News & Developments
The Unpurchased Consumer Products Issue in Class Actions
Plaintiffs’ counsel are increasingly bringing class action lawsuits challenging product lines or groups of products where the named plaintiffs have not purchased all of the products at issue. For example, a named plaintiff may seek to represent a class of all juice purchasers (including orange juice, apple juice, and grape juice) even though she only purchased grape juice. Below, we address the various approaches courts take when confronted with this scenario.
Some courts dismiss the claims related to unpurchased products at the pleading stage on the ground that the plaintiff lacks standing to sue over a product she did not purchase. See, e.g., Garcia v. Kashi, Co., 43 F. Supp. 3d 1359, 1393 (S.D. Fla. Sept. 5, 2014) (“a named plaintiff in a consumer class action lacks standing to challenge a non-purchased product because there is no injury-in-fact as to that product”); Leonhart v. Nature’s Path Foods, Inc., No. 5:13-CV-0492-EJD, 2014 WL 1338161, at *4 (N.D. Cal. Mar. 31, 2014) (“many courts in this district have found that claims regarding unpurchased products similar to [p]laintiff’s do not survive a motion to dismiss”). But see, e.g., Brady v. Basic Research, L.L.C., No. 13-CV-7169 SJF, 2015 WL 1542094, at *5 (E.D.N.Y. Mar. 31, 2015) (“there are sufficient similarities between the purchased products [and other products in the complaint] to withstand the motion [to dismiss]”). Other courts table the issue until the class certification stage. See e.g., Kumar v. Salov N. Am. Corp., No. 14-CV-2411-YGR, 2015 WL 457692, at *5 (N.D. Cal. Feb. 3, 2015) (“Whether [plaintiff] can properly represent a class of persons who purchased other products is a matter to be considered at the class certification stage, not the pleading stage”).
At the class certification stage, some courts have denied class certification for lack of typicality where the named plaintiff seeks to represent a class of consumers who bought products that she herself did not buy. See, e.g., Allen v. Hyland’s Inc., 300 F.R.D. 643, 662–63 (C.D. Cal. 2014) (denying class certification for lack of typicality where no named plaintiff purchased and/or relied upon the packaging statements for certain challenged products); Major v. Ocean Spray Cranberries, Inc., No. 5:12-CV-03067, 2013 WL 2558125 EJD, at *4 (N.D. Cal. June 10, 2013) (“The primary reason behind the Court’s determination that the typicality requirement has not been met is that Plaintiff’s proposed classes are so broad and indefinite that they encompass products that she herself did not purchase.”).
Other courts considering class certification have held that a plaintiff may represent absent class members who purchased different products, so long as the product or alleged defect are “substantially similar.” See e.g., Marcus v. BMW of N. Am., LLC, 687 F.3d 583, 599 (3d Cir. 2012) (finding no typicality problem and stating that “[w]hen a class includes purchasers of a variety of different products, a named plaintiff that purchases only one type of product satisfies the typicality requirement if the alleged misrepresentations or omissions apply uniformly across the different product types.”).
Finally, if a class is certified, there is still an opportunity to argue to a jury that not everyone in the class experienced problems with the same products, and therefore the jury should find in favor of the defendant. See, e.g., In re Whirlpool Corp. Front-Loading Washer Products Liab. Litig., 722 F.3d 838, 855–56 (6th Cir. 2013), cert. denied sub nom., Whirlpool Corp. v. Glazer, 134 S. Ct. 1277 (2014) (granting class certification and denying a motion for decertification where defendants argued that most of the machines purchased did not have the mold issues alleged). Commentators have suggested that the fact that the trial was over 20 different models of washers may be one reason why the jury found for Whirlpool in its Front-Loading Washer litigation.
While the success of arguments about unpurchased products may depend in part on the jurisdiction in which counsel find themselves, the foregoing illustrates that there are multiple opportunities for defense counsel to attempt to end the case with respect to products a named plaintiff did not purchase. If arguments are unsuccessful at the pleadings stage, the next question is whether the plaintiff can show that she is typical at the class certification stage, or that the products she purchased are “substantially similar” to those purchased by the class, and defense counsel would be well advised to provide affirmative discovery if they are not. In all events, unpurchased products may ultimately be useful at trial to show that there was no classwide defect.
Keywords: products liability, litigation, onsumer product, class action, unpurchased
Beware of "Subject To and Not Waiving" in Discovery Responses
Courts are becoming increasingly hostile to discovery responses that are provided “subject to and not waiving” a party’s objections. These responses—termed “conditional discovery responses”—may result in waiver of discovery objections.
The takeaway from the cases discussed below is that lawyers should check the rules and case law in their jurisdiction before using conditional discovery responses. Additionally, regardless of whether conditional language is used, all discovery responses should specify whether documents are being withheld based on objections.
Courts have identified three main issues with conditional discovery responses:
1. They can be confusing.What does it mean to produce documents “subject to and not waiving” various objections? It is not always clear. Perhaps the party is producing some documents and withholding others based on its objections. Or, perhaps the party is producing all responsive documents, but simply noting that the discovery request is objectionable as stated.
In the words of one court, the requesting party is “left guessing as to whether [the producing party] has produced all documents, or only produced some documents and withheld others.” See Pro Fit Mgmt., Inc. v. Lady of Am. Franchise Corp., No. 08-CV-2662, 2011 WL 939226, at *9 (D. Kan. Feb. 25, 2011) objections overruled, 2011 WL 1434626 (D. Kan. Apr. 14, 2011). (Though less common, courts have also criticized the use of conditional discovery responses to interrogatories. See Mann v. Island Resorts Dev., Inc., No. 3:08CV297, 2009 WL 6409113, at *3-4 (N.D. Fla. Feb. 27, 2009)).
2. They may render discovery unmanageable.Another concern is that conditional discovery responses may lead to increased motion practice during discovery. “Absent an indication of what, exactly, the responding party was objecting to. . . courts would be flooded with motions to compel by litigants seeking to confirm that undisclosed responsive documents did not exist. And courts would then be forced to ask counsel, over and over again, ‘Do other documents exist?’” Haeger v. Goodyear Tire and Rubber Co., 906 F. Supp. 2d 938, 977 (D. Ariz. 2012).
3. They may be inconsistent with the Federal Rules of Civil Procedure. “The plain language of Rule 34 requires a partial response be identified as such.” Id. See Fed. R. Civ. P. 34(b)(2)(C) (“An objection to part of a request must specify the part and permit inspection of the rest.”); see also Fed. R. Civ. P. 33(b)(3) (“Each interrogatory must, to the extent it is not objected to, be answered separately and fully in writing under oath.”).
But conditional discovery responses sometimes obscure whether the party is only providing a partial response (i.e., withholding documents). See Sprint Commc’ns Co., L.P. v. Comcast Cable Commc’ns, LLC, No. 11-2684, 2014 WL 1569963, at *2 (D. Kan. Apr. 18, 2014) (“[T]he practice of responding to discovery requests by asserting objections and then answering ‘subject to’ or ‘without waiving’ the objections is confusing, unproductive, and in violation of federal discovery rules.”).
For these reasons, several courts have disapproved of conditional discovery responses, with some courts even holding that the use of such responses will result in waiver of discovery objections. See, e.g., id. at *3 (“[W]hen a party objects to discovery but nonetheless answers ‘subject to’ the objection, the objection will be deemed waived.”); Mann, 2009 WL 6409113, at *3 (“In this court, however, no objections are ‘reserved’ under the rules; they are either raised or they are waived.”); Westlake v. BMO Harris Bank N.A., No. 13-2300, 2014 WL 1012669, at *3 (D. Kan. Mar. 17, 2014) (the court “strongly disapproves” of conditional discovery responses); Pepperwood of Naples Condo. Ass’n, Inc. v. Nationwide Mut. Fire Ins. Co., No. 2:10-CV-753, 2011 WL 4382104, at *4–5 (M.D. Fla. Sept. 20, 2011) (cautioning parties about the use of conditional discovery responses).
However, while these opinions criticized conditional discovery responses, the issue was not just the “subject to and not waiving” language itself. Rather, the problem was that the discovery responses at issue failed to indicate whether the responses were full and complete. Therefore, the key takeaway is that all discovery responses should specify whether the response is complete or partial, and whether the party is withholding documents based on its objections.
Keywords: products liability, litigation, young lawyer, discovery, objections, waiver
—Laura Sexton, Sidley Austin LLP, Chicago, IL
Supplements Industry Facing Increase Regulation, Litigation
For years, manufacturers, distributors, and suppliers of dietary and herbal supplements—reported to be a $32 billion industry—have operated largely outside the auspices of federal regulators and have for the most part avoided the attention of state attorneys general and the plaintiffs’ bar. Recent developments suggest those days are numbered.
At the outset, it is important to understand the universe of products at issue here. Dietary and herbal supplements range from energy drinks such as 5-hour ENERGY® to the myriad vitamins and mineral supplements on the shelves of pharmacies and nutrition centers around the country.
The industry now finds itself in a precarious position—between the crosshairs of federal and state regulators:
- The Food and Drug Administration (FDA) has expressed a heightened interest in dietary supplements, most recently filing suit in federal courts in California and New York against two dietary supplement manufacturers for allegedly failing to properly test their ingredients. In each case, the FDA asked the court to halt the manufacture and distribution of the products.
- In a recent 16-month period alone, the FDA reportedly took more than 100 actions against the makers and sellers of dietary supplements.
- Just last month, the FDA sent warning letters to the manufacturers of approximately 30 dietary supplements, directing them to cease the sale of products containing allegedly dangerous ingredients.
- In February of this year, the New York Attorney General issued cease-and-desist letters to GNC, Target, Walmart, and Walgreens for allegedly selling adulterated herbal supplements.
- Then, in April, 14 attorneys general asked Congress to launch an investigation of the herbal supplements industry and to consider giving the U.S. Food and Drug Administration stronger oversight of the industry.
If large-scale litigation against manufacturers of other products is any indication, other states and private plaintiffs’ attorneys are certain to follow suit. Indeed, a number of putative nationwide class action lawsuits already have been filed across the country against various dietary supplement manufacturers, alleging those manufacturers engaged in deceptive advertising and misleading marketing. Recent data also suggests that personal injury lawsuits against dietary and herbal supplement manufacturers and suppliers are being filed with increasing regularity. Because it is only a small step from a drug or device lawsuit to a personal injury suit against the manufacturer of a dietary or herbal supplement, repeat players on the plaintiffs’ side of drug and device litigation are likely to enter the supplement arena.
So, too, have supplements become a topic du jour in the media. Popular news outlets such as ABC News, NPR, HBO, and The New York Times have featured dietary supplements in a negative, even ominous, light. This increased media attention almost certainly portends more frequent and more serious attention from lawmakers and litigants, both public and private.
In the face of these developments, manufacturers, distributors, and sellers of dietary and herbal supplements are advised to consider the following:
- Work with governmental affairs specialists to have a voice in shaping the policies of federal and state governments.
- Stay abreast of updates in the law, which may come quickly but not be consistent across states.
- Implement policies to ensure compliance with the laws of every state in which the company is doing business.
- Take steps to reduce exposure to personal injury and consumer protection lawsuits.
- Be prepared to defend personal injury and consumer protection lawsuits.
The industry is not without recourse. Time, however, appears to be of the essence. The legal and political landscape is changing rapidly, and attorneys should advise their clients to be better positioned to anticipate and respond appropriately to legal and political challenges.
Keywords: products liability, litigation, supplements, dietary, herbal
—Brian Alexander Wahl and Whitt Steineker, Bradley Arant Boult Cummings LLP, Birmingham, AL
April 24, 2015
Regulation and Litigation Surrounding E-Cigarettes
Electronic Cigarettes, commonly known as e-cigarettes, are battery operated nicotine and flavor delivery devices. Although e-cigarettes do not contain tobacco, users, known as "vapers," exhale a mixture of volatile organic compounds and heavy metals in a cloud of aerosol. Due to the concerns driven by e-cigarettes and the possible negative health effects, about two-thirds of major nations have regulated e-cigarettes in some way. See Barnaby Page (5 March 2015). "World’s law-makers favour basing e-cig rules on tobacco." ECigIntelligence (Tamarind Media Limited). By contrast, regulations in the United States have been primarily generated at the state and local levels, followed slowly by the federal government. However, the ever-increasing controversy that the popularity—especially among minors—and escalating numbers of vapers has created substantial momentum toward greater national regulation.
As is often the case, California and New York have been at the forefront of state and local action. In 2010, the California Attorney General pursued two separate companies under California’s Health & Safety Code, alleging that they each targeted minors in their marketing and misled consumers. See People v. Smoking Everywhere, Inc. No. RG10493637 (Alameda Superior Court) and People v. Sottera, Inc. No. RG10528622 (Alameda Superior Court). Both companies settled, and the marketing and efficacy claims asserted by each were tightly restricted by the settlement. Consumer class actions seeking to recover against other distributors for alleged misrepresentation in advertising quickly followed, citing the inconclusive and contested scientific studies regarding possible adverse health effects of vaping. See In re Njoy Inc., Consumer Class Action Litigation, No. CV-14-00428 (C.D. Cal., filed January 17, 2014) and Sheppard v. Fumizer, LLC, No. BC 558403 (Los Angeles Sup. Ct., filed Sept. 22, 2014). Not to be outdone, the California Department of Public Health released an advisory that addressed the health risks posed by e-cigarettes in January 2015, advising against the use of e-cigarettes, especially by children.
In New York, the state assembly, in a 125–0 vote, banned e-cigarettes in 2010. This move was followed by a 2013 New York City restriction on the sale of e-cigarettes (and other tobacco products) to persons under the age of 21, and a further prohibition on the use of e-cigarettes at both public and private spaces which went into effect in early 2014. See, generally, New York “Smoke Free Air Act”.
Despite these active state based efforts, the Food and Drug Administration (FDA) regulatory movement has been delayed, with the lack of confirming scientific evidence regarding e-cigarettes standing as one of its largest impediments, coupled with the incredible amount of public interest in the pending regulations. Although numerous studies suggest that the chemical-laden aerosol generated by vaping leads to addiction and other negative health effects, the risks from e-cigarettes are simply undetermined, as acknowledged by the World Health Organization as recently as January 2015. Nonetheless, recent studies have indicated not only a link between e-cigarette use and an increase in cigarette or other tobacco use, but an increase is usage of the e-cigarettes by minors. See e.g., E-Cigarette Use in the Past and Quitting Behavior in the Future: A Population Based Study. Wael K. Al-Delaimy, et al., American Journal of Public Health, posted online on April 16, 2015.
Notwithstanding inconclusive scientific evidence, federal efforts have been ongoing. In 2009, the Family Smoking Prevention and Tobacco Act (Tobacco Act) was signed into law, creating the FDA Center for Tobacco Products and providing the FDA with the ability to regulate additional tobacco related products. Acknowledging the power created under the Tobacco Act, and noting the serious possible effects of e-cigarettes and what appears to be excessive underage use, the FDA issued a proposed “deeming” rule on April 25, 2014, including e-cigarettes, as one of several tobacco-related products for proposed regulation. Under the proposed rule, e-cigarettes would require registration with the FDA and reporting of product and ingredient listings, pre-marketing review and approval, restrictions on reduced risk claims until a determination by the FDA, and a prohibition on distribution of free samples. Significantly, the proposed regulation also sets minimum age and identification restrictions to prevent sales to underage youth and requires requisite health warnings.
Given the nationwide interest, it is unquestionable that the FDA will continue its efforts to finalize e-cigarette regulations as soon as practicable. And, as with any new regulations of consumer products, civil litigation will follow. Although e-cigarette companies have enjoyed a largely unchecked and widespread success, the continuation of that path, in light of the ongoing efforts and developing scientific evidence, seems questionable. Stay tuned.
Keywords: products liability, litigation, e-cigarette, FDA, regulation, tobacco
—Elizabeth V. McNulty, Archer Norris PLC, Newport Beach, CA
March 23, 2015
Sizing Up Food and Supplements Claims by Product Testing
From ice cream to pet food to protein powder, food and supplements manufacturers increasingly must defend against allegations that their products do not measure up in “independent laboratory testing” of ingredients. New York Attorney General Eric Schneiderman adopted this strategy last month, asserting that DNA bar coding tests run on herbal supplements sold by national retailers showed that four out of five of the tested products did not contain any of the herbs on their labels.
Plaintiffs’ tactic of referring to conclusive pre-litigation product testing is not new. In 2012, a consumer of diet ice cream bars sued product manufacturers, claiming laboratory tests revealed that calorie counts for the challenged products were 20-30 percent greater than listed on the box. Burke v. Weight Watchers Int’l, Inc. and Wells Enters., Inc., Case No. 12-cv-6742 (D.NJ). In 2013, Honest Tea was hit with class allegations that bottles of its Honey Green Tea did not contain the amount of antioxidants represented on labels. Salazar v. Honest Tea, Inc., Case No. 13-cv-2318 (E.D. Cal.). See also Gubala v. CVS Health Corp., Case No. 14-cv-9039 (N.D. Ill.) (alleging defendant engaged in deceptive amino acid spiking of whey protein products and “scientific testing” showed products did not contain claimed amino acid ingredients).
Despite the expanded use of these claims by class counsel and other consumer advocates, product testing allegations have proven vulnerable to 12(b)(6) challenges on preemption grounds. The problem rests in plaintiffs’ failure to specifically assert that their testing complies with strict FDA guidelines and the products do not satisfy “safe harbor” provisions that allow for limited deviation from labeled contents. In essence, cursory allegations of “independent laboratory testing” of product claims are themselves coming up short. Absent clear adherence to prescribed testing methods, courts are dismissing complaints (often without prejudice) because reliance on an alternative testing regime would impose state labeling requirements inconsistent with controlling federal regulations.
In Burke, Plaintiff asserted generally that all calorie count testing was conducted in compliance with FDA rules, but her complaint was dismissed because she failed to explicitly allege that: (1) the ice cream bars were tested using each of the five alternative methods prescribed by FDA regulations for calculating total calories, and (2) the bars exceeded safe harbor calorie allowances on each of the five tests. Burke, 983 F.Supp.2d 478 (2013). See also Salazar v. Honest Tea, Inc. (E.D. Cal. June 10, 2014) (dismissing Plaintiff’s complaint against tea manufacturer over allegedly inaccurate antioxidant claims due to failure to assert compliance with FDA 12-sample test method for nutrient content claims established by 21 CFR § 101.9(g)).
Plaintiffs have earned limited victories along the testing road. In 2014, a pair of lawsuits were filed against pet food company Blue Buffalo, one by a putative consumer class and the other by rival pet food manufacturer Purina, claiming that laboratory testing showed some Blue Buffalo pet foods contained poultry by-product meal (contradicting the company’s “no poultry by-products” pledge), as well as rice hulls in its purportedly “grain free” products. Stone v. Blue Buffalo Co., Case No. 14-cv-520 (S.D. Ill.); Nestle Purina PetCare Co. v. Blue Buffalo Co., Case No. 14-cv-859 (E.D. Mo.). Blue Buffalo countersued Purina for defamation but within months, Blue Buffalo had posted a public letter of apology to its customers stating that a supplier had mislabeled poultry by-product meal as chicken meal. Nonetheless, manufacturers are expected to continue to vigorously challenge laboratory testing allegations, both in motions to dismiss and in the court of public opinion.
In January, consumers of MusclePharm’s “Arnold Schwarzenegger Series Iron Mass” dietary supplement filed suit in California federal court, alleging that “scientific testing” showed the company had misrepresented the nature and amount of protein in the product. Durnford v. MusclePharm Corp., Case No. 15-cv-413 (N.D. Cal.). MusclePharm’s responsive pleading is pending. Meanwhile, the four retailers targeted in New York are mounting a defense against product testing claims, asserting that the DNA testing method used to evaluate their supplements is unproven for botanical extracts, due to expected denaturing and destruction of plant DNA during processing. According to media reports, the companies’ skepticism of the state AG’s test results has considerable support in the scientific community. See, e.g., Alex Morrell, Did The NY AG Flub Its Testing in Herbal Supplement Smackdown?, Forbes March 14, 2015; Nicola Twilley, How Not to Test A Dietary Supplement, The New Yorker February 10, 2015.
Keywords: products liability, litigation, product testing, food labeling, nutrient content claims, supplements, independent laboratory testing
—Alyssa L. Rebensdorf, Faegre Baker Daniels, Minneapolis, MN
February 20, 2015
Eastern District of Louisiana Denies Remand of NORM Mass Action
On October 23, 2014, the Eastern District of Louisiana denied remand in the matters of Warren Lester, et al. v. Exxon Mobil Corp., et al. (E.D. La. No. 14-1844), and Shirley Bottley et al. v. Exxon Mobil Corp., et al. (E.D. La. No. 14-1840). The plaintiffs therein seek damages for various personal injuries, medical monitoring, property damages, and punitive damages allegedly arising from exposure to Naturally Occurring Radioactive Material (NORM) associated with the cleaning of used oilfield pipe. The original Lester action, filed in 2002 in the Civil District Court for the Parish of Orleans, included the claims of over 600 individuals, including those of the plaintiff Cornelius Bottley.
The Class Action Fairness Act (CAFA) was passed in 2005. CAFA allows removal to federal court of “mass actions,” defined as actions “in which monetary relief claims of 100 or more persons are proposed to be tried jointly on the ground that the plaintiffs' claims involve common questions of law or fact.” In recent years, CAFA’s “mass action” provision has been used as an additional means of removal where plaintiffs take some step deemed by the court to be a proposal to jointly try one or more substantially similar matters with 100 or more total claimants.
After Bottley’s 2012 death, his heirs filed a separate wrongful death action (the Bottley action) in July 2014, also in the Civil District Court for the Parish of Orleans. When the Bottley plaintiffs moved to consolidate their action with the Lester action for the purpose of trial, ExxonMobil Oil Corporation (Mobil), a defendant in Bottley, removed both Lester and Bottley as a mass action under CAFA.
Judge Eldon Fallon of the Eastern District of Louisiana found that the Bottley plaintiffs’ motion to consolidate constituted a proposal to jointly try the claims of 100 or more plaintiffs within the definition of a mass action and therefore triggered removability under CAFA. Specifically, Judge Fallon noted that the motion to consolidate expressly requested “a consolidation for purposes of trial pursuant to article 1561 of the Louisiana Code of Civil Procedure,” which does not permit consolidation for any purpose other than trial. In so holding, the court agreed with the Seventh Circuit decision of In Re: Abbott Laboratories, Inc., 698 F.3d 568, 570 (7th Cir. 2012), wherein the court reasoned that a motion to consolidate for pretrial and trial purposes the claims of over 100 plaintiffs constituted a proposal for a joint trial under the mass action provision of CAFA.
While the plaintiffs argued that Lester’s state court procedural history included several non-preclusive “trial flights” of fewer than twelve plaintiffs, and the intent of the Bottley plaintiffs’ motion to consolidate was to be put into one of these flights, the court noted that the express language of the motion to consolidate requested only “consolidation for purposes of trial” and that pre-trial consolidation was impermissible under Louisiana law. Judge Fallon further noted that the eventual method of trial was for the court to determine, based on feasibility and efficiency, and that the requirement of a proposal for joint trial could not be interpreted as literally requiring a court to try the claims of 100 or more plaintiffs at the same time. Such a requirement, reasoned Judge Fallon, would be contrary to the plain language of CAFA, impractical, and could not have been Congress’s intent.
Finally, the court rejected the plaintiffs’ argument that Mobil’s removal of Lester and Bottley was premature, as the Bottley plaintiffs’ motion to consolidate had not been granted at the time of removal. Judge Fallon noted that, just as in the In Re: Abbott Laboratories matter, the court need not address whether or not the motion to consolidate had been granted. The plain language of CAFA required only a proposal for joint trial of 100 or more plaintiffs as the triggering event for removal.
Judge Fallon’s ruling joins a growing body of caselaw, particularly from the Seventh and Eighth Circuits, wherein proposed consolidations have been deemed sufficient to trigger the mass action provision of CAFA—even if a consolidation is never actually granted. See, e.g., In Re: Abbott Laboratories, Inc., 698 F.3d 568, 570 (7th Cir. 2012); Bullard v. Burlington Northern Santa Fe Railway Co., 535 F.3d 759, 762 (7th Cir. 2008); Atwell v. Boston Scientific Corp., 740 F.3d 1160, 1162 (8th Cir. 2013). The Bottley and Lester plaintiffs have recently sought to appeal Judge Fallon’s ruling, and the Fifth Circuit has agreed to hear the appeal.
Keywords: products liability, litigation, CAFA, Mass Action, Remand
—David M. Stein, Adams & Reese, New Orleans, LA
January 28, 2015
District Court Denies Takeda's Motion for a New Trial
The United States District Court for the Western District of Louisiana recently denied the Rule 59 Motion for a New Trial filed by Takeda Pharmaceuticals U.S.A. and related entities (Takeda) in a case involving Takeda’s anti-diabetes medication Actos and allegations that it causes bladder cancer (Actos Product Liability Litigation). Among other issues, Takeda contended that the jury’s $9 billion punitive award resulted from passion and prejudice. While the court remitted the jury’s $9 billion punitive award to $37 million, it defended its finding that Takeda acted in bad faith when it spoliated evidence.
The spoliation dispute in the Actos Product Liability Litigation involved alleged destruction of 46 custodial files of former Takeda employees. All of the employees from whom the plaintiffs sought discoverable information left Takeda’s employment between February 2001 and April 2011. Upon the employees’ departure from the company—but before the issuance of the Actos bladder cancer litigation hold in September 2011—Takeda deleted their files.
However, in July 2002—in connection with litigation involving a number of drugs (including Actos), but having nothing to do with bladder cancer issues—Takeda had implemented a general product liability litigation hold which required, among other things, the preservation of “any and all documents and electronic data which discuss, mention, or relate to Actos.” In re Actos (Pioglitazone) Prods. Liab. Litig., No. 6:11-md-2299, 2014 U.S. Dist. LEXIS 13307, at *39 (W.D. La. Jan. 27, 2014). Rather than withdraw the hold when the relevant 2002 litigation concluded, Takeda “refreshed” the general hold in 2003, 2006, 2007, 2008, and February 2011. Id. at *40. The general product liability hold, according to the court, created a duty to maintain the custodial files in question, and the company spoliated evidence when it deleted the files.
According to the court, “the clear, express, and unambiguous language of the 2002 Litigation Hold and its ‘refreshed’ incarnations all contain broad language without limitation to or distinction between or among specific maladies and, therefore, embrace the bladder cancer claimants who are plaintiffs in the instant MDL . . . .” Id. at *92 (emphasis in original). Accordingly, the court held that Takeda had a “duty to preserve documents relevant to the claims of these bladder cancer plaintiffs . . . in 2002, when Takeda chose to, and in fact, did issue a broad and sweeping litigation hold . . . .” Id. (emphasis in original); see also In re Actos (Pioglitazone) Prods. Liab. Litig., No. 6:11-md-2299, 2014 U.S. Dist. LEXIS 86101, at *117-18 (W.D. La. June 23, 2014) (“[Takeda] chose to institute a general product liability litigation hold, sweeping in its scope and breadth, and containing no such limitation to or identification of a particular malady, in 2002.”) (emphasis in original).
The court further held that the plaintiffs met their burden of proving the relevance of the spoliated evidence, prejudice resulting from the presumed deletion of such evidence, and that Takeda acted in bad faith. The court ordered that such “evidence of bad faith” could go to the jury—which, ultimately, resulted in six days of testimony by a Takeda in-house lawyer—and the court read an adverse inference instruction, advising the jury that it was “free to infer those documents and files would have been helpful to the plaintiffs or detrimental to Takeda. . . .” In re Actos, 2014 U.S. Dist. LEXIS 86101, at *225–26 (citing AllenTrial Tr., at 6278:25-6279:5 (Apr. 7, 2014)). The jury ultimately found in favor of the plaintiffs and awarded $9 billion in punitive damages.
Keywords: litigation, products liability, Takeda, Actos, spoliation, duty to preserve, litigation hold
—Shelby Feuerbach, Sidley Austin LLP, Chicago, IL
Under Scrutiny—Eyes Turn Toward the NHTSA after Highly Publicized Recalls
Highly publicized recalls, like those for the Toyota unintended acceleration issue and the GM ignition switch, lead inevitably to examination of the safety practices within the automotive industry. More recently, however, focus has shifted to include the regulatory agency tasked with safety oversight of the industry—the U.S. Department of Transportation’s National Highway Traffic Safety Administration (NHTSA). For instance, on September 14, 2014, The New York Times featured a piece entitled “Regulator Slow to Respond to Deadly Vehicle Defects,” and on September 17, 2014, the paper published an additional article with the headline, “Congress Castigates Auto Regulator Over a Deadly G.M. Defect.” These articles, and their theme, were quickly picked up by other media outlets, such as Wards Auto, and even by personal injury attorneys, such as Koonz, McKenney, Johnson, DePaolis & Lightfoot, L.L.P.
If the NHTSA is under scrutiny, what does that mean for attorneys who work with automotive clients? The legal framework for reporting and compliance remain unchanged, but the associated risks for delayed or incomplete action may be greater. Federal agencies facing criticism for appearing too cozy with the industry are under increased incentive to publicly demonstrate otherwise. A big-dollar penalty action is more likely to achieve this goal than tireless defense of historical practices. A company working cooperatively with the NHTSA to report and conduct a recall may be more likely to receive particular attention and inquiries surrounding the “when” of reporting, even if the “what” and “how” of the issue, the root cause, and the remedy are well established.
Another consequence of the recent scrutiny of the NHTSA may be the continued delay in the NHTSA’s publication of pending final rules, and in the NHTSA’s ability to issue policy guidance on emerging vehicle technology, like driverless features. With limited resources available, we may see a return to fundamentals and enforcement. Now is a good time for refresher training of in-house teams on the NHTSA reporting obligations and their timing in particular.
Keywords: litigation, products liability, NHTSA, recall, automotive, reporting, compliance, penalty
—Laura J. Walther, Crowell & Moring LLP, Washington, D.C. The statements in the article are those of the author, and do not constitute legal advice or the opinion of Crowell & Moring LLP.
New CPSC Magnet Standard Tackles Safety Concerns
The Consumer Product Safety Commission (CPSC/Commission) recently approved a new safety standard that effectively bans once wildly popular magnet sets. This rule [16 CFR 1240] affects millions of small high-powered magnet sets used as adult desk toys. The rulemaking followed a long history of CPSC efforts to address safety concerns with magnet sets—none of which eliminated ongoing incidents of serious harm to children.
In taking this action, the CSPC sought to prevent injuries that occurred when children or teenagers accidentally ingested the small but powerful individual magnets, which are typically composed of 200 or more individual BB-sized magnets. If more than one magnet is ingested, the magnets can attract to each other and pinch or trap intestines and other parts of the digestive tract. This can cause tissue death and subsequent serious—even life-threatening injuries. The CPSC states that ingested high-powered magnets have resulted in an estimated 2,900 emergency room visits and the death of a 19-month-old child.
The Rule is effective April 1, 2015. Under the regulation, individual magnets in a set must either be too big to fit into the CPSC “small parts cylinder” (about 1.25 inches wide) or the magnet must be weaker than a specified industry measure (a flux index of 50 or less). The Rule applies to sets of high-powered magnets and to individual magnets that are intended to be part of a set. The April 1, 2015, enactment date is not retroactive. However, any magnet sets or individual magnets manufactured or imported after that date must meet the new CPSC standard. It will then be illegal to manufacture, import, distribute, or sell such non-complying products.
In the recent past there has been extensive media coverage about the public battles between the Commission and Maxfield & Oberton, the company who imported and distributed “Buckyballs” magnet sets. Initially the CSPC and Maxfield & Oberton cooperated by jointly developing a public education program, enhancing product warnings, and limiting the marketing of Buckyballs to adults.
However, when ingestion incidents did not stop, the CPSC sought to recall all high-powered magnet sets. Maxfield & Oberton refused to voluntarily recall Buckyballs, and the Commission initiated litigation against the company and eventually against the CEO individually. The CPSC also pressured Amazon and other large retailers to stop selling Buckyballs, allegedly contributing to the failure of Maxfield & Oberton’s business. The Commission and the Buckyballs CEO subsequently reached a settlement that required the CEO to fund a product recall. Nevertheless this retrospective solution did not prevent problems with future distributors of such magnet sets.
In order to tackle that concern, the CPSC wanted a standard applicable to all manufacturers, importers, and distributors of high-powered, small-sized magnet sets. The new standard is prospective and seeks to prevent the hazards the CPSC previously addressed through recalls, administrative lawsuits, and informal market pressure.
This Rule applies to all high-powered small-sized magnet sets and effectively eliminates the entire class of consumer products from the marketplace. As part of the rulemaking, the CPSC had to first find the rule was “reasonably necessary to eliminate or reduce an unreasonable risk of injury associated with such product” and, additionally, find that the expected benefits of the rule have a reasonable relationship to the cost of the rule. Further, the rule had to impose the least burdensome requirements that would adequately reduce the risk of injury.
In analyzing alternatives to a strict mandatory standard, the CPSC considered whether product warnings could adequately reduce the risk of ingestion-related injuries. The CPSC, for a number of reasons, decided that warnings were unlikely to effectively reduce the ingestion of the magnets. This determination has the potential to significantly affect product safety regulatory practice. In the past, the CPSC relied on warnings to reduce hazards that otherwise could not be eliminated. In fact, the Consumer Product Safety Act contains mandatory provisions for warnings involving small parts in children’s products. The CPSC’s rejection of warning systems as a solution to the magnet ingestion problem may be a decision limited to this unique hazard and set of facts. If applied more broadly, however, it could call into question the regulatory use of consumer product safety warnings. How all of this may affect the development and regulation of consumer products in the future remains to be seen.
Whether other consumer products will suffer a similar fate is uncertain. For now, an entire group of popular products has been regulated out of existence. Buckyballs will go the way of the lawn dart.
Keywords: litigation, products liability, Consumer Product Safety Commission, CPSC, Consumer Product Safety Act, Magnets, Warnings
—Charles E. Joern, Jr., Joern Law Firm, Oak Brook, IL
November 24, 2014
Guidance Documents Issued Regarding Laboratory Developed Tests
On October 3, 2014, the FDA formally published two guidance documents: Framework for Regulatory Oversight of Laboratory Developed Tests and FDA Notification and Medical Device Reporting for Laboratory Developed Tests. These documents reflect the FDA’s intent to place more stringent regulations on Laboratory Developed Tests.
The publication of the documents on the Federal Register commenced a 120-day comment period which is likely to draw a great deal of commentary due to the controversy surrounding the regulations. The FDA’s efforts to step up regulation of medical laboratory testing have been strongly opposed by some laboratories and pathologists who argue that increased regulation is unnecessary and will significantly increase the time and costs to develop such tests—resulting in delayed implementation of testing with the potential to deliver vital information to patients and their physicians. In explaining its decision to increase regulation for Laboratory Developed Tests, the agency commented that the current market for these tests is unfair because some companies have to complete rigorous clinical studies to win approval while others are permitted to bypass FDA oversight and go to market without clinical studies.
Framework for Regulatory Oversight of Laboratory Developed Tests
The FDA defines a Laboratory Developed Test “as an [in vitro diagnostic device] that is intended for clinical use and designed, manufactured and used within a single laboratory.” The FDA does not consider devices to be LDTs if they are designed or manufactured completely, or partly, outside of the laboratory that offers and uses them. The framework essentially creates three tiers of regulation: (1) minimal (enforcement discretion); (2) moderate (enforcement discretion but with applicable regulatory requirements including registration, listing and adverse event reporting); and (3) full (applicable regulatory requirements, including registration and listing, adverse event reporting, premarket review and quality system requirements).
At the minimal level of regulation—enforcement discretion—are Laboratory Developed Tests, used solely for forensic purposes (such as law enforcement) and tests for transplantation when used in a certified, high-complexity histocompatibility laboratory. At the moderate level of regulation are low-risk tests (Class I devices), tests for rare diseases, and tests for unmet needs when no FDA-approved or cleared equivalent device is available. Full regulation is intended for high-risk and moderate-risk Laboratory Developed Tests, including tests with the same intended use as a cleared or approved companion diagnostic, tests with the same intended use as an FDA-approved Class III device, and certain tests for determining safety and effectiveness of blood or blood products.
FDA Notification and Medical Device Reporting for Laboratory Developed Tests
The Notification and Medical Device Reporting guidance document is intended to describe the process by which clinical laboratories notify the FDA of the Laboratory Developed Tests they manufacture and to describe the Medical Device Reporting requirements.
Keywords: products liability, litigation, FDA, Laboratory Developed Tests, LDTs, regulations, Guidance Document
—Kerry L. Gabrielson, Associate Godfrey & Kahn S.C., Madison, WI
October 14, 2014
FDA Provides Guidance on De Novo Classification Process
In August, the Food and Drug Administration (FDA) issued a draft guidance clarifying the de novo classification process, providing manufacturers of new medical devices a roadmap on how to avoid the demanding approval process. The revised de novo process allows certain low-risk products (Class I, low-risk, or Class II, moderate-risk medical devices), which are not substantially equivalent to current legally marketed devices, to be sold without premarket approval under Section 513(f)(2) of the Federal Food Drug, and Cosmetic Act (the FD&C Act). The new review processes also eliminate the requirement that applicants first file a 510(k) submission prior to seeking de novo classifications. This will likely speed up the de novo submission process greatly. This article outlines the recommended procedure for filing a de novo application pursuant to the new FDA staff guidelines.
First, the FDA “strongly recommended” that manufacturers prepare a Pre-Submission (Pre-Sub) before filing a de novo. A Pre-Sub is an applicant’s written request for feedback on whether a device should be categorized as low or moderate risk and a description of how the manufacturer verified that no similar device was previously approved. The Pre-Sub helps the FDA decide whether a new device is appropriate for the de novo process—the FDA’s response will then provide direction on whether the product at issue is appropriate for the de novo process. The FDA typically responds to a de novo-related Pre-Sub within 75–90 days.
With or without a Pre-Sub, a manufacturer may submit a de novo application requesting that the FDA make a classification determination for the device pursuant to the criteria included in Section 513(a)(1) of the FD&C Act. The de novo must include a detailed description of the device, along with the rationale for recommending that the device is appropriate for Class I or Class II classification. It should also include all information and evidence regarding the device’s safety and effectiveness, establish a risk profile for the device, outline the benefits of its use, and provide information demonstrating that the general or general and special controls support a Class I or Class II classification.
Upon submission of the de novo, the FDA will verify that another submission for the same device is not presently under review. If there is, the FDA will notify the applicant that it needs to withdraw the prior submission. If the prior submission is not withdrawn within 90 days, the FDA will consider the de novo withdrawn. The FDA will then check that the de novo contains the information required under Section 513(f)(2) of the FD&C Act. It will ensure that the submitter has found that there is no legally marketed device upon which to base a determination of substantial equivalence. The FDA will also perform a classification review of legally marketed device types and will continue its review only if no existing legally marketed device of the same type is identified.
Next, the FDA will perform a substantive review of the de novo. If it finds that the de novo is missing information necessary to determine whether general or general and special controls can provide a reasonable assurance of safety, it will issue an Additional Information letter and put the de novo on hold until a complete response is received. If no response is received within 180 days, the FDA will consider the de novo withdrawn. Additionally, if the FDA finds that the manufacturer’s general or general and special controls are insufficient to provide a reasonable assurance of safety and effectiveness, it will deny the de novo and the device may not be legally marketed until approval is granted, either through a new de novo or through a premarket approval application pursuant to Section 515 of the FD&C Act.
If all the requirements are met, the FDA will issue a written order granting the de novo application. It will also indicate whether the device is exempt from any premarket notification requirements. Once the written order is received by the applicant, the manufacturer may market the device immediately, subject to the identified controls. Finally, the FDA will publish an order in the Federal Register.
According to the FDA, approximately 50 products have been approved through the de novo process since 2010. A complete list of these devices is available on the FDA’s website. With these new changes, the number of de novo applications will likely increase and product manufacturers should be aware of this method of approval for novel Class I and Class II medical devices.
Keywords: litigation, products liability, FDA, de novo process, medical devices, manufacturers
September 29, 2014
Summary Judgment Affirmed for Procter & Gamble
The Eleventh Circuit recently affirmed summary judgment in Chapman v. Procter & Gamble Distributing, LLC et al., No. 12-14502, 2014 U.S. App. LEXIS 17535 (11th Cir. Sep. 11, 2014), a case in which plaintiff-appellant Marianne Chapman and her husband alleged injury from her use of Fixodent denture adhesive for eight years. Plaintiff suffers from myelopathy, a neurological disorder affecting her upper and lower extremities. She alleged that she had zinc-induced, copper-deficiency myelopathy, caused by a calcium-zinc compound Fixodent contains for adhesion. The case was one of multiple cases filed against Procter & Gamble and GlaxoSmithKline, the manufacturer of Poligrip, after a 2008 case report hypothesized that zinc in denture adhesives could lead to copper deficiency and neurologic injury.
Procter & Gamble had moved to exclude plaintiffs’ four causation experts (three general causation and one specific causation) because of unreliable methodologies. One week before trial, the district court issued an order excluding all four experts, finding their methodologies unreliable. The parties submitted a joint stipulation of dismissal with prejudice to obtain a final judgment for appeal, which the district court entered. On this first appeal, the Eleventh Circuit ruled that it failed to satisfy the Article III case or controversy requirement; appellants had disputed that the district court’s order was dispositive and argued that they could prove causation at trial with treating physician testimony. After the Eleventh Circuit dismissed the first appeal, the district judge vacated the stipulated final judgment, and Procter & Gamble moved for summary judgment. Because the designated causation experts were excluded, and the treating physicians had not been designated as experts, the district court entered summary judgment in Procter & Gamble’s favor. Plaintiffs appealed.
On appeal, the Eleventh Circuit differentiated between (1) cases in which the medical community “generally recognizes” the toxic effect of the substances (e.g.,asbestos and mesothelioma or cigarette smoking and cancer) and (2) cases in which the medical community does not generally recognize the toxicity of the substance in question or its ability to cause plaintiff’s injury. Cases in the first category are not subject to an extensive Daubert analysis, but cases in the second category require a two-part Daubert analysis. Specifically, the gatekeeper role requires considering general causation (whether the substance is capable of causing the harm the plaintiff alleges), and specific causation (whether the experts’ methodology determines that the substance caused the plaintiff’s specific injury).
Plaintiffs argued that the case should have been evaluated under the first category, because the medical community accepts that zinc ingestion can cause copper-deficiency myelopathy. The Eleventh Circuit disagreed, because plaintiffs had failed to show that the zinc compound in Fixodent was accepted in the medical community to cause the disorder. The district court had properly required a Daubert analysis of plaintiffs’ expert opinions on general and specific causation.
Applying the abuse of discretion standard, the Eleventh Circuit upheld the district court’s finding that plaintiffs’ expert methodologies were not sufficiently reliable and would not assist the trier of fact. The general causation experts had not relied on any studies or reports that allowed them to determine the amount of Fixodent, or the period of time it would have to be used, to increase the risk of copper deficiency. Nor could they establish how long a patient would need to experience copper deficiency to have an increased risk of myelopathy. They also had no epidemiological evidence to support their causation opinions, or any information on the background risk of copper-deficiency myelopathy. The experts’ methodologies—reliance on “plausible explanations, generalized case reports, hypotheses, and animal studies”—were not reliable and could mislead the jury.
The Eleventh Circuit further upheld the district court’s exclusion of plaintiffs’ specific causation expert on the grounds that the experts’ differential diagnosis methodology was not reliable. The plaintiff’s diagnosis of copper-deficiency myelopathy (as opposed to a more general neurological syndrome) first occurred when her expert examined her as part of the litigation. The plaintiff had experienced neurological symptoms prior to using Fixodent and after she stopped using it, but the expert failed to consider this or other potential causes. The Eleventh Circuit emphasized that a reliable differential diagnosis requires an expert to create a comprehensive list of potential explanations for a plaintiff’s injury and provide reasons for rejecting alternative hypotheses based on more than speculation or subjective belief.
Finally, the Eleventh Circuit upheld the district court’s grant of summary judgment, as plaintiffs’ efforts to establish causation through “alternative experts,” including treating physicians, were unavailing.
Keywords: litigation, products liability, Fixodent, Poligrip, denture adhesive, Daubert
—Elizabeth Curtin, Sidley Austin LLP, Chicago, IL
September 3, 2014
Manufacturing Representatives in the Operating Room
Representatives from medical device manufacturers are increasingly present in the operating room. Surgeons charged with implanting the devices report that the representatives’ knowledge of the device may improve quality control. However, creative plaintiffs’ attorneys are trying to create liability for manufacturers because of the representatives’ presence. The U.S. District Court of Utah recently blocked such an attempt.
A federal district court held this month that medical device manufacturers lack the special legal relationship with patients required to impose a duty of care nonfeasance during surgery. See McCartney v. U.S., No. 2:13-CV-1118 TS (D. Utah Jul. 16, 2014). The court also dismissed a count due to the plaintiff’s failure to include sufficient factual support for his negligence claims.
Factual and Procedural Background
In McCartney, two surgeries were at issue—one to implant a spinal cord stimulator and a second, corrective surgery. The surgeries took place at a VA medical center. At least one representative from the device manufacturer was present at both surgeries. There were no specific factual allegations about the representative’s actions during the first surgery. During the second surgery, the representative called the plaintiff’s wife to ask where the plaintiff had been experiencing pain. The plaintiff’s wife responded that she did not know. The stimulator was allegedly implanted in the wrong location.
The plaintiff received another corrective surgery from a private physician, and filed an action against the United States and the medical device manufacturer. There were two counts of negligence against both defendants—one for each of the first two surgeries.
Duty of Care for Misfeasance versus Nonfeasance
The McCartney opinion focused entirely on the duty element of negligence. The manufacturer filed a 12(b)(6) motion to dismiss, arguing that manufacturers do not owe a duty of care to patients to ensure that physicians properly implant their devices. The plaintiff argued that manufacturers owe that duty, and that the representative voluntarily undertook the duty during the second surgery. The court agreed with the manufacturer.
The court distinguished between actions and omissions—misfeasance and nonfeasance. Acts typically carry a duty of care, while omissions only implicate a duty of care “in cases of special legal relationships” or other exceptions. Id. at 6.
The first count alleged that the defendants failed to ensure that the physician properly implanted the device, which is an allegation of nonfeasance. The court dismissed the count as to the manufacturer, finding no special relationship between the device manufacturer and patient.
The second count alleged that the manufacturer voluntarily undertook the duty to ensure that the device was properly implanted by calling the plaintiff’s wife to ask where the plaintiff’s pain had been located, an allegation of misfeasance. The parties argued whether a duty was imposed under Restatement (Second) of Torts § 324A, which states:
One who undertakes, gratuitously or for consideration, to render services to another which he should recognize as necessary for the protection of the other’s person or things, is subject to liability to the other for physical harm resulting from his failure to exercise reasonable care to perform his undertaking, if:
(a) His failure to exercise such care increases the risk of such harm, or
(b) The harm is suffered because of the other’s reliance upon the undertaking.
Without deciding whether § 324A applied, the court dismissed the count without prejudice because the plaintiff did not plead facts showing that the manufacturer acted unreasonably or anyone relied on the manufacturer’s undertaking.
The Importance of the Motion to Dismiss
In cases alleging liability against device manufacturers based on representatives’ presence in the operating room, a motion to dismiss is a viable defense option that should be considered in the early stages of litigation. In McCartney, the motion to dismiss exposed deficiencies with the plaintiff’s complaint. For example, the court disregarded an allegation that the representative instructed the physician how to implant the device because the allegation, made “upon information and believe,” “completely lack[ed] factual support.” Thus, the plaintiff lost the chance to allege misfeasance because of pleading deficiencies.
This case does not raise all the potential issues with the presence of manufacturer representatives in the operating room, but this opinion shows that basic defense techniques can address even novel theories of liability.
Keywords: products liability litigation, McCartney v. United States, manufacturing representatives, operating room, medical device manufacturers
July 22, 2014
Fourth Circuit Rejects Anonymous Challenge to Products Database
In a much-anticipated decision, the Fourth Circuit Court of Appeals reversed the district court’s decision to permit so-called “Company Doe” to litigate under a pseudonym and to seal virtually the entire record of the litigation. Company Doe v. Public Citizen, No. 12-2209, 2014 U.S. App. LEXIS 7113 (4th Cir. Apr. 16, 2014).
The case involved one of the first proposed uses of SaferProducts.gov, a consumer product report database created under the Consumer Product Safety Improvement Act of 2008. Company Doe sued the CPSC in 2008, challenging the accuracy of a report of harm regarding the company’s product that would be published in the database, seeking to enjoin publication, litigate the case under seal, and proceed under a pseudonym.
Three consumer groups and the CPSC objected to the motion to seal. Because the district court did not grant the motion until nine months later when it issued a heavily redacted memorandum adjudicating cross-motions for summary judgment, virtually the entire litigation occurred under seal. The district court reasoned that Company Doe’s interest in “preserving its reputational and fiscal health” outweighed the public’s “abstract interest” in accessing information about the litigation. The court further reasoned that it must seal the documents and allow the company to proceed under a pseudonym to avoid bringing the report to the public’s attention. The court reasoned that, otherwise, the company’s interest in petitioning the court for redress of a grievance would be adversely affected.
The Fourth Circuit Found First Amendment Interest
The Fourth Circuit disagreed with the district court—substantively and in its delay in deciding the motion to seal. Noting the First Amendment and common law traditions that courts are presumptively open, the Fourth Circuit found that the public had a First Amendment interest in all of the information sealed or withheld by permitting Company Doe to litigate under a pseudonym.
The sealed information included the district court’s heavily redacted summary judgment opinion and the cross-motions for summary judgment, and the evidence relating to those motions, and depriving the public of access to evidence supporting the opinion undercut the public’s ability to oversee courts. The court found a First Amendment interest in the docket sheet, noting that the docket sheet educates the public as to how the district court adjudicates claims. Sealing the docket sheet also effectively shuts out the public and the press, thereby effectively depriving both of any ability to challenge the closure of proceedings or documents because they don’t know what documents have been filed.
No Compelling Government Interest Warranted Restricting Access
The court concluded that no compelling government interest warranted restricting access to those materials. The court stressed that the First Amendment right of access cannot yield to a business’s interest in protecting its corporate image, and that a “bare allegation of reputational harm” was not a sufficiently compelling interest to defeat that right of access.
Balanced against an unavailing (or unproven) interest in sealing the records, the court reasoned that the public’s interest in access to proceedings is “at its apex when the government is a party to the litigation,” as the “public has a strong interest in monitoring not only functions of the courts” but also litigation stances taken by officials and agencies. The fact that this was the first challenge to accuracy of material to be posted to the database “underscored” the public’s interest. Thus, the court concluded that the district court erred in granting the motion to seal and, for largely similar reasons, found that the district court erred in allowing Company Doe to proceed under a pseudonym.
The Fourth Circuit’s ruling threatens companies falsely accused in reports of harm posted on the CPSC’s database, but some hope remains. The court stressed the lack of record evidence to support Company Doe’s “bare allegation” of reputational harm, and a litigant seeking to seal any portion of the record must demonstrate a compelling interest sufficient to justify curtailing the public’s right of access. That heavy burden is not necessarily insurmountable. With that in mind, similarly situated companies should consider how to amass such evidence—perhaps using traditional methods of proving special damages regarding reputation in the tort context (e.g., special damages in a defamation case). In other words, companies might rely on economic analysis, market research, research regarding share value, and comparative analyses of the impact of similar cases on things like sales and insurance premiums.
Keywords: litigation, products liability, Company Doe, reports of harm, CPSC database, Public Citizen, sealing the record
—Tonya Newman, Neal, Gerber & Eisenberg LLP, Chicago, IL
A View from the Inside: Adrienne Gonzalez
The Corporate Counsel subcommittee of the Products Liability Committee is pleased to introduce this new column entitled “A View from the Inside.” Through this column, we look forward to hearing from in-house attorneys on issues relevant to our practice, as well as gaining useful insight into areas of law that are of interest or importance to our colleagues practicing in companies. We hope you enjoy it and look forward to presenting more “views” to you in future newsletters.
What accomplishment as an attorney are you most proud of?
Several years ago, I coached a mock trial team from an Urban Assembly high school in the South Bronx (similar to a charter school). Most of them were from very humble homes, some were first-generation American, and all of them were going to be the first in their families to go to college. For six months, they gave up every Saturday without complaint, in addition to several weekdays, for practice. No excuses, just 100 percent effort. More than once I marveled at the level of maturity, discipline, and dedication displayed by this group of 15- and 16-year-olds. That team went on to win both the New York City and the New York State Mock Trial Championship, even defeating my beloved alma mater, Brooklyn Tech. I will not forget standing in the New York Court of Appeals with tears of pride as I watched my kids graciously congratulate their opponents before they celebrated their hard won victory. I’ve had some incredible moments in my career so far but nothing has eclipsed that moment for me, and I’m happy to report that every single one of them went on to college, some with full scholarships!
What advice would you give to an attorney considering the jump to in-house legal work?
Do your research. Most outside counsel have no concept of what the in-house lawyers actually do, so they make certain assumptions based on bits and pieces that they may glean from conversations with in-house lawyers. I had the benefit of a secondment before I transitioned in-house full time, but a lawyer considering the move should mine his or her in-house friends about day-to-day activities and how they interact with the business so the lawyer can make an informed decision about whether or not in-house is the right move (this will also have the added benefit of helping you better service your clients once you understand what they are confronting on a daily basis). Also under the heading of “do your research,” do not assume that any and every in-house position will be the best move for you. Recognize that every company has its own culture, so you should be diligent in learning about it as you go through the interview process because it will have tremendous impact on your overall job satisfaction. Once you move in-house, be prepared for the shift of perspective. For an outside litigator, the litigation is the center of the universe. For the business, the litigation is simply one of the planets in the solar system. While important, it is not going to necessarily drive the business’s decisions; and colleagues, while understanding the importance of your requests, are not going to drop everything to respond simply because you’ve told them certain information has to be produced in the litigation. So as the in-house lawyer, you have to recognize this reality and adjust your perspective and strategy accordingly so that you can balance and manage both the external responsibilities and the internal realities.>
What litigation, legislation, or regulation are you keeping a close eye on, and why?
The FDA’s proposed rule on generic labeling changes, because as a brand name company, we are understandably concerned with the notion of innovator liability (even though only a minority of jurisdictions has adopted this position). But the FDA’s proposed rule may raise more complications than the problems it seeks to address, so it will be very interesting to see how this unfolds. E-discovery has been and continues to be an issue, but in light of three recent decisions against pharmaceutical companies in federal court involving alleged failures to fulfill their discovery obligations, this is once again a topic keeping in-house counsel up at night as we try to balance our obligations against the logistical, financial, and resource realities every company must confront.
What advice would you give to a young lawyer?
You are ultimately responsible for your career, but you cannot do it alone. Seek out mentors and champions (they are not synonymous!) to aid you along the way. Realize that your journey will not necessarily be a straight line, and keep an open mind to opportunities that at first glance do not appear to be the most attractive option or seem riskier than you would like to be at the moment. A quote I saw on Twitter (of all places) has stayed with me: “Courage is fear that has said its prayers and decided to go forward anyway.” This is a powerful reminder that fear will always be a factor, but you have the choice on whether you allow it to be the deciding factor in your decision making.
Keywords: products liability, litigation, in-house counsel, mock trial, research, generic labeling, e-discovery, mentors
— Daniel Wittenberg, Snell & Wilmer, Denver, CO
New Vehicles Required to Have Rear-View Technology
On March 31, 2014, after more than three years of delay, the U.S. Department of Transportation’s National Highway Traffic Safety Administration (NHTSA) finalized a rule that will require certain new vehicles to have rear visibility technology. The rule will apply to new vehicles less than 10,000 pounds (including passenger cars, motorcycles, and trucks) manufactured on or after May 1, 2018. For the “rear visibility technology” to be considered sufficient, it must display a 10-foot by 20-foot area directly behind the vehicle no more than two seconds after the vehicle is put in reverse. Although the rule itself does not identify any specific technology mandate, it is expected that most, if not all, manufacturers will comply with the rule by installing rearview cameras.
Phased Approach to Implementation
The rule sets forth a phased approach for implementation. Each manufacturer must ensure that 10 percent of its vehicles comply between May 1, 2016, and May 1, 2017. In the following year, the percentage rises to 40 percent. By May 1, 2018, manufacturers’ entire fleets of new vehicles less than 10,000 pounds must comply with the rule. NHTSA estimates that installing a compliant camera in a model year 2018 vehicle that already has a suitable display screen will cost $43 to $45, but that installation of a full system, including a camera and a display screen, will cost $132 to $142 per vehicle.
Response to Congressional and Other Legal Pressure?
The rule is designed to reduce the risk of death and serious injury caused by back-over accidents. Congress attempted by statute to obligate NHTSA to promulgate these final regulations by February 2011. The agency initially proposed these regulations in 2010, but delayed final promulgation multiple times under authority allowing the secretary of transportation to modify the timeline when, in his determination, the statutory deadline cannot be met.
The final rule was released the day before the Department of Transportation was scheduled to defend its delay in a writ of mandamus action brought by consumer groups in the U.S. Court of Appeals for the Second Circuit. The groups sought to compel finalization of the rule. As NHTSA had promulgated the rule, the court denied the consumers’ mandamus petition as moot. This was not the first instance in which NHTSA appeared to time its rule-making in response to this consumer-group lawsuit: The day before the mandamus petition was formally filed, NHTSA finalized its previously announced decision to add rear-view cameras as a recommended feature to its New Car Assessment Program list.
Other NHTSA Action Awaiting Final Rules
While NHTSA has now finalized the rear-visibility-technology rule, NHTSA remains behind schedule in publishing a number of other final rules, including those regarding the sound levels of hybrid and electric vehicles and the presence of electronic data recorders.
Keywords: litigation, products liability, NHTSA, final rule, rear visibility technology, automobile manufacturers, rearview cameras
July 7, 2014
Supreme Court Allows Lanham Act Challenges to Food Labels
In POM Wonderful, POM sued its competitor, Coca-Cola, under the Lanham Act. POM challenged Coca-Cola’s “Pomegranate Blueberry” juice as misleading because the juice only contains 0.3% pomegranate juice and 0.2% blueberry juice. At oral argument, Justice Kennedy joked that he was misled too: “Don't make me feel bad because I thought that this was pomegranate juice.” (To which Justice Scalia responded—“He sometimes doesn’t read closely enough.”)
In its defense, Coca-Cola argued that its juice—which is actually called “Pomegranate Blueberry Flavored Blend of 5 Juices”—fully complies with the Food and Drug Administration’s (FDA’s) detailed regulations on multi-juice blends. According to Coca-Cola, the FDA determined that the terms “flavored” and “blend” would be sufficient to educate consumers. Therefore, in Coca-Cola’s opinion, “Coca-Cola’s product name is authorized by FDA regulations,” and the “FDA has determined that labels such as Coca-Cola’s are not misleading.”
Coca-Cola argued that, once the FDA has determined that a certain type of label is not misleading, private actors cannot second-guess that determination with a Lanham Act claim. The Ninth Circuit agreed with Coca-Cola and held that POM’s Lanham Act claim was precluded: “Out of respect for the statutory and regulatory scheme before us, we decline to allow the FDA’s judgments to be disturbed.”
Supreme Court Decision
On June 12, 2014, the Supreme Court reversed the Ninth Circuit in an opinion written by Justice Kennedy. The Court essentially held that the FDA’s detailed juice regulations are a floor—not a ceiling—on which other requirements may be imposed.
The Court reached its holding using basic statutory interpretation principles, taking care to emphasize that “this is not a preemption case.” Because both the Lanham Act and the Food, Drug, and Cosmetic Act (FDCA) are federal statutes, the “state-federal balance does not frame the inquiry.”
Beginning with the text of the two statutes, the Court noted that Lanham Act claims are not expressly prohibited. This was considered significant because the statutes have coexisted since 1946, with both statutes being amended during that time. In particular, Congress amended the FDCA to add a provision preempting state law, with no mention of federal statutes. “By taking care to mandate express pre-emption of some state laws, Congress if anything indicated it did not intend the FDCA to preclude requirements arising from other sources.”
Turning to statutory structure, the Court determined that the two statutes are constructed in a complementary manner. For example, the Court found that each statute has a complementary scope and purpose: The Lanham Act protects commercial interests against unfair competition, while the FDCA protects public health and safety. Additionally, the Court found that each statute has a complementary enforcement scheme: The Lanham Act is enforced by private lawsuits, while the FDCA is enforced largely by the FDA.
Based on these considerations, the Court concluded that the statutes are capable of being enforced together. According to the Court, Lanham Act challenges do not undermine the FDCA, but instead “take[ ] advantage of synergies among multiple methods of regulation.” Thus, “Congress did not intend the FDCA to preclude Lanham Act suits like POM’s.”
After POM, brand wars are expected to heat up. The food industry should expect a new wave of Lanham Act claims—those targeting food labels that comply with federal regulations but that are still arguably misleading.
Keywords: litigation, products liability, Supreme Court, POM Wonderful, Coca-Cola, Lanham Act, FDA
—Laura A. Sexton, Sidley Austin, LLP, Chicago, IL
June 19, 2014
Standing Committee Approves Proposed Revised Rule 37(e)
The Committee on Rules of Practice and Procedure (Standing Committee) recently approved a revised Rule 37(e), which is intended to establish greater uniformity in the ways federal courts respond to the loss of electronically stored information (ESI), and to relieve pressures on potential litigants to engage in costly over-preservation of ESI for fear of sanctions. The proposed, revised Rule 37(e) provides the following:
(e) Failure to Preserve Electronically Stored Information. If electronically stored information that should have been preserved in the anticipation or conduct of litigation is lost because a party failed to take reasonable steps to preserve it, and it cannot be restored or replaced through additional discovery, the court may:
(1) upon finding prejudice to another party from loss of the information, order measures no greater than necessary to cure the prejudice; or
(2) only upon finding that the party acted with the intent to deprive another party of the information’s use in the litigation:
(A) presume that the lost information was unfavorable to the party;
(B) instruct the jury that it may or must presume the information was unfavorable to the party; or
(C) dismiss the action or enter a default judgment.
Sanctions are not the primary focus of the proposed revision. Rather, the revision is layered with an initial focus on what occurred (or did not occur) and what can be done to restore lost ESI. That is not to say that sanctions are not part of revision. They certainly are, as discussed below.
The first step is to determine whether reasonable steps were taken to preserve lost ESI. As the Advisory Committee on Civil Rules (Advisory Committee) noted in its report to the Standing Committee, the proposed revision does not require perfection but rather reasonable steps in preserving ESI, consistent with other civil rules on related subjects, such as Rule 502(b)(2) (addressing inadvertent disclosure of privileged or protected material). Determining the reasonableness of the steps taken includes consideration of resources and the proportionality of the efforts to preserve, and a party’s litigation sophistication. If ESI is lost because a party failed to take reasonable steps to preserve it, then the focus shifts to whether the lost ESI can be restored through additional discovery.
If the lost ESI cannot be restored through additional discovery, and if the court finds that a party is prejudiced by the loss, then pursuant to subsection (e)(1), the court may order measures “no greater than necessary to cure the prejudice.” There is a limit to what the court may order, however. For example, even if a party is prejudiced by the loss of ESI, the court may not impose the severe measures set forth in subsection (e)(2) unless it also finds that the party that lost it “acted with the intent to deprive another party of the information’s use in the litigation.”
In such an extreme case, the court then has three additional options under subsection (e)(2), including presuming that the lost information was unfavorable to the party, instructing the jury accordingly, or dismissing the action or entering a default judgment. Subsection (e)(2) eliminates the circuit split on when a court may give an adverse-inference instruction for the loss of ESI. Some circuits permit adverse-inference instructions on a showing of negligence or gross negligence, while others require a showing of bad faith. Subsection (e)(2) of the proposed, revised rule clearly defines what is required, which is more akin to bad faith (i.e., “intent to deprive another party of the information’s use in the litigation”). It also bears emphasis that the Committee Note to the proposed, revised rule specifically states that the new rule would “not affect the validity of an independent tort claim for spoliation if state law applies in a case and authorizes the claim.”
The Advisory Committee reasoned that a bad-faith standard is more appropriate, in part because negligently lost information may have been favorable or unfavorable to the party that lost it and, as a result, requiring an adverse inference in that circumstance could tip the evidentiary balance in ways that the lost evidence never would have. In addition, the Advisory Committee reasoned that permitting an adverse inference for negligence creates powerful incentives to over-preserve, often at great cost, the avoidance of which is one of the goals for revising the rule.
Following its approval by the Standing Committee, the revised Rule 37(e) will be considered by the Judicial Conference at its meeting in September 2014.
Keywords: products liability, litigation, Federal Rule of Civil Procedure 37(e), Standing Committee, discovery, sanctions, ESI
May 19, 2014
Dolin v. SmithKline: Harbinger or Outlier?
An Illinois federal judge recently held that a brand-name manufacturer can face negligence claims based on the content of the warning on the generic manufacturer’s label. Dolin v. SmithKline Beecham Corp., No. 12 C 6403, 2014 U.S. Dist. LEXIS 26219 (N.D. Ill. Feb. 28, 2014). This decision marks a break from other decisions holding that brand-name manufacturers cannot be held liable for injuries caused by generic versions of their drugs. The possible ramifications of this decision, if any, could expand brand-name manufacturers’ liability for such claims and potentially change the legal landscape in similar cases.
In 2010 a Chicago attorney committed suicide six days after he began taking a generic version of Paxil, an antidepressant drug. His widow brought a wrongful death action, grounded in negligence and product liability, against the name-brand owner and manufacturer, GlaxoSmithKline (GSK), and the generic manufacturer, Mylan Inc. Plaintiff alleged that GSK knew of an increased risk of suicidal behavior in adults but failed to warn doctors or patients of the risks.
Mylan moved to dismiss arguing that it cannot be held liable because it did not control the drug’s warning label. The judge granted Mylan’s motion to dismiss, citing federal preemption and Mutual Pharmaceutical Co., Inc. v. Bartlett, 133 S.Ct. 2466 (2013).
GSK moved for summary judgment arguing that it cannot be held liable for injuries caused by a generic drug it did not make. The court rejected that argument. In his decision, U.S. District Judge James Zagel reasoned that the plaintiff’s claims were grounded in common-law negligence, not product liability, and therefore the issue was whether the injury was foreseeable.
Judge Zagel held that the plaintiff had alleged facts that GSK was negligent in connection with the warning label sufficient to survive a motion for summary judgment. Judge Zagel found that “under the regulatory scheme created by the Hatch-Waxman Act, whether a consumer ingests the name-brand or generic version of a given drug is immaterial as to the likelihood that negligence in the design or warning label of that drug will cause injury.” In holding that other rulings were distinguishable, Judge Zagel identified the issue as “whether GSK, though not the pill’s manufacturer, may nevertheless be held liable for tortious conduct that was extrinsic to the manufacturing process and that contributed to Plaintiff’s injury.” In this case, the court held that GSK could be held liable.
The majority of prior decisions have reached the opposite conclusion. Of importance here is the fact that Illinois does not statutorily define products liability claims to include all actions brought as a result of the design or warning label of a product. The scope of the potential persuasive impact of this decision and whether it will be limited to jurisdictions that allow negligence claims against manufacturers remains to be seen.
Keywords: litigation, products liability, generic, products liability, brand-name manufacturer
—Collette A. Brown, Esq., Neal, Gerber & Eisenberg, LLP, Chicago, IL
April 23, 2014
FDA Proposes Equal Rights to Brand and Generic Manufacturers to Change Product Labeling
The FDA’s proposed changes to labeling regulations would permit both new drug application (NDA) and abbreviated new drug application (ANDA) holders to unilaterally make safety-related changes to approved product labeling, currently permitted only to NDA holders. Supplemental Applications Proposing Labeling Changes for Approved Drugs and Biological Products, 78 Fed. Reg. 67985 (proposed Nov. 13, 2013). The unilateral change process entails submitting a “changes being effected” (CBE-0) supplement, which does not require FDA prior approval. By making the CBE-0 process equally available to NDA and ANDA holders, the proposed rule would endow generic manufacturers with the responsibility to unilaterally update product labeling based on newly acquired data.
Disparate Reception of Proposal
Thirty state attorneys generals have expressed support for the proposal in a brief letter to the FDA, asserting that the rule would increase safety, save taxpayer money, and reinstate consumers’ ability to bring state law tort suits against generic manufacturers. Letter to J. Weiner, FDA (Mar. 12, 2014). “Consumers are currently unable to hold the wrongdoer financially accountable when harmed by a generic drug.” Id.
On the other side of the spectrum, the American Pharmacists Association, Cardinal Health, National Association of Chain Drug Stores and others have raised concerns about the proposal, as it would increase generic drug costs by necessitating generic manufacturers to reflect substantial new tort liability cost in their pricing, which would end up costing the government more money. Letter to M. Hamburg, FDA (Mar. 6, 2014).
Adding to the debate, there has been a congressional inquiry into the FDA’s potential favoritism of the plaintiffs’ bar based on newly surfaced allegations that the FDA met with the American Association for Justice during development of the proposed rule, but not with the defense side. Paul Bedard, “Trial lawyers Helped FDA with Rule Opening Generic Drug Firms to Lawsuits,” Washington Examiner (Mar. 27, 2014).
Effect on Federal Preemption
The proposed rule, if enacted, will level the playing field for personal injury product liability plaintiffs against brand and generic manufacturers in the wake of the 2011 Supreme Court decision Pliva, Inc. v. Mensing, which shielded generic manufacturers from liability for state tort claims based on impossibility federal preemption. 131 S. Ct. 2567 (2011). Mensing held it was impossible for a generic manufacturer to comply with both state and federal laws based on the illegality for the generic, as opposed to the brand, manufacturer to unilaterally modify a drug’s label. Any attempt to comply with a state law duty to warn would violate the federal requirement of sameness of the generic label to the brand counterpart.
While the proposed rule is motivated by a concern for patient safety, the apparent impetus for the proposal is evident from the agency’s discussion of Mensing in the proposed rule: “[t]he Court deferred to FDA’s interpretation of its CBE-0 supplement and labeling regulations for ANDAs”; “an individual can bring a product liability action for failure to warn against an NDA holder, but generally not an ANDA holder, and thus access to the courts is dependent on whether an individual is dispensed a brand name or generic drug.” Supplemental Applications, 78 Fed. Reg. 67985 (proposed Nov. 13, 2013).
The proposed rule would allow a temporary, but material difference between the labeling for ANDA holders and NDA. The “sameness” requirement was built into the 1984 Hatch-Waxman Act as part of a compromise between competing interests of innovative and generic manufacturers. The act prohibits the FDA from requiring more than bioavailability studies to gain generic approval, and provides that the active ingredient, route of administration, dosage form, strength and labeling must be the exact same as the pioneer drug product.
The FDA proposes new and unprecedented obligations on generic companies, beyond their traditional role to comply with good manufacturing practices in creating bioequivalent products, and could potentially create a bacchanal for plaintiffs’ lawyers. If enacted, the proposed rule might undermine the delicate balance of the Hatch-Waxman Act and its goal to increase availability and affordability of generic formulations by impinging on the statutorily created “sameness” safe harbor for generic-drug manufacturers.
In the recent statement before the House of Representatives Committee on Energy and Commerce, the FDA director of the Center for Drug Evaluation and Research acknowledged some concerns with the proposal, and assured that the submitted comments will be carefully considered and might be reflected in the final rule. Janet Woodcock, CDER Director, Examining Concerns Regarding FDA’s Proposed Changes to Generic Drug Labeling (April 1, 2014).
Keywords: litigation, products liability, proposed rule, labeling, federal preemption, generic drug manufacturers, labeling regulations, sameness, changes being effected, CBE-0, Mensing, Hatch-Waxman Act
April 10, 2014
CPSC Promulgates New Mandatory Standards for Carriages and Strollers
On March 4, 2014, the Consumer Product Safety Commission (CPSC) voted unanimously in favor of a new mandatory federal standard aimed at improving the safety of carriages and strollers. 16 C.F.R. § 1112.15; 16 C.F.R. § 1227. The effective date for the new standard is 18 months after the final version of the rule is published in the Federal Register.
Strollers are defined as wheeled vehicles used to transport children, typically from infancy until 36 months old. In a stroller, a child is transported sitting up or in a semi-reclined position by a person pushing a handle. In contrast, a carriage is a wheeled vehicle made to transport an infant who is typically lying down on his or her back. Carriages and strollers that fall within the scope of the new mandatory standard include two and three-dimensional strollers that fold in, car seats and other travel systems, as well as tandem, side-by-side, multi-occupant, and jogging strollers.
The new standard incorporates by reference the most recent voluntary standard—ASTM F833-12b, the Standard Consumer Safety Performance Specification for Carriages and Strollers—developed by ASTM (known until 2001 as the American Society for Testing and Materials). However, this new standard also includes additional requirements aimed at addressing the entrapment hazards associated with multi-positional and adjustable grab bars.
The CPSC has received approximately 1,300 reports related to carriages and strollers, four of which involved a fatality and an additional 359 which resulted in injuries. The new standard addresses the hazards related to such carriages and strollers including brake failures, restraint issues, structural integrity, stability, broken and detaching wheels, hinge issues, and problems with locking mechanisms. The standard seeks to reduce injuries and fatalities associated with the use of these products including amputated fingers and arms that have occurred when the appendage of a child or infant has become trapped in a hinge.
This newly approved standard is part of a larger effort to promulgate rules for durable infant and toddler products. The Danny Keysar Child Product Safety Notification Act (Section 104(b) of the Consumer Product Safety Improvement Act of 2008 (CPSIA)) requires the CPSC to issue consumer product safety standards for these types of products. One of the concerns driving the passage of the Keysar Act was that many children died after their parents unknowingly continued to use a nursery product identified as unsafe. In one such tragic instance, a 16-month-old child, Danny Keysar, died from strangulation when the portable crib in which he was napping collapsed. The crib had been recalled five years earlier due to the defect that led to its collapse, but Danny’s parents and caregiver were unaware of the recall. Therefore, the act comprehensively seeks to increase the effectiveness and awareness of recalls of durable nursery products in an effort to prevent injury and death.
Over the five years since the passage of the CPSIA, the CPSC has approved federal safety standards for a wide variety of children’s products including cribs, walkers, play yards, bath seats, portable bed rails, infant swings, toddler beds, bassinets, cradles, and infant carriers.
Keywords: litigation, products liability, child safety, regulations, CSPC, car seats, strollers
April 7, 2014
Functional Foods: Science is Ahead of the Law
Science continues to develop ways to define, refine, improve, and fortify conventional foods with naturally occurring nutrients to occupy niche marketing campaigns, health‑based consumption, and individual dietary supplementation efforts. See, e.g., Uros Miljic et. al., Acceptability of Wine Produced with an Increased Content of Grape Seeds and Stems as a Functional Food, J. Inst. Brewing, Jan. 2014 (increases in phenolic and anti‑oxidant compounds); Joseph Thomas Ryan, Nutraceutical and Functional Food Bioactive Peptides in Beef (2013) (unpublished Ph.D. thesis, University College Cork) (on file with the University College Cork library) (anti‑oxidant, antimicrobial and ACE inhibiting compounds found in beef muscle fibers). The law, though, continues to struggle with the concept that foods can have naturally occurring benefits and the methods used to convey those benefits through advertising and labeling.
All foods provide some functional benefit simply through the delivery of carbohydrates, fats, and proteins. The Federal Food, Drug, and Cosmetic Act does not provide a statutory definition of “functional foods.” However, the Academy of Nutrition and Dietetics defines a “functional food” as “food that provides additional health benefits that may reduce disease risk and/or promote good health.” Sharon Denny, “What are Functional Foods?” Academy of Nutrition and Dietetics website, April 2013. Regulatory proposals have been floated during the past three U.S. administrations, with no crystallization of how marketing and trade regulations address the evolution of new conventional food products. U.S. Gov’t Accountability Office, GAO/RCED‑00‑156, Food Safety: Improvements Needed in Overseeing the Safety of Dietary Supplements and “Functional Foods” at 18, 20 (2000); Sharon Ross, “Functional foods: The Food and Drug Administration Perspective,” Am. J. Clinical Nutrition 2000; 71(suppl): 1735S–8S; Public Hearing, Conventional Foods Being Marketed as “Functional Foods,” 71 Fed. Reg. 62400‑01 (proposed Oct. 25, 2006).
In 2010, FTC Commissioner Brill addressed functional food claims at the Summer NAAG Conference, explaining,
[T]hey are the kind of claims that a manufacturer makes when it wants to say “Do not only eat this food because it provides you with the nutrition that you need to lead a normal life, but because if you eat this product it will actually do something to improve your life—give you better reasoning ability, make you more attentive,” things like that. These are the kinds of claims that we are going to look at very closely and, I would add, that you all should look at very closely.
Julie Brill, Commissioner, Fed. Trade Comm’n, Remarks at the Panel on Consumer Protection: Update On State and Federal Efforts (June 15, 2010).
As late as January 2013, the FDA left open the functional foods questions in its most recent guidance to the food industry for labeling. Fed. Food & Drug Admin., Guidance for the Industry: A Food Labeling Guide. The FDA did not address functional food claims in the guidance, except to reiterate past criteria regarding “structure/function” claims, which many consider more applicable to dietary supplements, rather than to conventional foods. Id. at issue S5.
Recent discussions may focus regulators and clarify existing regulations, if the discussion of functional foods is incorporated into the discussion of new food-labeling regulations. Food Labeling: Revision of the Nutrition and Supplement Facts Labels, 79 Fed. Reg. 11880‑01 (proposed Mar. 3, 2014). It is unclear, though, whether these proposed regulations will bring closure to marketing and advertising issues discussed in recent FTC and litigation matters involving beverages, juices, and yogurts, for example.
Scientists will continue to develop more nutritious or more targeted conventional foods using parts of plants or animals not previously used in traditional ways or through extractions or concentrations of naturally occurring compounds. Regulatory and litigation counsel should be aware of past efforts to specifically address functional foods as an area for marketing, advertising, and labeling and prepare for and spur the development of new rules and regulations to clarify the use of these foods.
Keywords: litigation, products liability, functional foods, FDCA, FDA, food labeling
—Daniel J. Gerber, Rumberger, Kirk & Caldwell, Orlando, FL
January 22, 2014
FDA Quickly Issues Three Draft Guidances for Compounding Pharmacies
On November 27, 2013, President Barack Obama signed into law the Drug Quality and Security Act as a way of strengthening the current pharmaceutical supply chain and more rigorously regulating the compounding pharmacy sector. Less than one week later, the U.S. Food and Drug Administration (FDA) quickly issued three new draft guidances on human drug compounding. Each guidance addresses a specific issue relative to compounding pharmacies in the wake of last year’s New England Compounding Center fungal meningitis outbreak. The issues include reporting procedures, registration requirements, and conditions under the law that would determine when a compounded drug is exempt from certain other provisions and enforcement actions available to the FDA.
The first guidance, Interim Product Reporting for Human Drug Compounding Outsourcing Facilities Under Section 503B of the Federal Food, Drug, and Cosmetic Act, sets forth a timeline within which outsourcing facilities must report drugs compounded within the prior six months: “Upon initially registering as an outsourcing facility, and twice each year (once in June and once in December), an outsourcer that registers with FDA must submit to the Agency a report identifying the drugs compounded by the facility during the previous 6-month period.” Information to be reported includes the active ingredient and strength of same per unit, the source of the active ingredient, the National Drug Code (NDC) number of the active ingredient source, the dosage form and route of administration, the package description, the number of individual units produced, and the final product’s assigned NDC number. Following the first guidance, this second guidance further encourages companies that intend to compound as outsourcing facilities to immediately register with the FDA. In terms of reporting, because the FDA is not currently equipped to handle electronic reporting from outsourcing facilities, reports should be submitted in an Excel spreadsheet as an email attachment; a sample spreadsheet is included with the guidance.
The second guidance, Registration for Human Drug Compounding Outsourcing Facilities Under Section 503B of the Federal Food, Drug, and Cosmetic Act, discusses procedures for any facility that compounds sterile drugs to voluntarily register with the FDA as an “outsourcing facility.” Although a facility is not considered registered until all fees have been paid, no registration fees will be charged until October 1, 2014. Registered outsourcing facilities will also be subject to inspection by the FDA on a risk-based schedule. Likewise, the FDA will begin encouraging hospitals and other health-care providers to purchase compounded products from registered facilities. If compounders register with the FDA as outsourcers, hospitals and other health-care providers will be able to provide their patients with drugs that were compounded in facilities that are subject to FDA oversight and federal requirements for current good manufacturing practice.
The third guidance, Pharmacy Compounding of Human Drug Products Under Section 503A of the Federal Food, Drug, and Cosmetic Act, does not apply to registered outsourcing facilities, and clarifies that state boards of pharmacy are expected to continue their oversight and regulation of compounding pharmacies that do not register as outsourcing facilities. The guidance also sets out expectations for compounded drugs. For example, “[t]he drug product must not consist in whole or in part of any filthy, putrid, or decomposed substance, or be prepared, packed, or held under insanitary conditions whereby it may have been contaminated or rendered injurious to health.” This guidance also clarifies that, if a compounded drug product does not meet the conditions set forth in Section 503A, the FDA has a number of available options to use in enforcing these standards.
Each guidance instructs that comments and suggestions should be submitted to the FDA within 60 days of the December 4, 2013, notice announcing the availability of same as published in the Federal Register. Both compounding pharmacies and the providers that rely on them, as well as their respective counsel, should continue to be on alert as comments are gathered, guidances are finalized, and additional regulations are issued.
Keywords: litigation, products liability, pharmaceutical, compounding, FDA
—Sarah E. Lovequist, Litigation Management, Inc., Cleveland, OH
January 9, 2014
To Be Natural, or Not to Be . . .
Throughout the last year a number of proposed class actions have been filed against various food manufacturers of well-known brands, including Horizon Milk, Frito-Lay, Häagen-Dazs, General Mills, Campbell Soup, Pepperidge Farm, Mission Tortilla Chips, ConAgra Foods, J.M. Smucker, and Kashi. Although the specific allegations vary from case to case, essentially the plaintiffs claim that the manufacturers misled consumers by labeling their products as “all natural” or “100% natural” when the products were allegedly made with ingredients grown from genetically modified organisms (GMOs).
In the past, the FDA has not formally provided guidance regarding the meaning of “natural,” but its policy has been to apply the term to products where “nothing artificial or synthetic (including all color additives regardless of source) has been included in, or has been added to, a food that would not normally be expected to be in the food.” “Food Labeling: Nutrient Content Claims, General Principles, Petitions, Definition of Terms; Definitions of Nutrient Content Claims for the Fat, Fatty Acid, and Cholesterol Content of Food,” 58 Fed. Reg. 2302, 2407 (Jan. 6, 1993). The FDA also had not provided any specific guidance to manufacturers to answer the question of whether food products containing ingredients produced using bioengineered seed may be labeled “natural,” “all natural,” or “100% natural.” Thus, based on the definition and lack of other formal guidance, many manufacturers regularly use the term “natural” to label their products. This labeling is increasingly coming under attack, with varying results.
For example, courts in California and Colorado referred the issue to the FDA asking for guidance. See Cox v. Gruma Corp., No. 12-cv-6502 YGR, 2013 WL 3828800 (N.D. Cal. July 11, 2013); Barnes v. Campbell Soup Co., No. C 12-05185 JSW, 2013 WL 5530017 (N.D. Cal. July 25, 2013); Van Atta v. Gen. Mills, Inc., Civil Action No. 12-cv-02815-MSK-MJW (D. Colo. July 18, 2013). But earlier this month, the FDA declined to address the issue, citing its limited resources and higher-priority projects. “FDA ‘respectfully declines’ judges’ plea for it to determine if GMOs belong in all-natural products.” E. Watson, (Jan. 8, 2014). Other courts have dismissed claims of the proposed class actions or transferred and consolidated them instead of referring the issue to the FDA – see, e.g., Rojas v. Gen. Mills, Inc.,No. 12-cv-05099, 2013 WL 5568389 (N.D. Cal. Oct. 9, 2013); Shake v. Frito-Lay N. Am., Inc., No. 12-cv-00408 (E.D.N.Y. Aug. 29, 2013), while others have allowed the cases to proceed – see, e.g., Krzykwa v. Campbell Soup Co., Case No. 12-62058, 2013 WL 2319330 (S.D. Fla. May 28, 2013); In re Horizon Organic Milk Plus DHA Omega-3 Marketing and Sales Practice Litig., No. 12-md-02324-JAL, 2013 WL 3830124, at *28 (S.D. Fla. July 24, 2013).
One of the most recent cases is a case filed against Snyder’s Lance, Inc. (Snyder) in a Florida federal court. Barron et al. v. Snyder’s-Lance Inc., No. 0:13-cv-62496 (S.D. Fla. filed Nov. 13, 2013). The proposed class action claims that Snyder deceptively and misleadingly labeled a considerable number of its pretzel and chip snacks as “all natural” even though they allegedly contain GMOs. Plaintiffs, who consist of residents from several states, argue that Snyder consistently and systematically marketed several snacks as “all natural” merely to distinguish certain products to appeal to its health conscious consumers while charging a premium price.
According to the complaint, many of Snyder’s pretzel and chip snacks—including those from the Snyder’s of Hanover, Cape Cod, EatSmart and Padrinos line of products—contain unnatural ingredients, including genetically modified canola oil and corn, as well as synthetic ingredients that mislead and deceive reasonable consumers by portraying products containing non-natural ingredients as ‘All Natural,’ ‘natural’ and/or ‘naturals.’ Id. at pg. 3-4, 6. The consumers allege claims under Florida’s deceptive and unfair trade practices act, as well as breach of express warranty and intentional misrepresentation, among other claims, and seek declaratory and injunctive relief and unspecified damages. Id. at pgs. 43-46.
Cases involving the inclusion of GMOs in food products are on the rise. The Snyder litigation is just another in a long line “all natural” lawsuits that have been filed in the last year. Now that the FDA has officially declined to address the issue, manufacturers can continue to expect “all natural” litigation to gain steam, and they should take care to ensure the accuracy of their labeling and their compliance with the FDA regulations.
Keywords: litigation, products liability, FDA, class actions, natural, GMOs, genetically modified organisms, Snyder's-Lance
The Perils of Queso: Pennsylvania Federal Court Addresses Hot Cheese Claims
More than two decades after Stella Liebeck sued McDonald’s in the infamous hot coffee case, hot food and beverage cases continue to be litigated in state and federal courts. However, as recently noted by the U.S. District Court for the Eastern District of Pennsylvania, the difference between hot food and hot beverages may dictate varying results on summary judgment. See Freeman v. Ruby Tuesday, Inc., No. 12-2558, 2013 WL 4082235 (E.D. Pa. Aug. 12, 2013).
In that case, the plaintiff ordered a serving of hot beef queso dip, which the court described as “a hot appetizer which he knew was served hot.” The complaint—originally filed in state court before removal and available on PACER—described it as “an appetizer, which consisted of chips along with a dip . . . presented to plaintiff in a very hot and dangerous condition.” As he began to eat, the plaintiff allegedly burned his mouth and arm and sustained additional injuries when the purported trauma caused him to fall backwards. In the complaint, he claimed to suffer “serious and permanent orthopedic and neurological injuries.”
Judge Rufe was called upon to review the defendant restaurant’s motion to exclude the plaintiff’s purported food safety specialist and accompanying motion for summary judgment.
At its essence, the case revolved around how the restaurant prepared its queso. In fact, the plaintiff argued that its temperature was the “quintessential issue of fact to be decided by the jury.” According to the court, the beef and queso were prepared separately (in a microwave) and then joined together as one after they individually reached 165 degrees Fahrenheit (and the parties apparently agreed that it was served at or near that temperature). The plaintiff’s expert testified that the restaurant created a dangerous condition by failing to serve the “excessively hot” queso at a cooler 135 degrees. (It is interesting that the court noted that the restaurant formerly served its hot appetizers at 155 degrees but raised that temperature by 10 degrees after certain customers complained.)
Finding the expert’s opinion unreliable and without a “discernible methodological basis,” the court cited his failure to distinguish the different properties of water and cheese:
[D]ifferent substances have different melting points, different boiling points, and different thermal properties. [The expert] provides no data regarding the temperature and length of exposure to melted cheese which will cause burns to the skin. There is no indication that [the expert] has the expertise to discuss the relationship between the thermal properties of water and beef queso dip, and his report does not include such a discussion.
Further, the expert apparently misinterpreted the Pennsylvania Food Code as requiring that the queso be served to the plaintiff at a temperature of 135 degrees. However, as the court observed, state law required 135 degrees only as a “minimum holding temperature to prevent microbe growth in foods served hot.” (Indeed, the court went on to suggest that holding temperatures exceeding 140 degrees are preferred for this purpose.). Thus, it was not correct for the expert to opine that a failure to serve it at 135 degrees created a dangerous condition. After noting the absence of industry standards cited by the expert and characterizing his opinions on the restaurant’s training duties as “essentially a lay-person’s opinion,” the court excluded his expert testimony outright.
In its motion for summary judgment, the restaurant argued that the negligence claim could not succeed because “the danger was obvious; an invitee must expect a hot appetizer will be served hot.”It is interesting that the complaint alleged that the hot appetizer was “apparent, open and visible to the defendants, and existed for a sufficient length of time . . . for the defendants to have had actual and constructive notice thereof.” However, as the court noted, most of the cases cited by the restaurant involved hot coffee or tea and the general proposition that a warning may be unnecessary when a hot item is anticipated. Finding the beverage cases distinguishable, the court noted that “because the beef queso dip is not a hot beverage, whether the danger of spilled beef queso dip would have been similarly open and obvious to a reasonable person is a question of fact for the jury.” (They apparently should have cited some hot cheese cases.) Ultimately, the court denied the summary judgment motion and observed that “if the jury finds that the beef queso dip posed an unexpected and not readily-discovered danger to Plaintiff, it will need to determine whether serving beef queso at an unexpectedly hot temperature, without a warning, was unreasonable.” PACER records indicate the case resolved two months later following a court-ordered settlement conference.
Keywords: litigation, products liability, Pennsylvania Food Code, injury, hot beverage
—James M. Dedman IV, Gallivan, White & Boyd, P.A., Charlotte, NC
Overview of New FDA Guidance on Regulation of Mobile Medical Apps
On September 25, 2013, the Food and Drug Administration (FDA) issued its final guidance on mobile medical applications, or “apps,” under the Federal Food, Drug, and Cosmetic Act (FD&C Act): Mobile Medical Applications: Guidance for Industry and Food and Drug Administration Staff. The guidance clarifies which apps—defined as any software that can be executed on a mobile platform—will be regulated by the FDA and who will be required to comply with the regulations. The FDA intends to focus its oversight on apps whose functionality poses a risk to patient safety if the app malfunctions.
Which Mobile Apps Are Regulated
The FDA will regulate mobile medical apps that meet the definition of a device under section 201(h) of the FDCA and are intended to
1. be used as an accessory to a regulated medical device, or
2. transform a mobile platform into a regulated medical device.
Whether the app is a “device” under section 201(h) is determined by its intended use. If the intended use is for the diagnosis, cure, treatment, or prevention of disease, the app is a “device.” Examples are apps that
• display, store, analyze, convert, or transmit patient-specific data;
• transform the mobile device into a regulated medical device;
• perform patient-specific analysis, diagnosis, or treatment recommendations; or
• control the operation of a medical device.
Certain apps may meet the definition of a device under the FDCA, but because they pose a lower risk to the public, the FDA intends to exercise enforcement discretion. This means the FDA will not enforce requirements under the act for this category of apps. Examples are apps that
• help patients self-manage their disease through coaching without providing specific treatment,
• provide patients with tools to organize and track their health information,
• help patients document or communicate potential medical conditions to health care providers,
• provide easy access to information specifically related to patients’ health conditions or treatments,
• automate simple tasks for health care providers, or
• enable patients or providers to access health record systems, such as PHR or HER.
Apps that have a health or medical focus but do not meet the definition of a device under section 201(h) of the FDCA will not be regulated by the FDA. Examples are apps that
• provide access to electronic copies of medical textbooks or other reference materials,
• are intended for health care providers to use as educational tools for medical training,
• are intended for patient education,
• automate general office operations in a health care setting, or
• provide electronic access to medical device labeling or instructions.
The majority of the apps on the market will fit into the latter two categories and will not be the focus of the FDA’s regulation.
Who Is Responsible for Complying with the Regulations
The FDA requires compliance by a “mobile medical app manufacturer,” defined as any person or entity that manufactures mobile medical apps in accordance with the definitions of “manufacturer” in 21 C.F.R. parts 803, 806, 807, and 820; in other words, any person or entity that initiates specifications, designs, labels, or creates a software system or application for a regulated medical device. This also includes a person or entity that creates an app using existing off-the-shelf software and markets the product to perform as a mobile medical app.
The apps that are the focus of the FDA’s oversight will be subject to regulations consistent with the FDA’s existing approach for medical devices. The FDA will require the manufacturer to satisfy the regulatory requirements applicable to the specific device classification governing the app: Class I (low risk), Class II, or Class III (high risk). The guidance provides a brief description of the regulations:
Class I: General Controls, including:
• Establishment registration and Medical Device listing.
• Quality System regulation.
• Labeling requirements.
• Medical Device Reporting. Manufacturers must submit reports to the FDA whenever they become aware of information that reasonably suggests that a device they market may have malfunctioned or caused or contributed to a death or serious injury.
• Premarket notification. Manufacturers must identify the current classification covering their mobile medical app and submit the appropriate premarket materials to the FDA.
• Reporting corrections and removals. Manufacturers are required to promptly report to the FDA certain actions concerning device corrections and removals. Specifically, manufacturers must report any corrections made to an app to reduce a health risk posed by the app or to remedy a violation of the FDCA.
• Investigational Device Exemption (IDE) for clinical studies of investigational devices. This exemption allows an investigational device to be used in a clinical study to collect safety and effectiveness data required to support a Premarket Approval application or a Premarket Notification submission to the FDA.
Class II: General Controls (as described for Class I), Special Controls, and (for most Class II devices) Premarket Notification
Class III: General Controls (as described for Class I) and Premarket Approval
If an app is not addressed in FDA guidance, manufacturers may contact the FDA to obtain more information on classification. (See the FDA’s Device Advice: Regulatory Comprehensive Assistance webpage for an overview of the process.) The FDA will generally issue a confidential response to an inquiry by a manufacturer within 60 days of receipt of the request.
Keywords: litigation, products liability, mobile medical applications, apps, regulated medical device, mobile platform
Newest Food Safety Rules Approach Deadline
In June, a federal judge in California ordered the U.S. Food and Drug Administration (FDA) to issue proposed rules for the Food Safety Modernization Act (FSMA) by November 30, 2013. In July, the agency requested an extension for two of five rules that must be proposed by the November deadline. One of the primary areas at issue is known as the “intentional adulteration” or “anti-terrorism” rule related to contamination of food primarily from foreign markets. The agency requested an additional two years to develop this rule, indicating it had not previously regulated in this area. In addition, the agency sought a shorter extension for a proposed rule related to the sanitary transportation of food. The FDA argued that the current November deadline would result in proposed rules that were not fully evaluated and that may lead to delays in ultimate implementation as more areas of debate or concern would arise from hastily prepared rules. In fact, certain industry organizations, such as those representing produce groups at Fresh Summit 2013, recently called for a second comment period following the November deadline. These groups are citing the need for further industry input prior to publication of proposed rules.
In August, the judge declined to grant any extension for the adulteration rule, noting that the two years requested was too long. The judge also indicated the FDA’s dispute is with Congress, which she believed had established a “closed-end process” for implementation of FSMA rules. The judge noted she would not grant delay after delay, continually lengthening the rulemaking process. The judge did, however, grant a 60-day extension of the agency’s deadline to propose a rule related to sanitary transportation.
In September, the FDA appealed the original June order to the Ninth Circuit Court of Appeals, and in a recent motion to the Ninth Circuit for a stay, the FDA noted that the federal government shutdown has also affected its ability to meet the November deadline. The agency indicated that in addition to the work yet to be done to prepare the proposed rules, the agency must now make up for 16 days of lost time. This lost time includes catching up on routine inspections of food and drug facilities that were suspended during the shutdown. The agency is even claiming lost time in the days leading up to the shutdown as agencies prepared for the closing of the federal government. On November 4, the Ninth Circuit denied the stay requested by the agency but granted a 16-day extension of the November 30 deadline due to the October federal government shutdown.
Keywords: litigation, products liability, Food Safety Modernization Act, FDA
—Joseph S. Kiefer, Snell & Wilmer L.L.P., Phoenix, AZ
The Future of the Toxic Substances Control Act Still in Limbo
Currently, there are two Senate bills in committee which would modernize the Toxic Substances Control Act (TSCA). The Safe Chemicals Act of 2013 (Senate Bill 696) was introduced in April 2013 and referred to the Senate Environment and Public Works Committee. In May 2013, Senate Bill 1009, also known as the Chemical Safety Improvement Act, was introduced to the same committee. While the Chemical Safety Improvement Act has received bipartisan support within the committee, the Safe Chemicals Act has not. As a result, this article will focus on the Chemical Safety Improvement Act.
While most agree that TSCA needs to be updated (which has not occurred since its passage in 1976), the Chemical Safety Improvement Act has received scrutiny, and its support is not universal. Not surprisingly, the split is largely between industry and environmental groups. A full Senate committee hearing was held on July 21, 2013, and the archived webcast can be found on the committee’s webpage. The fate of the bill is still undetermined.
If the Chemical Safety Improvement Act is passed, it would have major implications for TSCA compliance, regulation, and related litigation. It would establish a new safety standard of “no unreasonable risk of harm to human health or the environment will result from exposure to a chemical substance” under “intended conditions of use.” The act would also empower the EPA to require that manufactures provide more information on risk assessment, and it would also require the EPA to categorize all chemicals in commerce to determine the priority level for risk assessment or if more information is needed. This prioritization would be used to determine whether the chemical meets the safety standard and whether further risk management is required. The act would also implicate preemption issues, and in many instances, preempt state law.
What remains to be seen is whether the current bipartisan support can reconcile the division between industry and environmental groups. Moreover, the current contentious climate of Congress might have implications for the passage of the reform. For those representing clients involved in the chemical industry or involved in chemical-related litigation, changes in TSCA could have significant consequences for their clients. The reform of TSCA will remain an important issue to watch.
A thorough review of the changes and implications of both the Safe Chemicals Act and the Chemical Safety Improvement Act can be found here.
Keywords: litigation, products liability, TSCA, Toxic Substances Control Act, S.1009, Chemical Safety Improvement Act
—Meg Coppley, Spilman Thomas & Battle, PLLC, Winston-Salem, NC
October 29, 2013
CPSC Proposes New Rules for Voluntary Recalls
Consumer product companies and their counsel must pay close attention to the U.S. Consumer Product Safety Commission’s (CPSC) recently proposed regulations concerning voluntary recalls. Although these proposed rules are not yet final, it is vital to understand them now because they reflect many of CPSC’s current internal practices and expectations for companies implementing a voluntary recall.
Generally, the new rules are intended to:
1) Formally put companies on notice that the agency may seek to mandate the implementation of an internal compliance program as part of a voluntary recall; and
2) Codify CPSC’s principles and guidelines for the content and form of voluntary recall notifications informing consumers of a recall.
The CPSC recently imposed internal compliance programs as elements of civil penalty settlements with Kolcraft, Williams Sonoma, and Ross Stores. The core requirements contained in each civil penalty agreement included:
• Written standards and policies, including a policy on recordkeeping;
• A mechanism for confidential employee reporting of compliance-related concerns;
• Training programs for applicable CPSC regulations;
• Management oversight of compliance and appropriate personnel responsibility for implementing compliance.
Through the addition of this new subsection to 16 CFR § 1115, the CPSC is now proposing to shift the imposition and announcement of these compliance programs to the voluntary recall itself in certain circumstances. This would mean that some companies working with CPSC on the parameters of a voluntary recall might have to simultaneously negotiate the parameters of a compliance program and the description of such a program in the recall announcement. The proposed rule states the circumstances in which the agency may propose these kinds of programs would include:
• Multiple previous recalls and/or violations of CPSC requirements over a relatively short period of time;
• Failure to timely report substantial product hazards on previous occasions; and
• Evidence of insufficient or ineffectual procedures and controls for preventing the manufacturing, importation, and/or distribution of dangerously defective or violative products.
Chairman Tenenbaum and Commissioner Adler made it quite clear in a joint vote statement and subsequent vote statements that the imposition of compliance programs in these types of circumstances would start to become more commonplace. Commissioner Nancy Nord and other commentators have criticized this enforcement trend over the lack of a public forum to debate the merits of these compliance programs. It appears that the agency is now attempting to respond to that criticism by offering the regulated community an opportunity to comment on the imposition and substance of these compliance programs in the context of broadening their application to voluntary recall agreements.
Guidelines for Voluntary Recall Notices
The second major aspect of the proposal is agency guidelines for consumer notification of a voluntary recall. The proposed rule for voluntary recall notices largely mirrors the mandatory recall notice rule published in 2010 but differs in some noteworthy ways.
The proposal recognizes that some companies may not need to conduct a public recall announcement because the purchasers’ contact information is known and the company can send direct notifications. However, where direct notification is not possible, the proposed rule lists press releases, recall alerts, in-store posters, and video/radio news releases as “the preferred means of disseminating recall information to broad audiences.” The agency also relies on social media tools to assist a company “get out the word.
Other noteworthy and new guidelines contained in the proposed rule for voluntary recall announcements include:
• The listing of recalls on the recalling companies first website entry point in a prominent manner;
• The use of the AP Stylebook for the language and format of the voluntary recall notice;
• The use of other languages in addition to English, as appropriate;
• The use of the word “recall” rather than any other alternative term in the recall notice;
• Automatic identification of any “significant retailers” of the product;
• Description of any “compliance program” requirements, if applicable; and
• Other standard information, such as: the name(s) of the product, description(s) of the product, model name and number, SKU number, recall logistics provider, approximate number and average price of units affected, type of hazard at issue, description of the remedies available to consumers, and other basic information.
One of the points of debate at the commission’s first meeting on this proposed rule was whether these new provisions would be turned into quasi-mandatory requirements without room for companies to negotiate the individual merits of the content and form of their voluntary recall notifications. Only time will tell whether the agency’s application of the rule will allow for flexibility when it comes to individual voluntary recalls. One thing, though, is for certain—these proposed rules are a must read for anyone who might work with CPSC on a voluntary recall.
Keywords: litigation, products liability, Consumer Product Safety Commission, voluntary recall notices, compliance programs
——Matt Howsare, Mintz Levin, Washington D.C.
October 28, 2013
Are You Up To Speed? NHTSA Reporting Requirements Are Changing
Key aspects of a National Highway Traffic Safety Administration (NHTSA) final rule went into effect in September 2013, with the remainder scheduled to take effect in August 2014. The NHTSA rule expands reporting obligations imposed upon motor vehicle and equipment manufacturers. Some of the highlights you and your clients should be aware of include:
More Information Required for Early Warning Reporting
Current NHTSA regulations require some manufacturers to provide quarterly reports about incidents involving death, injury or property damage, warranty claims, consumer complaints, and field reports. These reports are monitored by NHTSA as a way to spot trends or potential safety problems, and are dubbed EWR—early warning reporting.
As of August 2014, certain manufacturers will then also be required to disclose as part of their EWRs the vehicle type involved in the incident, the fuel or propulsion system, the stability control systems, and crash avoidance technologies. The addition of reporting requirements about fuel or propulsion system indicate NHTSA’s recognition of increasing diversity in available vehicle energy technologies. Light vehicle manufacturers will be required to provide data on additional items as well: electronic stability control (ESC), forward collision avoidance (FCA), lane departure prevention (LDP), and backover prevention. Buses, emergency vehicles, and medium and heavy vehicles will additionally need to report data for ESC and roll stability control (RSC).
New Post-Recall Responsibilities
In addition to expanding EWR information requirements, the new final rule also adds to a manufacturer’s responsibilities after it announces a recall. NHTSA will require manufacturers of large volume cars, light trucks, and motorcycles to provide a free online recall database, linked in a conspicuous place on the manufacturer’s main U.S. website. The free online database must be searchable by vehicle identification number (VIN). The database must also report, by VIN, whether a vehicle has been subject to a safety recall, and, if so, whether the vehicle has received the manufacturer’s free remedy. Information on uncompleted recalls must remain in the database for at least 15 years. Manufacturers will be obligated to update their own databases on a weekly basis, beginning in August 2014.
These database procedures were adopted in lieu of the agency’s primary proposal that would have required manufacturers to submit daily information to NHTSA regarding changes in recall remedy status for each VIN, a proposal criticized by the industry as onerous. While the new final rule applies only to larger manufacturers of light vehicles—those who manufacture 25,000 or more light vehicles, or 5,000 or more motorcycles, annually—the agency signaled that it might issue a notice of proposed rulemaking in the future to expand these post-recall requirements to smaller light vehicle manufacturers or manufacturers of other vehicles.
Changes to Defect/NonCompliance Reporting (Part 573)
Further, NHTSA’s final rule changes the information that must be submitted in a manufacturer’s Part 573 defect or noncompliance report. Under the former rule, information was to be submitted as it became available. Under the new rule, manufacturers will instead be required to submit new information within five business days of when the manufacturer confirms its accuracy.
Part 573 reports will now also need to include a description of the risk associated with the defect or noncompliance, like that required to be included in a Part 577 notification to vehicle owners. However, manufacturers will not be prohibited from including disclaimers that disavow the presence of a safety-related defect or noncompliance in the Part 573 report.
Moreover, manufacturers recalling motor vehicle equipment must now also report the brand name, model name, and model number of the equipment recalled.
Changes to Owner Notice Requirements
The new rule also includes changes to the requirements for notifying vehicle owners and purchasers about defects and instances of noncompliance. Manufacturers now will be required to mail notices to owners and purchasers no later than 60 days from the date the manufacturer files its Part 573 notice, even if the remedy is not yet available. A subsequent notice must then be mailed when the remedy becomes available. The phrase “IMPORTANT SAFETY RECALL” will need to appear at the top of all of the notices, with the VIN included conspicuously. The envelope for the notices must use a standardized label that includes the logos of the U.S. Department of Transportation and NHTSA, and a statement in red text that the letter includes important safety recall information.
New Way to Submit Foreign Reporting
NHTSA’s new final rule also modifies foreign defect reporting regulations. As before, manufacturers selling vehicles in the United States must submit a list each year to NHTSA identifying each of its models that is identical or substantially similar to a model they sell or plan to sell in a foreign country. Traditionally, these lists were submitted by mail, fax, or e-mail, and were not readily searchable. Starting in August 2014, manufacturers must upload the lists directly to NHTSA’s electronic database, just as they do with EWR reports.
The changes imposed by this NHTSA rule are coming fast. In February 2014, the new envelope label requirements go into effect. In August 2014, the changes to the EWR system, the databases searchable by VIN, and the electronic submission of documents to NHTSA all take effect. Before that, in October of this year, the other changes to the safety recall reporting and notification requirements become effective. Now is the time to familiarize and train yourselves and your clients to avoid reporting mishaps or penalties going forward.
Keywords: litigation, products liability, NHTSA, EWR, final rule, reporting obligations, vehicle manufacturers, defects, noncompliance, recall database
September 16, 2013
Proposed FDA Food-Safety Rules May Create Strains on Importer-Supplier Relationships
Proposed food-safety rules the FDA recently announced would add additional responsibilities for food importers and, among other things, would require importers to provide the FDA with records regarding their foreign suppliers. As written, these proposed rules raise potential concerns regarding the importer-supplier relationship and may necessitate review of existing importer-supplier agreements.
The proposed Foreign Supplier Verification Program (FSVP) rule would require importers of most foods to develop and implement a plan for imported food, including identifying hazards reasonably likely to occur for imported food and implementing measures to verify that such hazards are “adequately controlled.” The FSVP provides options for supplier-verification activities to ensure that foreseeable hazards are controlled. These include (depending on the type of hazard) on-site auditing of the foreign supplier, sampling and testing of food, and review of the foreign supplier’s food-safety records.
Auditing a supplier to monitor supplier food safety and product quality is nothing new. Disclosing the results of such audits or of observations made during those audits regarding a supplier’s facilities or processes, however, is another matter. It is not uncommon for a purchaser or importer of food and a supplier to agree to maintain the confidentiality of audits and to not disseminate audit reports or results to third parties or regulatory agencies. Under the proposed FSVP rule, however, importers would be required to maintain records regarding their foreign- supplier verification programs and “make them available promptly to an authorized FDA representative, upon request, for inspection and copying.” If the FDA requests electronic copies of those records, the importer must comply. The proposed rule’s language regarding recordkeeping and records access is broad enough to potentially include FDA access to audit reports or other records regarding auditing activities of foreign suppliers.
Another proposed rule the FDA announced along with the FSVP rule goes a step further. The proposed rule regarding accreditation of third-party auditors/certification bodies to conduct food- safety audits and to issue certifications is an attempt by the FDA to sanction a private system for auditing and certifying foreign food suppliers. Under this proposed rule, third-party auditors or certification bodies would be required to submit audit reports electronically to the FDA within 45 days of auditing a foreign supplier. If an auditor or certification body discovers any condition during an audit that would “cause or contribute to a serious risk to the public health,” the auditor/certification body must immediately notify FDA of that discovery.
The proposed FSVP rule does not require the use of accredited third-party auditors to conduct audits of foreign suppliers, but importers may begin relying on audits by accredited third parties to satisfy their obligations under the FSVP once the final versions of these rules go into effect. The record-sharing provisions in both of these proposed rules may cause tension between importers and suppliers as suppliers may become reluctant to share information with importers. The provisions could also impact agreements between importers and suppliers relating to the confidentiality of audits. Given the broad language regarding records access and record sharing in the proposed rules, suppliers may be concerned about audit details, trade secrets, supplier processes, or other sensitive commercial information becoming public once in FDA’s hands.
It remains to be seen whether any of the provisions relating to FDA access to auditing and supplier verification records will be modified in the final rules. The public comment period for both of these proposed rules is still open and will end on November 26, 2013. The FDA is hosting a public meeting on September 19 and 20, 2013 to discuss the proposed rules. The agency also is under a court order to publish final regulations relating to the Food Safety Modernization Act by June 30, 2015.
Keywords: litigation, products liability, FDA regulations, FSMA, food safety, imported food, FSVP, importer, supplier, audit, records access
—Bryan Anderson, Dykema Gossett PLLC, Chicago
September 9, 2013
Pennsylvania Superior Court Rules on Failure-to-Warn Claims
On July 29, 2013, the Pennsylvania Superior Court ruled in In re Reglan/Metoclopramide Litigation that failure-to-warn claims asserted against a generic-drug manufacturer that arose prior to the effective date of the Food and Drug Administration Amendments Act of 2007 (FDAAA) are preempted under federal law.
The superior court held, in accordance with the U.S. Supreme Court’s ruling in Pliva v. Mensing, that where failure-to-warn claims are based solely on a label that conformed to the brand-name equivalent drug’s label, and the claims arose prior to the effective date of the FDAAA, the claims are federally preempted. The court reached this conclusion based on the analysis employed in Mensing that such claims must be preempted because, under the federal laws in place during that period, generic manufacturers were required to use the same warning labels as their brand-name counterparts and could not change their labeling without the FDA’s prior approval.
However, the superior court also ruled in the same opinion that failure-to-warn claims that arose after the effective date of the FDAAA were not necessarily federally preempted, and that the trial court had not erred in refusing to dismiss claims as preempted at the preliminary objections stage of proceedings. The superior court drew the distinction between pre-FDAAA and post-FDAAA claims because all of the claims that the U.S. Supreme Court had found to be preempted in Mensing had arisen before the effective date of the FDAAA, and the court had specifically noted in footnote 1 of its Mensing opinion that it was referring “exclusively to the pre-2007 statutes and regulations and express[ed] no view on the impact of the [FDAAA].”
The Pennsylvania Superior Court also stated in its opinion that design-defect claims asserted against generic-drug manufacturers may be preempted under federal law, as the U.S. Supreme Court’s decision in Mutual Pharmaceuticals v. Bartlett seems to suggest. In Bartlett, which was decided while the generic manufacturers’ appeal to the superior court was pending, the U.S. Supreme Court held that federal law also preempts design-defect claims against generic-drug manufacturers because, as with generic labeling, generic-drug manufacturers cannot lawfully alter the design of their products. Referencing Bartlett,the Pennsylvania Superior Court stated nonetheless that it was premature to decide this preemption question in advance of “a careful analysis of the applicable state law” that may apply to each claim.
The Pennsylvania Superior Court further wrote that it would not dismiss the remaining claims upon defendants’ preliminary objections because they “either do not sound in failure to warn, arose after the passage of the [FDAAA], or involve a generic manufacturer’s failure to conform its label to that of the name brand, none of which is preempted under our reading of Mensing.”
The majority opinion issued in In re Reglan/Metoclopramide Litigation was authored by Judge Mary Jane Bowes, and joined by then-President Judge Correale Stevens.
Senior Judge William H. Platt filed a concurring and dissenting opinion, in which he disputed the majority’s analysis. Although Judge Platt concurred that the pre-FDAAA failure-to-warn claims against generic manufacturers were federally preempted, he believed the trial court had erred in overruling the generic manufacturers’ remaining preliminary objections because all of the claims asserted by plaintiffs “still rest on, or derive from, failure-to-warn claims.” Judge Platt asserted that the “clear teaching” of both Mensing and Bartlett “is that failure-to-warn claims are preempted under the Supremacy Clause because it is impossible to comply with both the assumed state-law based duties to warn and the federal regulatory scheme for generic-drug manufacturers.”
Keywords: litigation, products liability, federal preemption, failure to warn, generic pharmaceuticals
—Jessica L. Richman, Montgomery, McCracken, Walker & Rhoads, LLP, Philadelphia, PA
August 12, 2013
A Double Play for Prescription-Drug Manufacturers in the Eleventh Circuit
Consistent with the U.S. Supreme Court’s opinion in PLIVA, Inc. v. Mensing, 131 S. Ct. 2567 (2011), the Eleventh Circuit recently held that generic prescription-drug manufacturers cannot be held liable under state-law failure-to-warn claims because those claims are preempted by federal law. Guarino v. Wyeth, LLC, et al., No. 12-13263, slip op. at 6 (11th Cir. June 25, 2013).
The plaintiff in Guarino was prescribed metoclopramide, a drug sold under the brand name Reglan, to treat her abdominal pain and digestive problems. Id. at 2. For four months she took a generic form of the drug, manufactured by Teva Pharmaceuticals, which she claims caused her to develop tardive dyskinesia. Id. at 3. The FDA had previously changed the label to explicitly provide that “[t]herapy should not exceed 12 weeks in duration” and two years after she took the drug the FDA ordered a black box warning cautioning against taking the medication for more than 12 weeks. Id.
She sued Teva, as well as brand-name manufacturers Wyeth and Schwarz Pharma, under various liability theories, the basis for which was an alleged failure by the defendants to adequately warn medical providers of the risks associated with long-term use. Guarino at 6. The trial court dismissed her claims shortly after the Supreme Court held in Mensing that state-law failure- to-warn claims against generic manufacturers are preempted because the Federal Food, Drug and Cosmetic Act, 21 U.S.C. §§ 301-399f, mandates that generic manufacturers label their drugs the same as brand-drug manufacturers.
On appeal, the Guarino plaintiff argued that her negligence claim was “not preempted insofar as it alleges a ‘failure to communicate’ the label change to medical providers.” Id. at 4. The Eleventh Circuit affirmed and held (in sum):
Guarino’s attempt to elude Mensing by clothing her allegations as ‘failure-to-communicate’ claims rather than failure-to-warn claims does not alter our analysis. No matter the garb in which she attempts to present them, Guarino’s claims are at bottom allegations regarding Teva’s failure to warn her of the dangers of long-term metoclopramide use, and they therefore cannot escape Mensing’s grasp . . . . Were we to accept the failure-to-communicate theory, generic manufacturers such as Teva would need to take affirmative action to notify consumers, doctors, or pharmacists of FDA-approved changes to the drug label in order to avoid liability . . . . If generic-drug manufacturers, but not the brand-name manufacturer, sent additional communications such as “Dear Doctor” letters, that would inaccurately imply a therapeutic difference between the brand and generic drugs and thus could be impermissibly misleading. That fact is determinative here.
Id. at 7-8.
The brand-name manufacturers prevailed as well, as the Eleventh Circuit also affirmed the trial court’s summary judgment in their favor and, consistent with existing Florida law, held that brand-name prescription drug manufacturers cannot be held liable for injuries suffered by consumers who ingested only the generic form of their drug. Id. at 15.
Keywords: litigation, products liability, generic drugs, Guarino, Mensing, preemption, failure to warn, innovator liability
August 12, 2013
Another Perspective on Bartlett
Some injured plaintiffs may have no recourse following the ruling by the Supreme Court last June. The most recent case dealing with the limited recovery in product liability lawsuits within pharmaceutical torts is Mutual Pharmaceutical Co., Inc. v. Bartlett, 570 U.S.___, 133 S. Ct. 2466 (2013).
The court, in a 5-4 ruling, overturned a $21 million judgment won by a New Hampshire woman. The plaintiff suffered severe injuries allegedly caused by a generic anti-inflammatory drug, sulindac, manufactured by Mutual Pharmaceutical Co., which is owned by a unit of India-based Sun Pharmaceutical Industries, Ltd.
Karen L. Bartlett, was injured when she took sulindac for shoulder pain and as a result she sustained severe burns over much of her body and is nearly blind. The plaintiff had very serious injuries and spent months in a medically induced coma, was tube-fed for a year, and underwent a dozen eye surgeries.
The majority opinion authored by Justice Samuel Alito Jr. held that the lawsuit, based on state law, was barred by federal drug regulations. Chief Justice Roberts and Justices Scalia, Kennedy, and Thomas joined in the opinion.
The ruling follows an earlier 2011 Supreme Court decision in PLIVA, Inc. v. Mensing, 564 U.S. __, 131 S. Ct. 2567 (2013), which shielded generic-drug makers from lawsuits alleging they inadequately labeled their products also by reasoning that federal rules prevented a liability suit brought under state law.
An appeals court earlier had ruled in favor of the plaintiff, holding Mutual Pharmaceutical was not protected from the lawsuit because it could have chosen not to sell the generic drug at all.
The Supreme Court's majority disagreed with the appeals court and opined the company was “not required to cease acting altogether in order to avoid liability.” Mut. Pharm. Co., 133 S. Ct. at 2477. The Supreme Court held that the defendant had no way to comply with New Hampshire law because it had no power to unilaterally change the chemical composition or the warning label, and thus could not be held liable.
“The Court has left a seriously injured consumer without any remedy . . . ” Justice Sotomayor wrote in a dissent joined by Justice Ginsburg. Mut. Pharm. Co., 133 S. Ct. at 2496 (Sotomayor, J., dissenting). Justices Breyer and Kagan also dissented.
The dissent fervently argued that the defendant could comply with state law without changing the drug’s label or ingredients by either continuing to sell the drug and pay compensation for any harm it caused as a cost of doing business, or it could remove the drug entirely from the market.
The key principle is that generic drugs have to mirror the branded drugs and therefore, as generic-drug manufacturers are not in a position to change the design, they cannot be held accountable for issues emanating from that. Naturally people are calling for reform as approximately 80 percent of medications prescribed are generic, leaving a huge consumer base with no recourse. Expect more challenges to be brought to court in the near future or at the very least a push for reform legislatively.
Keywords: litigation, products liability, Supreme Court, sulindac, brand-name drug, generic-drug maker, Mensing, Bartlett
—Karen Muñoz, Dolan Law P.C., Chicago, IL
July 26, 2013
Supreme Court Addresses Generic Drug Liability under State Law
On June 24, 2013, in a 5-4 ruling, the U.S. Supreme Court issued a decision barring generic drug users from bringing state law design defect claims against the drug’s manufacturer. In reversing the First Circuit, the Court held that, because a generic drug manufacturer is precluded from altering the design of the drug under federal law, a state law design defect claim is entirely preempted by federal law. This ruling represents a landmark extension of federal jurisdiction with respect to state law claims against generic drug manufacturers under state laws that impose more stringent or different requirements on manufacturers than those imposed by federal law.
The federal Food, Drug and Cosmetics Act (FDCA) requires manufacturers of both generic and brand-name drugs to obtain approval from the Food and Drug Administration (FDA) before marketing a drug in interstate commerce. Once the FDA approves a drug, the manufacturer is prohibited from altering the “qualitative or quantitative formulation of the drug product, including active ingredients, or in the specifications provided in the approved application.” 21 C.F.R. § 314.70(b)(2)(i) (2013). Generic manufacturers are prohibited from making any unilateral changes to the drug’s label and likewise prohibited from materially deviating from the formulation of the brand‑name equivalent.
In Mutual Pharmaceutical Co., Inc. v. Bartlett, 570 U.S. __, 133 S. Ct. 2466 (2013), the Court ruled that the First Circuit had erred in upholding a $21 million award to a woman who experienced a life-threatening and severely disfiguring reaction to sulindac, a generic version of an anti-inflammatory drug that was manufactured by Mutual Pharmaceutical Co. The decision expands upon the 2011 ruling in PLIVA, Inc. v. Mensing, 564 U.S. __, 131 S. Ct. 2567 (2013), in which the Court held that state law failure-to-warn claims against generic drug manufacturers are barred by federal law because generic drug labels are required, under federal law, to mirror their brand-name counterparts.
The Bartlett decision expands upon Mensing under the rationale that, because the manufacturer of a generic drug cannot alter the drug’s design under the FDCA, a state law which would impose a higher or different duty on the manufacturer would make it impossible to comply with both state and federal law. The FDCA requires a generic drug manufacturer to use the same formulation as that of its brand-name equivalent and thus, any requirement of a state law that would impose differing requirements on the formulation of the drug is irreconcilable with federal law and similarly invalid.
The Court in Bartlett found that New Hampshire’s state law conflicted with federal law, but the effect of this decision in other states depends on the states’ substantive laws. The Bartlett decision will have more or less impact depending on the type of claims available under each individual state’s laws. If state law imposes a burden that is in conflict with the duties imposed by federal law in the area of generic drug manufacturing, however, Bartlett will result in the invalidation of such laws and claims.
Justice Sotomayor, the author of the Mensing dissent, again dissented in an opinion joined by Justice Ginsburg, and Justice Breyer authored another dissenting opinion in which Justice Kagan joined. The dissenters expressed concern that the Bartlett decision unnecessarily extends the Mensing holding to preempt state law governing generic drug design defects. Justice Sotomayor’s dissent noted that the police powers of the states are not to be superseded by federal law unless that was the “clear and manifest purpose of Congress” and Congress did not expressly provide in the FDCA that federal law should preempt state law with respect to design defect claims against generic drug manufacturers. Mutual Pharm. Co., at 2483 (Sotomayor, J., dissenting) (citing Rice v. Santa Fe Elevator Corp., 331 U. S. 218, 230 (1947)).
While the majority decision invited Congress to explicitly resolve the ambiguity between state and federal law on this issue, it ultimately reaffirmed its strong preemption analysis in Mensing. This preemption precedent previously established that the Supremacy Clause contains a non obstante provision which “suggests that federal law should be understood to impliedly repeal conflicting state law.” Mensing, 131 S. Ct. at 2580. The decision in Bartlett appears to have solidified the Court’s view that, in the realm of prescription drug manufacturing, federal law preempts conflicting state law. However, the 5-4 decisions in Mensing and Bartlett leave open the possibility for future decisions that may result in some reclamation of state authority in this area.
Keywords: litigation, products liability, preemption, brand-name drug, generic drug, Mensing, Bartlett
—Kerry Gabrielson, Godfrey Kahn, S.C., Madison, WI
Don't Blame the Employee
Last month, the Fifth Circuit Court of Appeals handed defendants a victory in the latest skirmish in the broader decades-old battle between plaintiffs and defendants over whether to proceed in a federal or state forum. Mumfrey v. CVS Pharmacy, Inc., 2013 WL 2476402 (5th Cir. June 10, 2013). Although Mumfrey was a wrongful termination action, the naming of local employees of a corporate defendant is a common tactic used in pharmaceutical and other product liability actions. In most instances, there is no reason to proceed against employees (whether sales representatives, individual pharmacists, or store clerks) when the real claim is against their employer. Naming a local defendant often serves one of two purposes, namely, to defeat an out-of-state corporate defendant’s ability to remove the case by defeating complete diversity among the parties or otherwise preclude removal by naming an in-forum defendant. A federal district court has aptly observed that “given the relative financial positions of most companies versus their employees, the only time an employee is going to be sued is when it serves a tactical legal purpose, like defeating diversity.” Ayoub v. Baggett, 820 F. Supp. 298, 300 (S.D. Tex. 1993).
Under the doctrine of fraudulent (or improper) joinder, an out-of-state defendant can still remove such cases when there is “no reasonable possibility for recovery” against the local employee defendant. Or, put another way, the standard is “whether there is a reasonable basis for the district court to predict that the plaintiff might be able to recover against an in-state defendant.” Mumfrey, 2013 WL 2476402 at *7. If there is no such basis, a court will disregard the presence of that defendant for purposes of removal.
In Mumfrey, the Texas plaintiff had originally sued in Texas state court. He named his former employer, a pharmacy that was not a citizen of Texas, as well as his local supervisors and a store manager. Although there was a lack of complete diversity, the pharmacy removed the action to federal court, asserting that the Texas individual defendants were improperly joined to the lawsuit. The plaintiff moved to remand to state court and the district court denied the motion.
On appeal after a bench trial in favor of the pharmacy, the Fifth Circuit affirmed both the denial of remand and the judgment. Applying Texas law, the Fifth Circuit concluded that there was no basis for a claim against the local individual defendants because the complaint did “not allege that the individual defendants were acting to serve their own personal interest.” Indeed, the plaintiff conceded that those defendants “were acting in the scope of their employment at the time of the retaliatory acts.” Moreover, the pharmacy “never complained or disciplined the individual defendants for their behaviors” which indicated that that they had not acted contrary to the interests of their pharmacy employer. Accordingly, the Fifth Circuit concluded that there “was no reasonable possibility for recovery against the individual defendants under Texas law” and the individual defendants were improperly joined.
The takeaway from this decision is that (at least under Texas law) employees cannot be held responsible for what in essence are the torts of their employer. As another federal court explained: “While the doctrine of respondeat superior may make a master liable for the torts of its employee merely because of their relationship, the converse does not hold true—a servant is not liable for the torts of his master unless he committed the tort personally.” James v. Parke-Davis, Case No. 1:00-CV-1203-JEC, at 19 (N.D. Ga. Nov. 30, 2000), reconsideration denied (N.D. Ga. Jan. 16, 2001).
What Mumfrey makes clear is that corporate defendants are not powerless in removing cases from state court where plaintiffs also name those defendants’ local employees. Where the only allegedly tortious conduct by the employee is serving the interests of the employer, that may well (at least in Texas) shield local employees from personal liability and permit the real target of plaintiff’s claims, the out-of-state corporate defendant, to proceed in federal court. Mumfrey also addressed a timeliness of removal issue, holding that it was an amended complaint expressly seeking more than $75,000 in damages, and not plaintiff’s original complaint that triggered defendant’s 30-day clock for removal. The original complaint did not “affirmatively reveal on its face” that the plaintiff sought more than the minimum jurisdictional amount.
Keywords: litigation, products liability, Mumfrey, corporate defendants, fraudulent joinder, Texas
—Alan E. Rothman, Kaye Scholer LLP, New York, NY
Federal Court Orders FDA to Issue New Food Safety Rules
Each year about 48 million people (1 in 6 Americans) report foodborne illnesses. On January 4, 2011, the Food Safety Modernization Act (FSMA) was signed into law. The purpose of the act was to shift the focus toward preventing foodborne diseases, rather than simply responding to outbreaks. To accomplish this goal, Congress provided the U.S. Food and Drug Administration (FDA) with new powers and directed it to enact new regulations covering several specific food safety areas: preventive controls, inspection and compliance, imported food safety, response, and enhanced partnerships between various federal and state food safety officials.
The FDA was expected to accomplish a relatively swift implementation of the FSMA; however, funding and resource limitations as well as the extensive nature of proposed changes have resulted in significant delays. As of June 2013, only a few provisions of the act are currently effective. Other regulations such as those pertaining to hazard analysis and prevention plans and procedures for tracking and tracing food products are in the study or comment phase. Regulations dealing with a foreign supplier verification program and the accreditation of third-party auditors are yet to be addressed.
On June 26, 2013, a federal judge in California ordered the FDA to finalize and publish food safety regulations mandated by the FSMA by June 30, 2015. The ruling resulted from a suit brought by the Center for Food Safety and the Center for Environmental Health challenging the FDA’s failure to implement a regulatory scheme for the FSMA in accordance with certain timelines included in the act. The parties’ proposed implementation schedules were vastly different. The consumer groups sought a relatively rapid implementation with finalization of regulations by May 1, 2014. The FDA’s proposal included a longer timeline and only committed the agency to work toward meeting its targets, citing potential unforeseen circumstances. The court recognized the complexity of the new legislation and the need for comment periods and review by other federal agencies such as the Office of Management and Budget, but the judge wanted a definitive schedule that could result in an injunction if deadlines were not met.
Ultimately, the court ordered the FDA to propose various regulations by November 30, 2013. The agency can then accept comments until March 31, 2014, and has until June 30, 2015, to finalize the rules. Given the limited progress the FDA has made in the 30 months since the FSMA was signed into law, its ability to comply with the court’s timetable will be a daunting task. The FDA has not yet indicated whether it intends to appeal the order.
Keywords: litigation, products liability, Food Safety Act, FDA
—Joseph S. Kiefer, Snell & Wilmer L.L.P., Phoenix, AZ
July 12, 2013
Court Sinks Storm-Water Runoff Allegations Related to Utility Poles
Affirming a district court’s order dismissing the plaintiff’s complaint for failure to state a claim, the U.S. Court of Appeals for the Ninth Circuit recently held that (1) utility poles treated with wood preservatives were not “point sources” of pollutants; (2) storm water runoff from the poles was not “associated with industrial activity” pursuant to the Clean Water Act; and (3) PCP-based wood preservative that escaped from the poles was not automatically “solid waste” within the meaning of the Resource Conservation and Recovery Act. Ecological Rights Foundation v. Pacific Gas & Elec. Co., 713 F.3d 502 (9th Cir. 2013).
Defendants Pacific Gas & Electric Company and Pacific Bell Telephone Company own and maintain utility poles treated with a wood preservative that contains pentachlorophenol (PCP) and other chemicals. Ecological Rights Foundation, the plaintiff, claimed that these poles discharged chemicals into the environment in violation of the Clean Water Act, 33 U.S.C. §§ 1251-1387, and the Resource Conservation and Recovery Act (RCRA), 42 U.S.C. §§ 6901-6992k.
Defendants filed motions to dismiss the plaintiff’s second amended complaint for failure to state a claim. The district court granted the motions, and the plaintiff appealed. The Ninth Circuit affirmed.
The Ninth Circuit noted that, under the Clean Water Act, the Environmental Protection Agency (EPA) may issue a National Pollutant Discharge Elimination System (NPDES) permit for the discharge of pollutants from a “point source.” 713 F.3d at 505. The Clean Water Act defines a point source as “any discernible, confined and discrete conveyance, including but not limited to any pipe, ditch, channel, tunnel, conduit, well, discrete fissure, container, rolling stock, concentrated animal feed operation, or vessel or other floating craft, from which pollutants are or may be discharged . . . .” Id. citing 33 U.S.C. § 1362 (14). Recognizing that the Clean Water Act does not define a “nonpoint source,” the court determined that the utility poles were not “discernible, confined and discrete conveyance[s] that channel and control storm water.” Id. at 510 (internal quotations omitted). Accordingly, the defendants were not required to obtain a NPDES permit, and the plaintiff failed to state a claim under the Clean Water Act.
The court further noted that the dismissal of the Clean Water Act claim was appropriate because the alleged storm water runoff was not “associated with industrial activity.” Id. at 511-12. The court stated that (1) the utility poles were not used to collect or convey storm water, and were not related to an industrial plant’s operations; (2) runoff from the poles was not an activity covered by the Standard Industrial Classification Codes; (3) the EPA rejected including “major electrical power line corridors” in its definition of industrial activity; and (4) defining the runoff as a “discharge associated with industrial activity” might require the EPA or the states to regulate a variety of commonplace items. Id. at 512-13
The plaintiff also argued that the poles’ wood-preservation chemicals produced “solid waste” within the meaning of the RCRA. Id. at 514. Noting that the RCRA did not address whether solid waste includes wood-preservation chemicals seeping from utility poles, the court looked to the RCRA’s legislative history. Id. at 514-15. The court stated that whether a manufactured product is a “solid waste” under these circumstances hinges on whether the product has either (1) served its intended purpose; or (2) is no longer wanted by the consumer. Id. at 515. Because the PCP-based wood preservative in this case escaped from the utility poles via normal wear and tear while the poles were in use, the court concluded that the chemicals did not automatically constitute solid waste under the RCRA. Id. at 518.
Keywords: litigation, products liability, toxic chemical, PCP, solid waste, industrial activity, Clean Water Act, Resource Conservation and Recovery Act, National Pollutant Discharge Elimination System
—Bryan A. Coleman, Maynard, Cooper & Gale, P.C., Birmingham, AL
June 28, 2013
President Obama Nominates Republican Buerkle to Fill CPSC Vacancy
Late last month, President Barack Obama nominated former Republican representative Ann Marie Buerkle of New York to serve on the Consumer Product Safety Commission. If confirmed, Buerkle would fill the seat recently vacated by Republican Anne M. Northup, who left the CPSC to join Bracewell & Guilliani LLP. Buerkle would fill a seven-year term, retroactive to October 27, 2011. There is some speculation that Obama nominated Buerkle to smooth the confirmation process of another nominee, Democrat and former trial attorney Marietta Robinson. President Obama renominated Robinson to the commission earlier this year, after Congress failed to confirm her last year.
Buerkle earned a law degree from Syracuse University School of Law in 1994, and before attending law school worked as a nurse at St. Joseph’s Hospital and Columbia-Presbyterian Hospital. She was in private practice from 1994 until 1997, and thereafter served as assistant attorney general from 1997 until 2009. Backed by the tea party, she was elected in 2010 to serve New York’s 25th congressional district. After New York’s redistricting earlier this year, Buerkle’s home city of Auburn is now located in the 24th district, and her political website suggests that she is targeting that congressional seat. Although she closed her campaign account in April, she claims not to have decided whether to run again.
During her congressional term (2011-2012), Buerkle memorably proposed eliminating the U.S. Department of Education and voted to reduce oversight of the Environmental Protection Agency. She has continued to criticize President Obama, including after his February 2013 State of the Union address.
The CPSC is authorized to have three or five members, and the political party controlling the White House has the majority of appointments. The CPSC is chaired by Democrat Inez Moore Tenenbaum, who was sworn into office on June 23, 2009. Tenenbaum is joined by fellow Democrat Robert (Bob) Adler and Republican Nancy Nord. The CPSC has been increasingly aggressive in recent months, and some believe that trend will continue for the remainder of 2013. There have been predictions that civil penalties will increase significantly in 2013 as compared to 2012, and that we will continue to see increased use of administrative complaints seeking product recalls. It will be interesting to watch the direction the CPSC takes if Buerkle and Robinson both are confirmed.
Keywords: litigation, products liability, CPSC, Buerkle, President Obama, nomination
—Tonya G. Newman, Neal, Gerber & Eisenberg LLP, Chicago, IL
June 20, 2013
Oral Argument Granted on Petition for Rehearing in Weeks Case
On Thursday, June 13, 2013, the Supreme Court of Alabama granted oral argument to hear appellants Wyeth LLC, Pfizer Inc. and Schwarz Pharma, Inc.’s application for rehearing in Wyeth, Inc. v. Weeks, Case No. 1101397. The oral argument is set for September 2013.
In January 2013, the state’s supreme court released an 8-1 decision in Weeks endorsing a cause of action for “innovator liability.” The court 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 his or her use of a generic drug manufactured by a different company.
Appellants Wyeth LLC, Pfizer Inc., and Schwarz Pharma, Inc. quickly applied to the court for rehearing and requested oral argument.
The Supreme Court of Alabama’s decision in Weeks has attracted close attention from groups in the pharmaceutical industry and the business community. The Pharmaceutical Research and Manufacturers of America (PhRMA), the U.S. Chamber of Commerce, the Product Liability Advisory Council (PLAC), and the Business Council of Alabama have all filed amicus curiae briefs in support of the application for rehearing.
Despite the attention the Weeks decision has attracted, the Supreme Court of Alabama’s grant of oral argument is somewhat surprising. In the initial appeal, the court denied the parties’ request for oral argument and decided the case on the briefing alone. Moreover, the court rarely grants oral argument. A recent study of the court’s record showed that it granted oral argument in about 1 percent of all cases. J. Mark White, Request for Oral Argument Denied: The Death of Oral Argument in Alabama’s Appellate Courts, Ala. Lawyer, Mar. 2008 at 123.
Keywords: litigation, products liability, innovator liability, brand-name drug, generic drug, Weeks
June 6, 2013
"Exhaustion Doctrine" Doesn't Apply in Context of GM Seeds
The U.S. Supreme Court has determined that the “exhaustion doctrine” does not apply in the context of a patented genetically modified (GM) seed, and thus a farmer who reproduced patented seeds through planting and harvesting without the patent holder’s permission impermissibly infringed the patent. Bowman v. Monsanto, 133 S. Ct. 1761 (2013)(decided May 13, 2013).
The patent owner, Monsanto, brought a patent-infringement suit against farmer Hugh Bowman who openly planted GM soybean seeds from commodity seeds he purchased from a local grain elevator for planting as a late-season crop. He also saved seeds from his late-season crop to plant again as a late-season crop. The Federal Circuit Court of Appeals determined that farmers who plant the progeny of GM seeds protected by U.S. patents infringe those patents even where the progeny are derived from commodity seed. According to the appellate court, even if the patent rights are exhausted in the commodity seeds (which are generally used as animal feed), when a grower plants those seeds “and the next generation of seeds develops, the grower has created a newly infringing article.”
Writing for the Supreme Court, Justice Elena Kagan stated, “Under the doctrine of patent exhaustion, the authorized sale of a patented article gives the purchaser, or any subsequent owner, a right to use or resell that article. Such a sale, however, does not allow the purchaser to make new copies of the patented invention.” According to the Court, this is, in effect, what the farmer did by buying from a grain elevator “commodity soybeans” intended for human or animal consumption, planting them in his fields, and then saving seed from those crops to use repeatedly, “until he had harvested eight crops that way.”
While the Court recognized the farmer’s right to purchase the commodity soybeans, resell them, consume them, or feed them to his animals, it held that the exhaustion doctrine “does not enable Bowman to make additional patented soybeans without Monsanto’s permission (either express or implied). . . . Because Bowman thus reproduced Monsanto’s patented invention, the exhaustion doctrine does not protect him. Were the matter otherwise, Monsanto’s patent would provide scant benefit.”
Keywords: litigation, products liability, exhaustion doctrine, genetically modified seeds, patent infringement, commodity soybeans
June 6, 2013
Scope of Daubert Review at Class-Certification Stage Still in Flux
Whether a district court must apply a full Daubert review of expert testimony or opinions offered at the class certification stage continues to be a point of question and debate in the wake of Wal-Mart Stores Inc. v. Dukes et al., 131 S.Ct. 2541 (2011). In Dukes, the court suggested in dicta that Daubert likely applies to expert evidence used in the class-certification process. “The District Court concluded that Daubert did not apply to expert testimony at the certification stage of class-action proceedings. We doubt that is so . . .” (emphasis added). But the scope of Daubert review at the class-certification stage of class-action litigation remains an open question.
Currently, district courts across the country are less than consistent in their approach regarding this question and the circuits are also without agreement on the issue. Many practitioners on both sides of the “v” expected more guidance from the U.S. Supreme Court on the scope of Daubert review at the class-certification stage in the Court's opinion in Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013), but that ruling did not address Daubert directly. Significantly, the Court did not address whether the expert testimony supporting the plaintiffs’ damages theory was reliable. One point that seems to be overlooked by many is that the Daubert question was not before the Court because Comcast did not challenge the admissibility of the plaintiffs’ expert’s testimony in the district court. However, the Court did state again that class certification requires a “rigorous analysis” that includes an examination of expert opinions.
In February 2013, the U.S. District Court for the District of New Jersey precluded the testimony and reports of experts proffered by an automotive defendant in opposition to certification in a consumer product class action. In Neale, et al. v. Volvo Cars of North America, LLC, et al, No. 2:10-cv-4407(DMC)(MF), slip op. (D.N.J. Feb. 28, 2013), ECF No. 268, the named plaintiffs representing a putative nationwide class sued Volvo alleging a uniform design defect in the sunroof drainage systems of various vehicle models. Plaintiffs alleged that Volvo had long-standing knowledge of the alleged defect and, had the company disclosed it, plaintiffs would have purchased a different vehicle or paid less for the vehicle in question. Volvo proffered two well-known and experienced automotive experts in support of its opposition to the plaintiffs’ motion for class certification. And while it has become typical for defendants in automotive class action litigation to raise Daubert challenges to experts proffered by plaintiffs at the class-certification stage, these plaintiffs turned the tables on Volvo and raised Daubert challenges to Volvo’s experts.
The district court judge in Neale acknowledged that the law does not currently require that the court conduct a “full” Daubert inquiry as to an expert at the class-certification stage. However, this judge also cited to Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541, 2553-54 (2011), to make the point that “the Supreme Court expressed its ‘doubt’ that ‘Daubert did not apply to expert testimony at the certification stage of class-action proceedings.’” Neale, No. 2:10-cv-4407, slip op. at 3. While not entirely clear from the trial judge’s opinion, it appears that the court in Neale applied a fulsome Daubert review before concluding that Volvo’s automotive experts had offered opinions that were “speculative,” “without foundation” and that the “admitted lack of preparation and sound methodology” by one of Volvo's experts also convinced the court that his opinions were “not supported by good grounds.” Id. at 5; Neale, 2:10-cv-4407, slip op. at 6, ECF No. 272.
The trial court decisions in Neale should serve as a reminder that the Daubert sword can cut both ways. And as Daubert motions become more common place in automotive class action litigation at the class-certification stage, more clarity from the U.S. Supreme Court on the scope of Daubert review will be useful and welcome. It is becoming clear that, while lower courts understand that they are to employ “rigorous analysis,” they cannot seem to agree on the scope of Daubert review. Based upon the Court's dicta from Dukes, however, it seems likely that when the Court finally does speak again on the issue, it will favor a full Daubert review even at class- certification stage.
Keywords: litigation, products liability, Daubert, class certification, automotive class action, Supreme Court, rigorous analysis, expert testimony
—Tom Branigan, Bowman and Brooke LLP, Bloomfield Hills, MI
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:
Absent full disclosure, the defendants cannot be informed of the full extent of an individual’s exposure. They are therefore often led to believe – erroneously – that their products were far more responsible for the plaintiff’s disease than what may have been the case, because they have no way of knowing the substance of an individual plaintiff’s claims.
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:
The number of confirmed asbestos bankruptcy trusts and level of trust claim payments has increased significantly over the last five years, creating an alternative compensation system to the civil tort system where solvent defendants continue to indemnify claimants in full. Asbestos bankruptcy trust transparency is not about determining how much money a victim of an asbestos-related injury should receive, but rather determining the appropriate amount that each culpable party should pay, including the bankruptcy trusts.
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
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.
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
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:
- Enhanced port surveillance, which has resulted in increased seizures of imports.
- Increased use of administrative complaints for mandatory recalls and other litigation against consumer-product businesses.
- Increased pressure on retailers to “voluntarily” stop selling the “suspect” products of manufacturers/importers who refuse to voluntarily recall such products.
- Higher civil penalties for late self-reporting of violative products—even when a company has recalled a violative product.
- Public statements by majority commissioners arguing for larger civil penalties.
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
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
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
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:
Expert testimony may be admitted, in the form of an opinion or otherwise, if the court determines that the testimony will assist the trier of fact to understand the evidence or to determine a fact in issue. In making that determination, the court shall determine (1) whether the witness is qualified as an expert by knowledge, skill, experience, training, or education, (2) the appropriateness of the expert testimony on the particular subject, and (3) whether a sufficient factual basis exists to support the expert testimony.
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
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:
Under Alabama law, may a drug company be held liable for fraud or misrepresentation (by misstatement or omission), based on statements it made in connection with the manufacture or distribution of a brand-name drug, by a plaintiff claiming physical injury from a generic drug manufactured and distributed by a different company?
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:
[i]n the context of inadequate warnings by the brand-name manufacturer placed on a prescription drug manufactured by a generic-drug manufacturer, it is not fundamentally unfair to hold the brand-name manufacturer liable for warnings on a product it did not produce because the manufacturing process is irrelevant to misrepresentation theories based, not on manufacturing defects in the product itself, but on information and warning deficiencies, when those alleged misrepresentations were drafted by the brand-name manufacturer and merely repeated by the generic manufacturer.
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
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:
- On June 30, 2011, 20 plaintiffs filed a second-amended class-action complaint in the U.S. District Court for the District of Massachusetts, seeking, among other remedies, declaratory relief regarding drug rationing and an injunction to take drug licenses away from a pharmaceutical company. See Anita Hochendoner, et al., v. Genzyme Corporation, et al., No.1:11-cv-10739-DPW, Second Amended Complaint, ECF No. 29 (D. Mass. June 30, 2011). Genzyme manufactures the drug Fabrazyme, which is used to treat Fabry disease, a lethal genetic illness. The plaintiffs allege Genzyme created a shortage of Fabrazyme by introducing adulterated injectable vials into interstate commerce, subsequently entering into a consent decree with the FDA and promulgating a rationing system, causing the plaintiffs to receive diluted doses of the drug. The plaintiffs claim such diluted doses are ineffective, and are suing to obtain full prescription doses. Genzyme moved to dismiss, arguing plaintiffs’ suit alleges “Genzyme is not manufacturing the biologic treatment Fabrazyme quickly enough, well enough, or in sufficient quantities to meet demand,” and is an attempt to shoehorn such allegations into products liability claims. Oral argument was held September 28, 2011, and the court took Genzyme’s motion under advisement, but has not yet released a decision.
- On April 16, 2012, two plaintiffs filed a class-action complaint in the U.S. District Court for the Middle District of Florida, seeking damages for their injuries and the injuries of those who require parenteral treatment for Vitamin A deficiency. See Jennifer Lacognata, et al., v. Hospira, Inc., No.8:12-cv-00822-JSM-TGW, Complaint, ECF No. 1 (M.D. Fla. April 16, 2012). Hospira manufactures Aquasol A (injectable vitamin A palmitate). Plaintiff was diagnosed with Vitamin A deficiency in April 2011, which causes, among other injuries, blindness. Plaintiff was treated with Aquasol A. Plaintiff alleges Hospira was able to meet market demand for Aquasol A until November 2010, when it closed a manufacturing site and had not stockpiled enough Aquasol A to create an inventory to mitigate against supply disruptions. Plaintiff alleges Hospira acted with reckless disregard for human life and health and created a global shortage which led to otherwise preventable injuries including causing her to lose her vision. Hospira moved to dismiss plaintiffs’ claims. On July 2, 2012, the trial court granted Hospira’s Motion to Dismiss, dismissing plaintiffs’ complaint with prejudice. Plaintiffs appealed to the Eleventh Circuit where the appeal remains pending.
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
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