm published on SaferProducts.gov (through July 7, 2011), the CPSC published 160 reports (nearly 10 percent) with MII claims by manufacturers and private labelers.

The entirety of Company Doe’s lawsuit remains under seal pending the court’s decision on the company’s motion to seal the proceedings. Reports indicate that an unidentified government agency, not the family of the child, submitted the report about Company Doe’s product. Apparently, Company Doe claims that there is no evidence to support the report, and is seeking to have the CPSC enjoined from publishing the report to the public. This supposedly first legal challenge to the CPSC’s database centers on one of the most controversial features of the database; unless a manufacturer or private labeler can refute a report of harm regarding its product within 10 days, it will be published on the database and viewable by the public.

Keywords: CPSC, CPSIA, Company Doe, reports of harm, children

—Cassandre L. Charles is with Chadbourne & Parke LLP in New York, NY

September 16, 2011

Class Action Certified on Omega-3 Health Claims in Shelled Walnuts

Following accusations by the FDA that Diamond Foods made unauthorized health claims regarding omega-3 fatty acids found in its shelled walnut products, Diamond is now defending a certified class action involving the same health claims. U.S. District Judge Jeffrey S. White of the Northern District of California granted plaintiff Elliot Zeisel’s motion for class certification on June 7, 2011. The proposed class definition includes all consumers living in the United States who purchased for personal or household use Diamond Foods’ shelled walnuts in various sized bags from March 22, 2006, through June 7, 2011, bearing labels with a banner stating “OMEGA♥3 . . . 2.5 g per serving” on the front and back of the package, and the statement: “The omega-3 in walnuts can help you get the proper balance of fatty acids your body needs for promoting and maintaining heart health” on the back of the package.

The FDA’s warning letter to Diamond, issued on February 22, 2010, concluded that the company’s shelled walnut products were “drugs” under the Federal Food, Drug, and Cosmetic Act (the Act) because they were being promoted for “use in the prevention, mitigation, and treatment of disease.” The FDA pointed to statements on the company’s website that omega-3 fatty acids may help lower cholesterol, protect against heart disease, stroke and some cancers, ease arthritis and other inflammatory diseases, fight depression and other mental illnesses, and inhibit tumor growth. Asserting that walnuts are not recognized as safe and effective for these medical conditions, the FDA also claimed that Diamond’s shelled walnuts qualify as “new drugs” that cannot be marketed absent an approved new drug application. Additionally, the FDA asserted that Diamond’s shelled walnuts were “misbranded” drugs because the packaging failed to provide adequate directions for use and contained unauthorized health claims suggesting a correlation between the consumption of omega-3s and a reduced risk of coronary heart disease. Notably, in 2004, the FDA approved a qualified health claim (based on a petition filed by the California Walnut Commission) that made a correlation between the consumption of walnuts and a reduced risk of coronary heart disease.

Although the product label for Diamond’s shelled walnuts included that qualified health claim, it also included language suggesting that the correlation between walnuts and coronary heart disease is related to the omega-3s in walnuts. Believing there to be insufficient evidence of any such connection, the FDA advised Diamond that the entire statement on its shelled walnut packaging constituted an unauthorized health claim.

Having been instructed by the FDA to take prompt action to correct the alleged violations, Diamond advised the agency that it would change its shelled walnut packaging. Diamond also posted on its website that it expected to make any necessary changes to its packaging and website expeditiously. The FDA is not believed to have taken any further regulatory action against Diamond.

On March 22, 2010, one month after the FDA issued the warning letter, Zeisel filed a putative class action against Diamond. Relying extensively on language contained in the FDA’s warning letter, Zeisel alleged that Diamond’s shelled walnuts were misbranded under the Act because the health claims on the product labels were not authorized by the FDA. Zeisel further alleged that the packaging was misleading because it falsely led him to believe that consuming omega-3s found in Diamond’s shelled walnuts would provide the proper balance of fatty acids, promote his heart health and reduce his risk of coronary heart disease. Zeisel asserts that Diamond has engaged in unfair, unlawful, and fraudulent business practices under California’s Unfair Competition Law; deceptive practices under California’s Consumers Legal Remedies Act; false advertising; and violations of California’s Sherman Food, Drug, and Cosmetic Law. Before certifying a class, the court rejected Diamond’s attempt to dismiss the complaint pursuant to a Rule 12(b)(6) motion, finding that Zeisel’s state law claims are neither expressly nor impliedly preempted by federal law, and Zeisel’s request for injunctive relief is not moot. Dispositive motions are scheduled to be heard in early November 2011, and the case is scheduled for trial on January 30, 2012.

Keywords: FDA; class action; warning letter; misbranded; walnuts

—Matthew J. Calvert and Brooke F. Voelzke, Hunton & Williams LLP, Atlanta, GA

 

September 9, 2011

CPSC Publishes Final Rule on Drawstrings in Children’s Upper Outerwear

After years of creative and increasingly aggressive enforcement of a voluntary industry standard forbidding the use of drawstrings in the neck, hood, and waist areas of certain children’s clothing, the Consumer Product Safety Commission (the Commission) has approved a federal safety rule formally declaring such drawstrings a substantial product hazard. Effective August 18, 2011, the new rule subjects children’s upper outerwear to ASTM F 1816-97, Standard Safety Specification for Drawstrings on Children’s Upper Outerwear, a voluntary standard that has been in place for nearly 15 years. The rule, and a rare unanimous vote of the five commissioners, follows more than 25 years of reported injuries and fatalities and the failure of voluntary industry efforts to completely eliminate the use of such drawstrings.

Section 223 of the Consumer Product Safety Improvement Act of 2008 (CPSIA) amended Section 15 of the Consumer Product Safety Act (CPSA), creating CPSA Section 15(j). This new section gives the Commission the ability to “specify, by rule, for any consumer product or class of consumer products, characteristics whose existence or absence . . . [present] a substantial product hazard.” 15 U.S.C. § 2064(j). To do so, the Commission must determine that: the characteristics are “readily observable” and are already addressed by voluntary standards; the voluntary standards have been effective in reducing the risk of injury; and there is substantial compliance with the standards. Id. Because it is issued under Section 15(j), the new rule is not a consumer product safety rule that subjects products to testing and certification requirements under Section 14(a) of the CPSA.

According to the Commission, between 1985 and April 2011, it received 84 reports of incidents where drawstrings in the neck, hood, waist, or bottom of children’s upper outerwear became entangled with playground equipment, school bus doors, and other objects, resulting in 26 fatalities. The long history of reported injuries and fatalities, the existence of a voluntary industry standard, and many years of effort by the Commission to regulate children’s upper outerwear with drawstrings make it no surprise that this particular product characteristic is one of the first acted on by the Commission under its new Section 15(j) authority. (For additional background, see Josh Johanningmeier, CPSC Drawstring Enforcement Tightens, ABA Products Liability Newsletter, Summer 2008, at 12.)

Consistent with CPSA Section 15(j), the Commission easily made the requisite findings that the characteristic was “readily observable” and about the existence of a voluntary industry standard. The Commission demonstrated the voluntary standard’s effectiveness in reducing the risk by analyzing the number of incidents per year before and after ASTM F 1816-97 was published, concluding that the standard reduced the risk based on a decline in the number of reported incidents on an annual basis. Finally, against the backdrop of a dramatic increase in the number of recalls involving drawstrings in children’s upper outerwear in the past five years, the Commission faced a higher hurdle—showing substantial compliance with the standard. To do so, the Commission made various assumptions regarding the total number of new units of clothing subject to the standard sold each year from 2006 through 2010, and the percent of violating garments recalled, and arrived at the conclusion that there was 99 percent compliance with the voluntary standard (the Commission also noted that, even if its assumptions were incorrect, compliance was “very high”).

The new rule subjects children’s upper outerwear to ASTM F 1816-97, as well as a broader definition of drawstring, and the Commission’s interpretation of the standard’s application to different sizing protocols. If garments are subject to but do not comply with the ASTM standard, they are considered a substantial product hazard (triggering Section 15 reporting obligations and leading to corrective action).

The ASTM standard applies to children’s clothing (sizes 2T to 12 for neck and hood drawstrings; 2T to 16 for waist-level drawstrings) intended to be worn on the exterior of other clothing. The new rule includes size equivalency findings for garments labeled extra-small through extra-large in children’s sizes, and also makes clear that the rule applies to garments marked with a range of sizes, even if some of the sizes in the range would not be subject to the standard. The rule also dispels—with its own definition of drawstring—any confusion or ambiguity regarding the status of “ties” as drawstrings—they are, along with any other “non-retractable cord, ribbon, or tape of any material to pull together parts of upper outerwear to provide for closure.” 16 C.F.R. 1120.2 (2011).

What now? While testing and certification of compliance are not mandated by the CPSA, many retailers will no doubt demand certification of compliance. The days of cobbled-together Commission enforcement on this issue are over and compliance is non-negotiable. The Commission has spoken and, while penalties will still result from failure to report a substantial product hazard under Section 15, the mandate is no longer the product of voluntary efforts and sellers’ “presumed and actual knowledge” of the hazard—it is the law.

Keywords: CPSC; drawstrings; children; CPSIA

—Josh Johanningmeier, Godfrey & Kahn S.C. Madison, WI

 

August 26, 2011

Ruling Affects the Centers for Medicare and Medicaid Services Collection Practices

The District of Arizona recently issued a decision affecting the collection practices of the Centers for Medicare and Medicaid Services (CMS) when recovering Medicare as secondary payer (MSP) reimbursement claims from beneficiaries and attorneys. Haro v. Sebelius, Case 4:09-cv-00134-DCB (D. Ariz. May 5, 2011). When a primary payer, such as liability and no-fault insurance and workers’ compensation, does not promptly pay a claim, CMS makes conditional payments for medical care. When a primary payer finally pays, CMS seeks reimbursement under the MSP Act from primary payers for CMS’s conditional payments.

Background
In Haro, the plaintiffs were injured and received medical services for which Medicare conditionally paid. The plaintiffs then received settlement proceeds from a primary payer, and the defendant used a demand letter to inform the plaintiffs of her reimbursement claim. The demand letter stated that the plaintiffs must reimburse CMS within 60 days of settlement, or interest would accrue and collection actions could be initiated. Each plaintiff, however, disputed CMS’s reimbursement claim and invoked their statutory right for administrative appeal and review to resolve MSP claim disputes.

The Haro court addressed two issues: (1) whether the defendant can require prepayment of an MSP reimbursement claim before the correct amount is administratively determined where the beneficiary either appeals or seeks a waiver of the MSP reimbursement claim; and (2) whether the defendant can hold plaintiffs’ attorneys financially responsible for MSP reimbursement if the attorneys do not hold or immediately turn over to the defendant their clients’ injury compensation awards. The court answered both questions as a matter of statutory construction.

Holdings
On the first issue, the court held that, although it is permissible to require payment 60 days after a beneficiary receives payment from a primary payer, the defendant has no authority to require prepayment of an MSP reimbursement claim when a beneficiary has appealed or requested a waiver. The 60-day reimbursement requirement for immediate payment is neither rational nor consistent with the statutory scheme for appeal and waiver to dispute a reimbursement claim. Such immediate repayment when a reimbursement claim is disputed reaches beyond the fiscal objectives behind the 60-day reimbursement provision. Moreover, interest cannot be due and owing until the MSP reimbursement amount is finally determined.

On the second issue, the court determined that there was no statutory authority to support a direct action against the plaintiffs’ attorneys, except to the extent that they are endpoint recipients of settlement proceeds. The court therefore enjoined the defendant from seeking direct recovery for conditional payment funds from plaintiffs’ attorneys. Further, the court held that the defendant cannot preclude plaintiffs’ attorneys from disbursing undisputed portions of settlement proceeds to beneficiary clients.

Conclusions
In sum, a defendant cannot (1) collect reimbursement funds from beneficiaries or attorneys pending resolution of waiver requests when beneficiaries dispute these claims; and (2) a defendant may not disallow attorneys from distributing undisputed portions of settlement funds to beneficiary clients. Beneficiaries can therefore receive a portion of settlement funds even before the defendant issues a final demand letter.

Importantly, the court’s decision that the defendant could not pursue direct actions against attorneys who disbursed funds to clients (unless they are the endpoint recipients of settlement proceeds) is against established federal case law. In United States v. Harris, the court interpreted the MSP Act to place plaintiffs’ attorneys within a defendant’s purview in reimbursement actions. It remains to be seen how this discrepancy will be resolved.

As a result of this holding, the Medicare Secondary Payer Recovery Contractor (MSPRC) stopped sending rights and responsibilities (RAR) and demand letters while it determined how to address the Haro court’s decisions. RAR letters explain the Medicare/Medicaid lien process to plaintiffs and their attorneys. The conditional payment process was temporarily delayed as a result of this suspension.

The MSPRC revised and resumed issuing RAR letters on June 10, 2011. To address the Haro decision, the MSPRC removed the following sentence from the RAR letter: “Medicare should be repaid before funds are disbursed for other purposes.” And the MSPRC replaced it with the following:

If Medicare determines that it has a recovery claim, you will be provided with a demand letter, which will include applicable appeal and waiver of recovery rights. Medicare will not take any collection action during the pendency of any appeal or waiver request (The applicable law can be found at 42 U.S.C. 1395y(b)(2)(A) & (B).)

The MSCRP resumed issuance of affected demand letters [PDF] on June 27, 2011.

Keywords: CMS, Centers for Medicare and Medicaid Services, MSP, demand letters

—Amy K. Jay is with Stites & Harbison, PLLC, in Louisville, KY

 

August 17, 2011

Experts to FDA: 510(k) Clearance Process Doesn’t Work for Class II Medical Devices

The Institute of Medicine (IOM) has advised the FDA to discard its 510(k) clearance process for Class II Medical Devices and replace it with a process that promotes innovation and provides a premarket evaluation of the subject medical devices’ safety and effectiveness. The report, “Medical Devices and the Public’s Health: The FDA 510(k) Clearance Process at 35 Years,” was issued on July 29, 2011, after the IOM formed a committee in response to questions posed to it by the FDA. The IOM’s recommendations are not binding, but the FDA is opening a public docket to begin receiving public comments on the IOM report. FDA News Release, “FDA to Seek Public Comment on IOM Recommendations.” A public meeting is also planned for September 16, 2011, with a September 30, 2011, deadline for comments.

In 2009, the FDA commissioned the report seeking a review of the 510(k) clearance process for medical devices and answers to two questions. FDA News Release, “FDA to Seek Public Comment on IOM Recommendations.” First, the IOM was tasked with investigating whether “the current 510(k) process protect patients optimally and promote innovation in support of public health” and evaluating “if not, what legislative, regulatory, or administrative changes are recommended to achieve the goals of the 510(k) process optimally?” Institute of Medicine, Medical Devices and the Public Health: The FDA 510(k) Clearance Process at 35 Years, 3–4 (July 29, 2011).

Class II medical devices are “devices that [are] or eventually will be subject to special controls. A device is in class II if general controls alone are insufficient to provide reasonable assurance of its safety and effectiveness and there is sufficient information to establish special controls, including the promulgation of performance standards, postmarket surveillance, patient registries, development and dissemination of guidance documents (including guidance on the submission of clinical data in premarket notification submissions in accordance with section 510(k) of the act) . . .” Medical Device Classification Procedures, Definitions, 21 C.F.R. 860.3 (c) (2) (Apr. 1, 2010). The FDA explains that “[m]ost medical devices are considered Class II devices. Examples of Class II devices include powered wheelchairs and some pregnancy test kits. Fourty three percent of medical devices fall under this category.” FDA, Medical Devices, “Learn if a Medical Device Has Been Cleared by FDA for Marketing.”

Under Section 510(k) of the Food, Drug, and Cosmetic Act, medical device manufacturers who are required to register with the FDA have to inform the FDA at least 90 days in advance that they plan on marketing a medical device (a premarket notification). As explained by the FDA, “[t]his allows FDA to determine whether the device is equivalent to a device already placed into one of the three classification categories. Thus, ‘new’ devices (not in commercial distribution prior to May 28, 1976) that have not been classified can be properly identified.” FDA, Medical Devices, “510(k) Clearances.”

In analyzing the process of 510(k) clearance, the IOM determined that 510(k) clearance did not guarantee the safety of medical devices. Under current law, any Class II medical device that was not in the market at the time of the 1976 passage of the Medical Device Amendments can be cleared for marketing with limited exceptions if the FDA finds the device to be “substantially equivalent” to a device that was previously cleared under Section 510(k) of the Federal Food, Drug, and Cosmetics Act or which was in the market when Medical Device Amendments were enacted. See id. at 1–2.

The IOM found that this process was “not intended to evaluate the safety or effectiveness of medical devices with some exceptions[,]” and the standard of “substantial equivalence to any previously cleared device” makes it impossible for the process to serve as a “premarket evaluation of safety and effectiveness of moderate-risk Class II devices and cannot be transformed into one.” Id. at 4. The IOM also found that information does not exist to evaluate whether the 510(k) clearance process “facilitates or inhibits innovation[.]” Id. at 5. Notably, the IOM explicitly stated that it was not suggesting that devices presently on the market that were cleared through the 510(k) process are unsafe or ineffective. Id. at 156.

As a result of these findings, while not recommending specific changes, the IOM advised the FDA to develop a new regulatory framework based on science to replace the 510(k) clearance process for Class II medical devices “that effectively provides a reasonable assurance of safety and effectiveness throughout the device life cycle.” Id. at 158. In addition to this major recommendation, the IOM issued a number of related recommendations including the implementation of post-market surveillance and the commissioning of an assessment of the effect of FDA regulation on innovation within the medical device industry. Id. at 160–63.

Keywords: FDA, Medical Devices, Class II, Institute of Medicine, 510(k) Clearance

—Sara F. Merin, McCarter & English, LLP, Newark, NJ

August 15, 2011

Recent Decision Demonstrates that Separation of Government Is Alive and Well

Over the last few years, a growing number of people have expressed concern that the United States is headed down the road to communism, or at the very least, socialism. “There is too much government interference in every sector of our lives!” they cry. And, to some degree that might be true. But, the Supreme Court’s June 20, 2011, decision in American Electric Power Co. v. Connecticut,No. 10-174, 564 U.S. __, 131 S. Ct. 2527 (2011), is an indicator that hope is not lost. The opinion makes clear that the pinnacle of the U.S. judiciary understands quite well the respective roles of our separate branches of government and intends to stand firm defending those boundaries.

The issue in the suit was presented in a manner begging for the intervention of our allegedly all-encompassing government. Several states and a land trust filed suit seeking injunctive relief against five major electric power companies. The petitioners alleged that the five power companies were the largest carbon-dioxide emitters in the country. Accordingly, they asked the federal court to set carbon dioxide emissions for each defendant at an initial cap, to be reduced annually. How could that be unreasonable? The Supreme Court didn’t say it was, but said it wasn’t the job of the judiciary to be setting such limits. Rather, that was a job that Congress had specifically delegated to the experts at the EPA by way of the Clean Air Act. In so ruling, the Court emphasized the limitations on its power granted by the Constitution: “the Court remains mindful that it does not have creative power akin to that vested in Congress.” 131 S. Ct. at 2536.

And, the fact that the EPA might be moving a little slower in its rulemaking duties than some states or citizens might like didn’t seem to faze the Court. The suit at issue had been filed in 2004. While it was pending, in connection with another lawsuit, the EPA undertook greenhouse gas regulation and had committed to issue a final rule in May 2012. The Supreme Court noted that if the EPA does not set emissions limits for a particular pollutant or source of pollution, states and private parties may petition for a rulemaking on the matter and EPA’s response will be reviewable in federal court.

Obvious, but unstated in the Court’s opinion, was the further time delay for limits to be set on these five power companies’ carbon-dioxide emissions. If the EPA does not issue a rule in 2012, thereafter the states and land trusts could petition the EPA for rulemaking and thereafter could they seek judicial review. So, the result of the Supreme Court’s decision is that states and land trusts could spend several more years pursuing the carbon-dioxide limits they sought by filing suit in 2004.

Without being calloused to the frustration such delay may cause the proponents of the suit, American lawyers should be proud that our Supreme Court still recognizes the value of preserving the separate branches of government and their separate functions that our founding fathers instituted. Yes, there are many things wrong with our government. Yes, sometimes it seems our Constitution is not remembered or respected by everyone in Washington. But, this recent opinion clearly demonstrates that our Supreme Court justices know from whence their power comes, as well as the breadth and limitation of that power. That is reassuring.

Keywords: Supreme Court, federalism, carbon dioxide, power companies, Clean Air Act, EPA

—Monique Weiner, Kuchler Polk Schell Weiner & Richeson, LLC, New Orleans, LA

 

July 20, 2011

Supreme Court Confirms Limitations on Personal Jurisdiction over Foreign Manufacturers

More than 20 years after Asahi, the U.S. Supreme Court issued two personal jurisdiction opinions in products liability cases on June 27, 2011: J. McIntyre Machinery v. Nicastro, No. 09-1343, 180 L. Ed. 2d 765, 2011 U.S. LEXIS 4800 (2011), and Goodyear Dunlop Tires Operations v. Brown,No. 10-76, 180 L. Ed. 2d 796, 2011 U.S. LEXIS 4801 (2011). In both decisions, there was a holding that the exercise of jurisdiction over a foreign manufacturer was improper. Nicastro addresses specific personal jurisdiction, while Goodyear focuses on general jurisdiction. Goodyear is a unanimous decision. Nicastro is not.

In Goodyear, individuals sued foreign tire manufacturer subsidiaries of Goodyear USA in North Carolina state court alleging tires made in Turkey were defective and caused a bus accident in France. Specific jurisdiction was not an issue because the manufacturing and incident occurred abroad. The trial court denied the foreign subsidiaries’ motion to dismiss for lack of personal jurisdiction. The North Carolina Court of Appeals affirmed, holding there was general jurisdiction because “the stream of commerce” brought some of the foreign companies’ tires to the state.

The Supreme Court unanimously rejected “the stream of commerce” as a basis for general personal jurisdiction and held, “[a] connection so limited between the forum and the foreign corporation . . . is an inadequate basis for the exercise of general jurisdiction.” 180 L. Ed. 2d at 803. The unanimous Court further asserted, “[s]uch a connection does not establish the ‘continuous and systematic’ affiliation necessary to empower North Carolina courts to entertain claims unrelated to the foreign corporation’s contacts with the State.” Id.

The Goodyear opinion confirms the difference between specific and general jurisdiction and provides a reminder that “[f]low of a manufacturer’s products in to the forum, . . . may bolster an affiliation germane to specific jurisdiction.” Id.at 808. The Court further explains, “[t]ies serving to bolster the exercise of specific jurisdiction do not warrant a determination that, based on those ties, the forum has general jurisdiction over a defendant.” Id.

In Nicastro, six justices voted to reverse a New Jersey Supreme Court decision that held there was specific jurisdiction over a foreign manufacturer in a products liability case. The New Jersey court had applied the following test to determine personal jurisdiction: “New Jersey’s courts can exercise jurisdiction over a foreign manufacturer of a product so long as the manufacturer ‘knows or reasonably should know that its products are distributed through a nationwide distribution system that might lead to those products being sold in any of the fifty states.’” 180 L. Ed. 2d at 772.

The plaintiff sued English corporation J. McIntyre Machinery, Ltd. in New Jersey state court because he was injured in New Jersey while using a metal-shearing machine it manufactured. the plaintiff alleged the New Jersey court had jurisdiction over J. McIntyre because (1) it had a U.S. distributor; (2) it sent employees to trade shows in the United States; and (3) there were four of the company’s machines in the state.

The plurality opinion by Justice Kennedy, joined by Chief Justice Roberts and Justices Scalia and Thomas, states the “general rule” is “[purposeful availment] of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws,” which “appli[es] in this products-liability case and the so-called ‘stream-of-commerce’ doctrine cannot displace it.” Id. The plurality applies a “purposeful availment” analysis and concludes, “[at] no time did petitioner engage in any activities in New Jersey that reveal an intent to invoke or benefit from the protection of its laws.” The plurality also observes, “[b]oth the New Jersey Supreme Court’s holding and its account of what it called ‘[t]he stream-of-commerce doctrine of jurisdiction,’ . . . were incorrect. . . .” Id. at 773.

Justices Breyer and Alito concur in the judgment only, opining that the Court’s precedents determine whether there is personal jurisdiction over J. McIntyre in New Jersey. The concurrence authored by Justice Breyer expresses that the Court should adhere to precedent because the case does not present issues of “recent changes in commerce and communication, many of which are not anticipated by our precedents.” Justice Breyer’s opinion specifically disagrees with adoption of the “seemingly strict no-jurisdiction rule of the plurality” and the New Jersey Supreme Court’s “absolute” rule. Id.at 780.

The opinions of the six justices who voted for reversal in Nicastro signal that we should expect to hear more from the Court on specific personal jurisdiction in the context of what Justice Breyer has described as “the relevant contemporary commercial circumstances.” Id. at 782.

Keywords: litigation, products liability, personal jurisdiction, specific jurisdiction, general jurisdiction

—Elizabeth Raines, Baker Sterchi Cowden & Rice LLC, Kansas City, MO

 

July 13, 2011

Sunscreen Labeling and Testing Regulations Get “Ray”ised

On June 14, 2011, the U.S. Food and Drug Administration (the FDA) issued new regulations for sunscreens currently sold over-the-counter (OTC) (i.e., without a prescription). The new regulations, which become effective June 18, 2012, establish labeling and testing requirements for OTC sunscreen products containing specific ingredients, or combinations of ingredients, and marketed without an approved application under section 505 of the Federal Food, Drug, and Cosmetic Act (the Act). As far as consumers are concerned, the most noticeable regulatory change will be that sunscreen products are required to include standard “Drug Facts” information on the container, not unlike food items. A few of the additional changes are discussed below.

In its new regulations, the FDA created a category of sunscreen products that are designated as “Broad Spectrum.” Before a sunscreen can label itself as “Broad Spectrum” though, it must pass new testing procedures promulgated by the FDA. In general terms though, to be considered Broad Spectrum, the UVA protection must increase as the sun protection factor (SPF) value increases. If the sunscreen product passes the Broad Spectrum test and has an SPF value of 15 or higher, it may include a statement informing consumers that using the product “as directed with other sun protection measures decreases the risk of skin cancer and early skin aging caused by the sun.” On the other hand, non-Broad Spectrum sunscreens and Broad Spectrum sunscreens with an SPF value between 2 and 14 can only claim to help prevent sunburn and must explicitly mention on their labels that the product has not been shown to help prevent skin cancer or early skin aging.

The FDA’s new regulations are aimed at curtailing sunscreen manufacturers from overstating the effectiveness of their products. Consistent with this purpose, sunscreen manufacturers may no longer label their sunscreens with buzzwords, such as “waterproof” or “sweatproof,” nor can they identify their products as “sunblock.” Additionally, sunscreens may not claim to provide sun protection for more than two hours without reapplication, nor can they claim to provide protection immediately after application without submitting data to support these claims and obtaining FDA approval. If a sunscreen product label contains these or similar claims, the product will be considered “misbranded” under section 502 of the Act.

While certain buzz words are strictly prohibited from labels, manufacturers can use other words so long as the regulatory requirements are satisfied. For example, while a sunscreen may not be labeled as “waterproof,” a sunscreen manufacturer may label its sunscreen as “water resistant” if, of course, certain proscribed tests are successfully completed. Additionally, the FDA’s sunscreen regulations permit a sunscreen manufacturer to advertise its product as providing either 40 or 80 minutes of water resistance, depending on the outcome of the testing. If a product fails to satisfy the minimum testing thresholds however, the label must state that the consumer should “use a water resistant sunscreen if swimming or sweating.”

In addition to the promulgated rules, the FDA also issued a proposed regulation that would, if finalized, prevent sunscreen manufacturers from advertising their sunscreen products at a SPF level higher than 50. Instead, any sunscreen with an SPF value over 50 would be labeled “50+.”

The abovementioned changes represent only a few of the newly promulgated regulations that will apply to the labeling of sunscreen products. Legal counsel should be consulted to address questions about testing requirements, proper labeling, and the general applicability of the new regulations to particular products.

Keywords: litigation, products liability, sunscreen, FDA, labeling, regulations, OTC

—Diane J. Romza-Kutz and Seth M. Erickson, Troutman Sanders LLP, Chicago, IL

 

July 13, 2011

Pliva v. Mensing: Supreme Court Addresses Failure-to-Warn Claims

On June 23, 2011, in a 5–4 ruling, the U.S. Supreme Court issued an opinion that bars failure to warn claims brought against generic drug manufacturers under state tort law. The Court’s opinion, however, potentially has much broader implications for the law of federal preemption: It foreshadows the possibility that, in a future opinion, the Court might eliminate the presumption against preemption.

In Pliva, Inc. v. Mensing, the Court addressed failure-to-warn claims brought under state tort law by two women whose prescription for Reglan had been filled with the generic version of the same drug. No. 09-993, 564 U.S. __, 2011 U.S. LEXIS 4793 (June 23, 2011). After taking the generic drug for several years, both women developed tardive dyskinesia, a severe neurological disorder. Although the labels of Reglan and its generic equivalents had been modified several times to include stronger warnings about the risk of tardive dyskinesia, the plaintiffs claimed that the generic drugs’ warning labels were inadequate because long-term use carried a greater risk than the risk disclosed on the labels.

The various generic manufacturers named as defendants moved either to dismiss the claims or for summary judgment, arguing that federal statutes and FDA regulations preempted failure-to-warn claims brought under state tort law. Their preemption arguments centered on the “impossibility” strain of implied preemption, contending that federal statutes and FDA regulations required generic drugs to bear the same safety and efficacy labeling as their brand-name counterparts. The generic manufacturers argued that it would be impossible for them both to comply with federal law restricting the disclosures on generic drug labels and also with a state tort-law based requirement that would have required additional disclosures.

In analyzing “impossibility,” the majority opinion deferred to the FDA’s interpretation of its regulations as requiring generic drug labels always to be the same as their brand-name counterparts, which the Court referred to as an “ongoing federal duty of ‘sameness.’” The Court reasoned that if the generic drug manufacturers had unilaterally changed their products’ labels as the plaintiffs alleged was required by state tort law, making those labels different than the brand-name drug’s label, they would have violated their federal duty of “sameness” in labeling. Thus, the Court held, “[i]t was not lawful under federal law for the Manufacturers to do what state law required of them,” and therefore, “it was impossible for the Manufacturers to comply with both their state-law duty to change the label and their federal law duty to keep the label the same.”

In holding that the state-law claims were preempted, the majority rejected several arguments that the plaintiffs raised. Most notably, the plaintiffs observed that the FDA’s labeling process provides avenues for the generic manufacturers to petition the FDA to permit the type of stronger warnings that the plaintiffs believed should have been issued. Because the generic manufacturers did not even attempt to use that process to ask the FDA to require a stronger warning, the plaintiffs argued, they could not bear their burden of establishing that it was “impossible” for the generic drugs’ labels to have included the stronger warnings because it was possible that the FDA might have required the warning that the plaintiffs sought under state law. Although the Court acknowledged that statutory provisions and FDA regulations governing misbranding require generic manufacturers to propose stronger warning labels to the FDA if they believe that such warnings are needed, the majority rejected the plaintiffs’ argument, noting that “[t]he question for ‘impossibility’ is whether the private party could independently do under federal law what state law requires of it.” The Court reasoned that the plaintiffs’ argument required speculation about what the FDA might do, and that if such “conjectures” were sufficient to prevent state and federal law from conflicting for Supremacy Clause purposes, conflict preemption would be rendered meaningless.

In a strong dissent joined by three other justices, Justice Sotomayor agreed with the plaintiffs’ argument that the generic manufacturers’ failure to attempt to notify the FDA of the need for additional disclosures prevented them from carrying their burden of proving “impossibility,” unless they had at least requested that the FDA change the label to provide for a stronger warning.

A plurality of the Court (Justice Kennedy did not join this part of the opinion) went even further in its preemption analysis, commenting that the Supremacy Clause contains a non obstante provision, which “suggests that federal law should be understood to impliedly repeal conflicting state law.” Consequently, the plurality observed, when performing a preemption analysis, courts “should not strain to find ways to reconcile federal law with seemingly conflicting state law” and “need look no further than ‘the ordinary meanin[g]’ of federal law, and should not distort federal law to accommodate conflicting state law.” For now, the presumption against preemption remains intact, but it is clear that four members of the Court will eliminate that presumption if they can convince one of their colleagues to join them.

Keywords: litigation, products liability, preemption, presumption, impossibility, Supreme Court, generics, failure to warn

—Douglas M. Poland, Godfrey & Kahn, S.C., Madison, WI

 

July 1, 2011

A New Discovery Pitfall: Expert Disclosures Under Revised Rule 26(a)(2)(C)

In December 2010, revisions to Rule 26 of the Federal Rules of Civil Procedure went into effect and created a new peril in discovery. Prior to the 2010 revisions, witnesses that had not been retained to testify as experts but would necessarily be providing testimony of an expert nature were not typically disclosed as experts. A common example would be a treating physician whose testimony would be required to establish such things as causation, a party’s prognosis, and future medical costs. Now, under Rule 26(a)(2)(C), a party is required to identify and provide disclosures for experts not specifically retained to serve as an expert. The rule does not require an expert report in the form required under Rule 26(a)(2)(B). However, the rule does require that the expert disclosure state “(i) the subject matter on which the witness is expected to present evidence under Federal Rule of Evidence 702, 703, or 705; and (ii) a summary of the facts and opinions to which the witness is expected to testify.”

Although the case law interpreting the revised rule is still developing, it appears that the test is simply whether the witnesses will be providing testimony based on their skill, experience, training, or education without regard to whether they were specifically retained for that purpose. Based on that seemingly broad standard, one must wonder how far the new rule will reach. Will a party now have to disclose employees that are expected to serve as fact witnesses, but who may also testify based on their training, experience, and specialized knowledge? Employees in technical fields that are expected to serve as fact witnesses may fall within the new rule.

The issue appears to arise most often with treating physicians. According to the committee notes, the rule was revised to address the issue of whether treating physicians must be disclosed. The new committee notes make it clear that treating physicians must be disclosed in accordance with the provisions of Rule 26(a)(2)(C). In a recent unpublished decision, a court strictly followed the new rule when one of the parties disclosed a treating physician well past the deadline set by the scheduling order and as the discovery cut off was nearing. On motion, the court ordered that the opposing party’s expert disclosures be stricken. See Noffsinger v. The Valspar Corp., 2011 U.S. Dist LEXIS 60, * 17(N.D. Ill. 2011) (holding that “the untimely disclosure limits [plaintiff’s alleged treating physician], at most, to testimony about the scope of treatment and does not include what she reviewed for litigation. To allow her to opine on topics like causation and prognosis would permit [plaintiff] to circumvent the March 22, 2010, deadline for the expert disclosures, which would be neither harmless nor justified”).

Another result of failing to disclose a witness that falls within the revised rule could be to have that expert’s testimony excluded at trial as required by Rule 37(c)(1). See Musser v. Gentiva Health Servs., 356 F.3d 751, 756–59 (7th Cir. 2004) (excluding expert testimony of doctors and nurses not properly disclosed based on holding that “even treating physicians and treating nurses must be designated as experts if they are to provide expert testimony and finding that plaintiff’s failure to disclose those experts prejudiced the defendant”). Accordingly, the significance of the new rule cannot be ignored. Until the limits of the new expert disclosure requirement are fleshed out, be careful to evaluate your witnesses in view of the rule and seek to avoid this potential discovery pitfall. Likewise, be prepared at trial to seek to exclude testimony of Rule 26(a)(2)(C) experts where the expert has not been disclosed.

Keywords: litigation, products liability, discovery, experts, disclosures, Rule 26(a)(2)(C)

—Joseph W. Carlisle, Johnston Barton Proctor & Rose LLP, Birmingham, AL

 

June 23, 2011

Nevada Allows Seatbelt Nonuse Evidence in Defect Case

On April 14, 2011, the Nevada Supreme Court issued a unanimous written opinion reinstating BMW’s unanimous defense verdict and discussing the admissibility of seat belt nonuse evidence in Nevada. BMW v. Roth, No. 50262, 127 Nev. Adv. Rep. 11, 2011 Nev. LEXIS 12, 2011 WL 1436499 (Nev. April 14, 2011). The underlying trial arose over a single vehicle rollover accident that resulted in the plaintiff being ejected from the vehicle and receiving a spinal-cord injury. The plaintiff alleged her injury was due to various defects, including a defect in the seatbelt. BMW contended that the seatbelt was safe and free of defects and that the plaintiff did not wear it. The jury returned a verdict in favor of BMW and found no defect. The appeal before the Nevada Supreme Court stemmed from the trial court’s order granting a new trial based on its belief that a pretrial order limiting seatbelt evidence was violated.

Like most states, Nevada adopted a statute requiring persons riding in an on-road vehicle to wear their seatbelts. See Nev. Rev. Stat. § 484D.495(2). The trial court ordered that evidence the plaintiff was not wearing the seatbelt could only be considered to evaluate the plaintiff’s claim “that the subject vehicle was defective and unreasonably dangerous and not for any other purpose.” BMW, 2011 Nev. LEXIS 12, at *12 (internal citations omitted). The Nevada Supreme Court recognized that “unlike some seatbelt statutes, NRS 484D.495(4) does not say that ‘evidence of failure to wear a seatbelt shall not be admissible’ in any proceeding.” Id. at *29.

The Nevada Supreme Court seemed to agree with BMW that Nevada’s statute requiring adults to wear seatbelts when riding in cars precludes evidence “that a party’s conduct constituted a statutory violation of law” but does not preclude “evidence of the underlying conduct” of seatbelt nonuse. Id.

Throughout the trial, the plaintiff emphasized an alleged “defect” in BMW’s seatbelt system, and BMW’s counsel introduced evidence that the plaintiff was not wearing her seatbelt, thus maintaining the defect claim was irrelevant. After the unanimous defense verdict, the judge found that BMW’s evidence and arguments about seatbelt nonuse went beyond the limits of her ruling and granted a new trial, which BMW appealed. The Nevada Supreme Court agreed with BMW that if the plaintiff was not wearing her seatbelt, the claimed seatbelt defect was a “non-starter.” The court reinstated the unanimous defense verdict, concluding the trial court’s grant of a new trial was erroneous.

Commenting on the trial court’s initial order limiting the admissibility of evidence of seatbelt nonuse, the Nevada Supreme Court said, “The order’s parameters were far from clear—as is Nevada law, generally, concerning seatbelt evidence in a crashworthiness case.” The Nevada Supreme Court clarified Nevada’s seatbelt law by noting that “once a plaintiff makes an affirmative claim that a vehicle’s safety restraint system was used and failed, court imposed limits on a manufacturer’s ability to rebut such claims with proof that an integral part of the safety restraint system—the seatbelts—were not used will rarely, if ever, be appropriate.” Id. at *32 n.8.

Although the Nevada Supreme Court declined to resolve the issue of admissibility of seatbelt nonuse evidence in crashworthiness cases, the court appears to be headed in that direction. Specifically, the court acknowledged the wisdom of admitting evidence of seatbelt nonuse in crashworthiness cases, stating:

Id. at *28 (internal citations omitted).

In further support of its apparent direction to extend the ruling to crashworthiness cases, the court added, “Thus, ‘in secondary-collision product-liability actions,’ seatbelt nonuse may necessarily ‘be admissible to show, or as in this action, rebut, the essential element of causation.” Id. at *28–29 (emphasis added).

The Nevada Supreme Court expressly confirmed in BMW v. Roth that Nevada’s seatbelt statute does not bar evidence of seatbelt nonuse where a seatbelt defect is alleged. A broader discussion in the opinion suggests that the court may lean toward permitting evidence of seatbelt nonuse in crashworthiness cases.

Keywords: litigation, products liability, seatbelt, defect, nonuse, crashworthiness, BMW, Nevada

—Curtis J. Busby and Jennifer L. Melton, Bowman and Brooke, LLP, Phoenix, AZ

June 3, 2011

D.C. Circuit Allows Stem Cell Research Funding to Continue

A divided D.C. Circuit Court of Appeals panel has determined that National Institutes of Health (NIH) guidelines allowing federal funding for research using embryonic stem cells are not clearly at odds with an ambiguous federal statute, and thus that a district court abused its discretion in granting a preliminary injunction to two scientists who opposed the guidelines. Sherley v. Sebelius, No. 10-5287, 2011 U.S. App. LEXIS 8686 (D.C. Cir. Apr. 29, 2011).

The court majority distinguished research that involves the derivation of stem cells, which NIH cannot fund under the law, from projects using an embryonic stem cell that was previously derived. Because simply using embryonic stem cells in research does not itself destroy human embryos, which occurred in the past during the derivation phase, the court determined that the use-only projects can be funded under the Dickey-Wicker amendment, “an appropriations rider that bars federal funding for research in which a human embryo is destroyed.” The dissenting judge characterized the court’s effort to divide “research” into “temporal bits” as “linguistic jujitsu.”

The D.C. Circuit previously determined that the researchers who brought the challenge had standing to pursue their claims because they use adult stem cells and thus compete with embryonic stem cell researchers for NIH funding. The only issue before the appeals court was the propriety of the preliminary injunction, which it had earlier stayed to allow the continuation of funding for ongoing projects. Because the court determined that the statute was ambiguous, it concluded that the plaintiffs had not shown they are likely to prevail on the merits. The district court is currently considering cross motions for summary judgment.

Keywords: embryonic, stem cell, research, funding, NIH,; Dickey-Wicker

—Dale Walker, Shook Hardy & Bacon, Kansas City, MO

May 17, 2011

Component Part Manufacturers: Consumer Product Safety Laws May Apply to You

One of the big recurring questions in the consumer product arena is whether a manufacturer or importer of component parts must comply with the consumer product laws. The misconception is that, “because my company does not sell to consumers and has no control over the final product being sold, such requirements do not apply.” Although it might not make much sense, and, if you practice in this arena, creates a whole host of compliance questions, the reality is that the consumer protection laws can, and likely do, apply.

The Consumer Product Safety Commission (CPSC) has authority over consumer products, which is defined in 15 U.S.C. § 2052 as "any article, or component part thereof, produced or distributed (i) for sale to a consumer for use in or around a permanent or temporary household or residence, a school, in recreation, or otherwise, or (ii) for the personal use, consumption or enjoyment of a consumer in or around a permanent or temporary household or residence, a school, in recreation, or otherwise." (emphasis added). Thus, by statutory definition, a component part of a consumer product is a consumer product. At least one court of appeals has addressed this definition, explaining that "a product may be a 'consumer product' if it either is produced or distributed as a distinct article of commerce . . . or is produced and distributed as a component part of such a distinct article." Consumer Prod. Safety Comm’n v. Anaconda Co., 593 F.2d 1314, 1319–20 (D.C. Cir. 1979). Although dated, the CPSC's General Counsel also issued an Advisory Opinion in 1974 that states that "component parts of consumer products are subject to the requirements of the Consumer Product Safety Act."

Unfortunately, the CPSC failed to address this simple question in the guidance document that it issued in November 2009 to address the multitude of questions surrounding the 2008 Consumer Product Safety Improvement Act, but the guidance document does suggest that component parts are covered. See Guidance Document: Testing and Certification Requirements under the Consumer Product Safety Improvement Act of 2008. Specifically, the guidance document provides an example of a children's clothing manufacturer asking a button supplier to provide third-party testing results. If component parts such as buttons are not considered a consumer product, one would expect a simple response from the CPSC to this end. Instead, the CPSC embarks on the much more involved analysis of whether the buttons constitute a children's product. This suggests that the CPSC views components parts as consumer products.

Also, the CPSC issued a December 28, 2009, enforcement policy concerning component part testing that states, among other things, that one can rely on certifications from paint manufacturers and from the manufacturer or importer of component parts. The fact that the CPSC issued a policy allowing for certification of the final product based on testing or certification of the component parts is just another indication that the CPSC tends to look upstream in the production process.

"Well, I do not sell my products to consumers." This is a much more complicated issue and analysis and beyond the scope of this article, but suffice it to say that the end use of a component part, in terms of the final product, is what really matters in deciding what is a "consumer product," not to whom you may be selling your product. According to the court in Anaconda Co., the definition of "consumer product" addresses "the various modes of distribution through which consumers acquire products," including both direct sales to consumers and "situations in which a consumer acquires the use of the product other than through a direct sale transaction." The only difference is that the manufacturer or importer of a component part may have a stronger argument that their component is not manufactured or imported for use in consumer goods.

What does that mean for component part manufacturers and importers? It means that they are likely governed by the consumer product laws. It also creates a host of challenges and questions for such companies because they often have no control over the use of their components, including, for example, whether it goes into office furniture (typically not a consumer product) or home furniture or whether it is exposed or properly enclosed (which, depending on the use, dictates whether the lead limits apply). Ultimately, many of these issues will be sorted out through the marketplace because the CPSC has at least clarified that the manufacturer or importer of a final product can rely on certifications from the component part suppliers. This means that the manufacturers and importers of the final product will likely start looking upstream to their suppliers anyway. But until then, questions abound, and component part importers and manufacturers need to be aware that the consumer product laws can apply to their products.

Keywords: litigation, products liability, consumer product safety laws, CPSC

—Stacy K. Taylor, Nelson Mullins, Columbia, SC

April 19, 2011

FDA's Reportable Food Registry Profoundly Impacts Litigation and the Food Industry

The ABA's recent food and supplements CLE at Coca-Cola World Headquarters in Atlanta included a lively discussion of the litigation impacts of the Reportable Food Registry (RFR). Since its rollout at the end of 2009, the RFR has proven to be a game changer.

The ticking of the RFR's 24-hour time line to report to the FDA’s electronic portal forces a company to make snap decisions that can profoundly impact business and litigation. Once a report is submitted, the FDA promptly alerts customers and suppliers of the "reasonable probability" that the product will result in "adverse health consequences or death." Even if a recall has not yet been issued, an RFR report often has the consequences of a Class I recall. While RFR reports can be amended or withdrawn based on new information, in the world of food products, the bell can almost never be unrung.

Two hot-button issues discussed at the ABA CLE were whether the FDA (1) intends to use the RFR as an enforcement tool; and (2) will move toward the concept of "control" and away from "possession" in interpreting one of the key exceptions to the RFR.

The RFR was created by Congress as part of the Food and Drug Administration Amendments Act (FDAAA) of 2007 and is codified at 21 U.S.C. 350f. The RFR requires that "as soon as practicable, but in no case later than 24 hours after a responsible party determines that an article of food is a reportable food, the responsible party shall (A) submit a report to [FDA] . . . (B) investigate the cause of the adulteration if the adulteration of the article of food may have originated with the responsible party."

The congressional intent behind the RFR is to provide the FDA with a mechanism to track patterns of adulterated product, essentially as an information gathering tool. Many in the industry fear that the FDA will also use the RFR as an enforcement tool. Even an unintentional failure to report in compliance with 21 U.S.C. 350f constitutes a criminal violation of the Food, Drug, and Cosmetic Act (FD&CA). It’s not clear if the FDA has initiated any enforcement action concerning the RFR yet but this should be monitored closely by the food industry.

The second hot-button issue concerns 21 U.S.C. 350f(d)(2), which provides an exception to the reporting obligation if:

• (A) the adulteration originated with the responsible party;
• (B) the responsible party detected the adulteration prior to any transfer to another person of such article of food; and
• (C) the responsible party (i)corrected such adulteration or(ii) destroyed or caused the destruction of such article of food.

The challenge with interpreting this exception centers around the term "transfer."

The FDA's current draft guidance document says: "A transfer to another person occurs when the responsible person releases the food to another person. 'Person' is defined in section 201(e) of the FD&CA as including individuals, partnerships, corporations, and associations. Though the FDA does not consider an intra-company transfer in a vertically integrated company to be a 'transfer to another person,' where the company maintains continuous possession of the article of food."

The rub is that if the product is shipped to a third-party warehouse, but the responsible party maintains ownership and direct control over distribution, it is reportable. The FDA’s draft guidance rationalizes that "'[p]erson' is defined in section 201(e) of the FD&C Act (21 U.S.C. 321(e)) as including individuals, partnerships, corporations, and associations," and a "warehouse operator is a distinct legal person."

Another scenario under the 21 U.S.C. 350f(d)(2) exception but not addressed by FDA's draft guidance arises if the product is subject to an intra-company transfer, but the company uses a common carrier to transport product. Taking the FDA's rationale that use of a third-party warehouse takes a company out of the exception, the use of a common carrier could also be considered a "distinct legal person." According to the logic in the draft guidance, use of a common carrier in an intra-company transfer, like use of a third-party warehouse, could take the company out of the 21 U.S.C. 350f(d)(2) exception and require the company to report.

Many believe that the intent of the FDA (and the statute) could not be that an otherwise unreportable food under 21 U.S.C. 350f(d)(2) becomes reportable for no reason other than that a company uses a third-party trucking company in an intra-company transfer. Many also question whether the FDA's current position on third-party warehouses is correct if the food company retains complete control over the product. Neither of these policies reflects the reality of how many food companies operate. From a food safety policy perspective, many believe that food companies should not be forced into the business of trucking and warehousing.

As Fred Degnan from King & Spalding discussed at the ABA CLE, some believe that the FDA may be moving away from interpreting "transfer" through the lens of possession and broadening its view toward an interpretation that focuses on issues of control. Control may more accurately reflect the reality of food production and more effectively promote food safety and the intent of the RFR. Whether the FDA will move toward a notion of control should be revealed in the FDA's expected amendments to its draft guidance document and should be monitored closely by the industry.

 

Keywords: FDA, food, RFR, registry, adulteration

—Kenneth Odza, Partner, Stoel Rives LLP, Seattle, WA

March 16, 2011

Supreme Court of Appeals of West Virginia Revisits Claims for Medical Monitoring

In Perrine v. E. I. du Pont de Nemours & Co., 694 S.E.2d 815 (W. Va. 2010), the Supreme Court of Appeals of West Virginia revisited medical monitoring, and in so doing expounded upon the controversial cause of action that it first recognized in Bower v. Westinghouse Electric Corp., 522 S.E.2d 424 (W. Va. 1999).Under Bower, to maintain a claim for medical monitoring, the plaintiffs were required to prove that (i) relative to the general population, they were significantly exposed, (ii) “to a proven hazardous substance,” (iii) by the defendant’s tortious conduct, (iv) the plaintiffs suffered an increased risk of contracting a serious latent disease as proximate result of their exposure, (v) the significantly increased risk of disease made it reasonably necessary for plaintiffs to undergo periodic diagnostic medical examinations “different from what would be prescribed in the absence of the exposure,” and (vi) “monitoring procedures exist that make the early detection of a disease possible.” Syl. pt. 3 (in part), Bower.

In Perrine,the jury awarded a class of plaintiffs over $380 million for soil and structural remediation, medical monitoring, and punitive damages from exposure to toxic substances as a result of the defendant’s operation of a zinc smelter decades ago. The defendant appealed, challenging the sufficiency of the evidence to support the jury verdict, among a number of other issues. The Supreme Court of Appeals affirmed, despite the fact that plaintiffs offered no evidence to prove the relative comparison between their exposure with that of the general public, much less that the exposure was significant. The plaintiffs’ own expert had testified during trial that exposure to lead outside the class areas was as great, if not greater, than that within the class. In his dissent, Justice Ketchum challenged the majority opinion, noting that the jury did not find that plaintiffs were significantly exposed in relative comparison to the general population as required by Bower, a fatal evidentiary shortcoming that should have barred recovery. Accord Rhodes v. E. I. du Pont de Nemours and Co., 2008 WL 2400944 (S.D. W. Va. June 11, 2008) (requiring plaintiffs to prove “significant exposure to a proven hazardous substance”). Nor, for that matter, didn it appear that the plaintiffs established that they were at a significantly increased risk of contracting a serious latent disease, a ruling that deviates from both Bower and federal courts sitting in West Virginia. See Rhodes v. E. I. du Pont de Nemours & Co., 657 F. Supp. 2d 751 (S.D. W. Va. 2009).

Importantly, Perrineaddressed whether a medical monitoring regimen should be rejected due to its risk of harm to a plaintiff. Drawing on Bower,the Perrine court concluded that the requirement that a diagnostic testing regimen must be medically advisable does not necessarily preclude a scenario where a determination is based (even if only in part) on a plaintiff’s desire for information concerning the state of his health—a conclusion that would seem to permit testing even though such testing poses a danger to a plaintiff. Perrine, 694 S.E.2d at 875 n. 66. That having been said, though, an outer limit must exist where the risk of harm to a plaintiff outweighs any potentially beneficial information that could be derived from a diagnostic testing regimen—the appropriate case for the Supreme Court of Appeals to draw that line, however, has yet to come before the court. Importantly, and in a holding that cleared up years of ambiguity since Bower, the Perrine court held that punitive damages may not be awarded for a cause of action for medical monitoring. Id., Syl. pt. 5.

Perrine was remanded to the trial court to consider a statute of limitations defense that the trial court had refused to permit DuPont to present. The case resolved thereafter.

Keywords: medical monitoring, West Virginia, Perrine

—Timothy D. Houston, Spilman Thomas & Battle, PLLC, Charleston, WV

February 15, 2011

FDA Announces New "Innovation Pathway"

On February 8, 2011, the Food and Drug Administration’s (FDA) announced the launch of a new medical device review program, called Innovation Pathway. Innovation Pathway is a priority review program for potential quality-of-life changing medical devices. It is part of a greater endeavor to encourage research and development of cutting-edge technologies among medical device manufacturers.

Innovation Pathway Implementation
To lead the Innovation Pathway, the FDA has created a new administration—the Center Science Council (CSC). The CSC is being developed within the Center for Devices and Radiological Health (CDRH), and will be comprised of a group of CDRH senior managers and experienced staff members. The CSC will monitor the device development and review processes from the date of acceptance into the new program until the date of regulatory approval. Under the new program, the primary review team would be assigned in the very early stages of the development process and the team would keep the CSC updated on the progress of the device, identify and advise whether there are any unresolved regulatory or scientific challenges, and whether there have been new or proposed changes to current policies or decisions. It is hoped that early CSC involvement will lead to speedier resolution of difficult scientific issues, recognizing when additional expertise is needed outside the center, and a reduction in unnecessary delays, thus, facilitating the availability of new medical technology to the general public.

The medical device industry has long bemoaned the FDA’s snail pace and ancient approval practices for new medical devices, claiming that it has prevented life changing devices from timely reaching patients, thus, significantly impacting the health and well being of the general public. The FDA’s launch of the Innovation Pathway is part of its efforts to overhaul its 35-year-old system for approving medical devices in response to those recurring criticisms. The FDA has already accepted a test case—a robotic arm controlled by a microchip implanted in a patient’s brain. Clinical trials are expected to begin in approximately six months.

While the announcement of Innovation Pathway brings great news to the medical device industry, the industry will undoubtedly continue to push the FDA to maintain its new focus on bringing greater speed and consistency to its current review process and address the full spectrum of concerns that have contributed to delays in medical device approvals, including those devices that might not qualify for inclusion in the Innovation Pathway.

Will “Innovation Pathway” Affect Medical Device Litigation?
It is currently unclear what impact, if any, Innovation Pathway will have on the future of medical device litigation. An omen may have arisen just one week after the announcement of this new, faster review process, when criticisms of the FDA’s abbreviated 510(k) approval process surfaced. A study in the medical journal Archives of Internal Medicine found that a majority of the medical devices recalled between 2005 and 2009 were allowed on the market through the 510(k) process, which is popular in the industry because it saves time and money in regulatory reviews. Alicia Mundy & Jon Kamp, Device Review Process Faulted, The Wall Street Journal, Feb. 15, 2011, at B2. Industry lobbyists immediately responded to these findings by criticizing the study and defending the product safety record of 510(k) devices.

CDRH “anticipate[s] that most devices that qualify for Innovation Pathway will be submitted for review as PMAs or through the de novo process” as opposed to the 510(k) process. Therefore, at least at this point, it appears that the Supreme Court’s decision in Riegel v. Medtronic, Inc., 552 U.S. 312 (2008), will cover the majority of Innovation Pathway devices. Nevertheless, the recent criticism of one of the FDA’s speedier review processes demonstrates the intense scrutiny Innovation Pathway will receive from research groups, industry insiders, and the medical device bar. As with any change in the FDA’s review procedures, it will be interesting to monitor whether and how the Innovation Pathway may affect the future of medical device litigation.

Keywords: Innovation Pathway, Riegel, medical device litigation

—Alan D. Mathis and Lisa E. Johnston, Johnston Barton Proctor & Rose LLP, Birmingham, AL

February 15, 2011

NHTSA Adopts a Final Rule for Ejection Mitigation, FMVSS 226

Twenty-two years after beginning rulemaking efforts to reduce ejections of occupants in side impact and rollover crashes, the National Highway Traffic Safety Administration (NHTSA) adopted FMVSS 226, which the agency estimates will result in 373 fewer deaths per year at a cost of more than $500 Million. 76 Fed. Reg. 12, 3212 (2011). To put this in perspective, NHTSA estimates that increasing seatbelt usage rates to 90 percent would result in 1,652 fewer deaths per year—more than four times as effective as FMVSS 226—with a cost of $0. DOT HS 811 140. Further, the technology manufacturers will use to meet FMVSS 226 already exists: side-impact- and rollover-initiated side curtain airbags, which Ford Motor Company introduced in 2002 and have spread to other manufacturers and models.

Background
In 1988, NHTSA initiated efforts regarding ejection mitigation by issuing proposed rulemaking under the hypothesis that advanced glazing, combining layers of glass and plastic or polymer, could be a countermeasure. 53 Fed. Reg. 161, 31712 (1988). NHTSA found that more than 90 percent of all ejection fatalities were unbelted occupants and grew concerned that advanced glazing could increase injuries to belted occupants. “Ejection Mitigation Using Advanced Glazing,” NHTSA Final Report (2001). So, after a decade or more of work, NHTSA terminated rulemaking, stating, “there is no reasonable possibility of proposing regulatory requirements for advanced glazing in the foreseeable future due to safety and cost concerns.” 67 Fed. Reg. 117, 41365 (2002). NHTSA noted that the advent of side curtain airbags would shift its focus to “more comprehensive, performance-based test procedures.” Id.Then, in 2009, NHTSA issued new rulemaking, focusing on performance requirements and side curtain airbags. 74 Fed. Reg. 230, 6310 (2009). After another year of research and analysis, NHTSA adopted FMVSS 226.

FMVSS 226
FMVSS 226 applies to the side windows in the first three rows of seats (and part of the cargo area) in most passenger vehicles up to a certain weight rating, except for exempt modified vehicles and convertibles. Because FMVSS 226 is a performance, not a materials, standard, it does not require a specific countermeasure. However, NHTSA anticipates manufacturers will meet the standard with side-impact- and rollover-initiated side curtain airbags, possibly supplemented with advanced glazing. Advanced glazing cannot be used alone in moveable windows.

As to testing, NHTSA rejected dynamic testing in favor of laboratory testing stating, “Rollover crashes can be complex and unpredictable. At this time there is no conventional rollover scenario or test representative of real-world rollover crashes that can be used in a dynamic test to the agency’s satisfaction to evaluate the performance of ejection mitigation countermeasures.” FMVSS 226 testing uses a 40-pound impact device with a headform on the end to impact the countermeasure at up to four points around the perimeter of each window opening. The specific test points depend on the geometry and may be eliminated if there is overlap. For each point, there may be two tests at different times and different speeds to account for long duration rollover crashes, wherein occupants can be ejected early or late.

In the first test, if the manufacturer chooses, glazing may be left in place but must be pre-broken because NHTSA assumes glass will break early in a crash. Then, at 1.5 seconds after deployment of any airbag, the countermeasure must be impacted at 12.5 MPH. Assuming the manufacturer uses an airbag, the manufacturer must remove moveable glazing for a second test because NHTSA has no confidence it would survive a multiple impact crash. Then, at 6 seconds after deployment, the airbag must be impacted at 10 MPH. If a manufacturer uses glazing without an airbag, an option only for a fixed window, the performance standard is less demanding and simply requires passing the first test with the glass pre-broken. To pass FMVSS 226, the countermeasure must be robust enough to pass all impact tests without allowing more than 4 inches of excursion beyond the window plane.

NHTSA has not tested the full population of countermeasures. Of those tested, many passed in some but not all locations. Later models performed better than early models. Results indicate that technology is advancing on its own but will need to advance further to meet FMVSS 226.

Manufacturers also must provide monitoring systems and written information relevant to countermeasures. FMVSS 226 requirements will be phased-in, requiring full compliance by 2017 except for certain modified vehicles.

Keywords: litigation, FMVSS 226, ejection mitigation, rollover

—Bradley W. Petersen, Snell & Wilmer LLP, Phoenix, AZ

December 21, 2010

Judge Excludes Evidence Concerning Wyeth's Alleged Failure to Adequately Test Prempro

A federal district judge in the Eastern District of Virginia ruled on December 15, 2010, that under Virginia law, evidence and testimony was not admissible for the purpose of establishing that the manufacturer of an FDA-approved drug could or should have conducted additional tests of its product. In Torkie-Tork v. Wyeth, No. 1:04cv945, 2010 U.S. Dist. LEXIS 133179 (E.D. Va. Dec. 15, 2010), the plaintiff, who was diagnosed with hormone receptor positive breast cancer in 2002, after having used Wyeth’s hormone replacement drug Prempro for several years, sued Wyeth on theories of negligent failure to warn and design. During trial, however, the plaintiff’s counsel introduced evidence with the apparent goal of arguing that Wyeth had negligently failed to conduct studies to more accurately assess the potential link between Prempro and breast cancer.

Judge T.S. Ellis III of the Alexandria Division held that the Virginia Supreme Court’s decision in Owens-Corning Fiberglas Corp. v. Watson, 243 Va. 128, 413 S.E.2d 630 (1992) “made unmistakably clear” that a pharmaceutical manufacturer’s duty to warn does not include a duty to conduct additional studies because the decision explicitly adopted the Restatement (Second) of Torts’ “reason to know” standard instead of the broader “should have known” standard. Torkie-Tork, 2010 U.S. Dist. LEXIS 133179, at *13–14. The plaintiff had contended that this language in Owens-Corning was dicta.

In reaching this decision, Judge Ellis noted that the approach dictated by Owens-Corning “struck a proper balance between the costs to manufacturers of additional studies and tests—costs, which are subsequently passed onto consumers, often in the form of delays in releasing the product—and the benefits of bringing the drug to market expeditiously based on existing knowledge of the product's dangers.” Id. at *14–15. Further, the imposition of the reason to know standard is “particularly sensible” in the context of pharmaceutical drugs “given the FDA already requires testing of any drug as a qualification for approval.” Id. at *16–17.

Judge Ellis’ ruling provides a template for use in other jurisdictions in which the law on failure-to-test claims remains unsettled. Even in jurisdictions that have definitively addressed the viability of such claims, the policy rationale explained by Judge Ellis in Torkie-Tork may bolster pretrial arguments from pharmaceutical manufacturers seeking to exclude evidence concerning the adequacy of their product testing, thus providing another weapon to manufacturers defending against failure-to-warn and negligent design claims in a post-Levine world.

—Nicholas Klaiber, Troutman Sanders LLP, Richmond, VA

November 11, 2010

Federal Judge Dismisses Complaint Based on Heightened Pleading Standard

A Tennessee federal judge recently dismissed a products liability complaint in Sallie Maness v. Boston Scientific, et al. (E.D. Tenn.) for failure to comply with the heightened pleadings requirements announced in Bell Atl. Corp. v. Twombly [PDF], 550 U.S. 544 (2007) and Ashcroft v. Iqbal [PDF], 129 S. Ct. 1937 (2009).  The plaintiff filed her complaint against Boston Scientific and Advanced Bionics, the corporations that allegedly “designed, manufactured, assembled, distributed and sold” a “defective device” that was implanted for the control of back pain.

The complaint alleges that after “much pain and intense suffering and massive infections,” the device was removed.  There were no specific factual allegations about the nature of the alleged defect nor did the plaintiff explain what pain or injuries were allegedly caused by the device or the mechanism of the alleged injury. The plaintiff did reference and rely upon the fact that there had been a recall of the product.

The defendants moved to dismiss under FRCP 12(b)(6) arguing that the complaint did not plead sufficient factual allegations concerning how the product was purportedly defective and how the purported defect caused her alleged injury.  In response, the plaintiff argued that the complaint satisfied Twombly because it put the defendants on notice that this is a products liability case, that the defendants are the maker of a defective product, and that this defective product had to be removed from the plaintiff’s body.

The court rejected the plaintiff’s argument, holding that at this stage of the proceeding, the plaintiff must allege factsfor the court to infer that the device was defective, and that the plaintiff’s injuries were caused by the condition of the device. The court pointed out that the fact the plaintiff allegedly suffered an injury from the device does not show that the device was defective, and conclusory legal allegations like “the defective medical device was not fit for the purpose intended and was defective and therefore caused the plaintiff harm” were not enough.

Similarly, on the issue of causation, the court found the complaint deficient because it contained legal conclusions about the product causing the plaintiff injury, but it did not allege facts to make that theory plausible. On a final note, the court found the plaintiff’s allegations about a recall were insufficient to save an otherwise deficient complaint because the recall notice attached to the complaint stated that the recall was not for health-related concerns and also because the plaintiff failed to allege the device failed because of the recall condition and caused specific harm to the plaintiff. The court allowed plaintiff 30 days to file a sufficient complaint but said failure to do so would result in dismissal with prejudice.

The Maness decision follows many recent Federal decisions that have dismissed products liability complaints under Twombly/Iqbal. See, e.g., Heck v. American Medical Sys., Inc., 2008 WL 1990710, No. CCB-07-2101 (D. Md. April 30, 2008); Whitson v. Bumbo, 2009 WL 1515597, No. C 07-05597 (N.D. Cal. Apr. 16, 2009); Lewis v. Abbott Lab., 2009 WL 2231701, No. 08 Civ 7480 (S.D.N.Y. July 24, 2009); Provencio v. Armor Holdings, Inc., 2007 WL 2814650, No. CV-F-07-00651 (E.D. Cal. Sept. 25, 2007); Frey v. Novartis Pharm. Corp., 642 F. Supp 2d 787 (S.D. Ohio 2009); Durkin v. Paccar, Inc., 2010 WL 4117110, at *8–10 (D.N.J. Oct. 19, 2010); Anderson v. Select Comfort Retail Corp., 2010 WL 2635079, at *1–2 (E.D. Cal. June 29, 2010); and Steen v. Medtronic, Inc., 2010 WL 2573455, at *2–4 (N.D. Tex. June 25, 2010). But see, Friedman v. Internet, Inc., No. 3:09CV2945, 20102945, 2010 WL 2817257, at *3, 4 (S.D. Ohio Jul. 16, 2010).

—Samuel L. Felker, Bass, Berry & Sims, PLC, Nashville, TN

October 21, 2010

Eighth Circuit Affirms Preemption-Based Dismissal Under Riegel and Buckman

On October 15, 2010, a three-judge panel of the U.S. Court of Appeals for the Eighth Circuit affirmed the District of Minnesota’s January 5, 2009, dismissal of the master complaint in In re Medtronic, Inc. Sprint Fidelis Leads Products Liability Litigation, No. 09-2290 (8th Cir. Oct. 15, 2010). A copy of the Eighth Circuit’s slip opinion [PDF] can be found the Drug and Device Law blog, while the district court opinion is available at 592 F. Supp. 2d 1147 1152, 2009 U.S. Dist. LEXIS 50248.

In affirming the district court’s decision, the Eighth Circuit held that the plaintiffs’ claims for design defect, manufacturing defect, fraud, and breach of express and implied warranties concerning Medtronic’s Class III PMA Sprint Fidelis Leads were preempted by the Medical Device Amendments to the Federal Food, Drug, and Cosmetic Act, 21 U.S.C. § 360c(a)(1)(C), as applied in Riegel v. Medtronic, Inc., 552 U.S. 312 (2008), as well as the principles set forth in Buckman Co. v. Plaintiffs’ Legal Committee, 531 U.S. 341 (2001). The Court noted:

Riegel and Buckman create a narrow gap through which a plaintiff’s state-law claim must fit if it is to escape express or implied preemption. The plaintiff must be suing for conduct that violates the FDCA (or else his claim is expressly preempted by § 360k(a)), but the plaintiff must not be suing because the conduct violates the FDCA (such a claim would be implied preempted under Buckman).

In re Medtronic, No. 09-2290, slip op. at 4–5 (quoting Riley v. Cordis Corp., 625 F. Supp. 2d 769, 777 (D. Minn. 2009)). Notably, the court stated that failure to recall claims, claims based on failure to provide the FDA with sufficient information, and claims based on a manufacturer’s failure to timely file adverse event reports as required by federal regulations were preempted. The court rejected the plaintiffs’ attempt to rely on the Supreme Court’s decision in Wyeth v. Levine, 129 S. Ct. 1187 (2009), and held that the pleading principles set forth in Supreme Court’s decision in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), apply to allegations that a manufacturer failed to comply with the FDA’s Current Good Manufacturing Practices concerning medical devices.

The Eighth Circuit’s decision is certainly one with which any attorney handling claims involving PMA medical devices will want to become familiar.

—Brian D. Fowler, Troutman Sanders LLP, Richmond, VA

FDA Approval of Drug Label Doesn't Preempt State Law Tort Claims

On March 4, 2009, the U.S. Supreme Court issued its long-awaited opinion in Wyeth v. Levine.  This case was the most recent in the ongoing debate over federal preemption in the area of pharmaceutical and medical device products.  Here, Wyeth presented a fundamental issue: Does Food and Drug Administration (FDA) approval of a drug’s label preempt common-law tort claims?  By a 6-3 vote, the Supreme Court held that FDA approval of a drug label does not preempt state law tort claims.

—Brendan M. Ford and Saleem K. Erakat, Snell & Wilmer LLP, Orange County, CA

Insurer Obligated to Provide Defense for Products Claims Involving Overseas Production

Product liability claims based on overseas production processes are the new reality for manufacturers. Recent cases involving claims of contaminated pet food and lead-painted toys are just two examples of the growing number of cases involving allegedly deficient overseas processes. Most products practitioners are familiar with several recent MDLs involving these issues, but the application of insurance coverage to these claims is often overlooked. The recent decision of ACE American Insurance Co. v. RC2 Corp., Inc., No. 07C5037 (N.D. Ill. June 26, 2008), focuses on coverage in these circumstances, and it highlights issues that products lawyers need to know.

—Eric E. Hudson, Butler, Snow, O'Mara, Stevens & Cannada, PLLC, Memphis, TN

Manufacturers of PMA Devices Are Entitled to Preemption Defense

The U. S. Supreme Court, by an 8-to-1 majority, recently held that the express preemption provision of the Medical Device Amendments to the Food, Drug, and Cosmetic Act, 21 U.S.C. 360k(a), preempts state-law claims seeking damages for injuries caused by medical devices that have received premarket approval (PMA) from the Food and Drug Administration (FDA). Thus, plaintiffs who have brought suits for injuries allegedly sustained as a result of a PMA device now confront a preemption defense that should bar most state tort claims. In reaching this result, the Supreme Court distinguished its decision in Medtronic v. Lohr, 518 U.S. 470 (1996) where it held that a finding by the FDA of “substantial equivalence” under § 510(k) did not preempt state-law tort claims based on the use of such medical devices.

—Caryn M. Silverman, Sedgwick, Detert, Moran & Arnold, LLP

A Disturbing Expansion of the Duty to Warn in Products Liability Cases

A product manufacturer is generally not liable for failing to warn consumers of the dangerous nature of a product designed and sold by a third party. A recent decision from the Court of Appeals for the State of Washington, Simonetta v. Viad Corp., alters this general rule. It is no longer sufficient for a manufacturer to investigate its own product and issue warnings based on the potential dangers its product might present. Manufacturers are now responsible for dangers related to other products that may be used in conjunction with, or in close proximity to, their products, and are obliged to warn the consumer about those dangers.

—Gregory D. Shelton, Williams Kastner, Seattle, WA, and R. Joseph Sexton, Williams Kastner, Tacoma, WA