Consumer Class Actions and Mass Torts : Class Action Lawyer & Attorney : J. Russell Jackson : Skadden Law Firm : Complex Class Actions : Consumer Class Actions & Mass Torts Law Blog

In a strange opinion that raises nearly as many questions as it answers, the Nebraska Supreme Court last week adopted a very restrictive form of the economic loss doctrine.  See Lesiak v. Central Valley Ag Cooperative, Inc., 2012 WL 246641 (Neb. Jan. 27, 2012) (per curiam).

In Lesiak, a farmer contracted with the local ag coop for the "complete package":  The coop would provide all of the farmer's diesel fuels, chemicals, fertilizer and seed for his 2,000-acre farming operation.  As part of the package, the coop would test the farmer's soil in his various fields and then recommend which fertilizers, seed corn, pesticides and herbicides to use. In fact, the coop even applied the herbicide to the fields once the farmer was done planting them.

Apparently the coop used too high of a concentration of herbicide, allegedly harming the farmer's yield on his crops.  The farmer sued and the case went to trial on the following theories:  negligence, breach of the implied warranty of merchantability, and breach of the implied warranty of services.

There is no description of the contract, and no explanation of why there was no breach of contract claim.

At trial, the court granted summary judgment on the implied warranty of services claim, holding that the common law only recognizes such warranties in the construction context.  The Lesiak court affirmed that holding.

The trial court also granted summary judgment on the negligence claim, holding that such a claim was barred by the economic loss doctrine.  The Nebraska Supreme Court reversed this holding, and it is this holding that I'll focus on in this blog post.  (There was also a lengthy discussion of why the trial court was wrong to direct a verdict on the plaintiffs' proof of damages, but I won't get into that here.  Amazingly, however, the court set out a complicated formula for how damages could be calculated, holding that no expert testimony was necessary because Nebraska jurors were more than capable of making such calculations themselves.  Maybe they are really good at word problems in Nebraska.)

The Nebraska Supremes traced the history of the economic loss doctrine, from California's articulation of it in 1965 in Seely through its adoption by the U.S. Supremes in East River Steamship in 1986.  The court noted that Nebraska previously had adopted the economic loss doctrine, but had only applied it in product liability cases involving a defective product.  It viewed the Lesiak case as an opportunity to define the boundaries of what it viewed as an ever-expanding doctrine.

The court held:

[W]e hold that the economic loss doctrine precludes tort remedies only where the damages caused were limited to economic losses and where either (1) a defective product caused the damage or (2) the duty which was allegedly breached arose solely from the contractual relationship between the parties.  And economic losses are defined as commercial losses, unaccompanied by personal injury or other property damage.  

2012 WL 246641 at *11.

The court explained that the doctrine's underlying rationale is to preserve the distinction between contract and tort where both theories could apply, and thereby preserve the ability of the parties to privately order the risk of loss through contract.  It noted that "[i]f a party could simply avoid its contractual bargain by suing in tort, which often offers more generous terms of recovery, then the effectiveness of contract law would be reduced."  Id.

The court then made a logical leap that does not necessarily follow:

But the opposite must also be true, and the same type of concern must also exist for tort law.  While the doctrine has its place in the law of damages, it should not be interpreted so broadly as to undermine tort law and preclude remedies in situations which, historically, have presented viable tort cases.  That is to say, the doctrine should not be expanded to allow traditional tort remedies to drown in a sea of contract.

Id. at *12.

The court said that it was reaffirming the doctrine's "continued application in the products liability context," namely that "where a defective product causes harm only to itself, unaccompanied by either personal injury or damage to other property, contract law provides the exclusive remedy to the plaintiff."  Id.  This, the court reasoned, was merely the loss of the benefit of the bargain, "which is the essence of a warranty action." 

The court gave no hint, however, of the fact that courts in other states have been struggling for decades about precisely what "harm to the product itself" actually means.  For example, where the product is a motor that has been incorporated into a boat, if the motor's failure causes the complete destruction of the boat, is that damage to "other property," or is it the type of economic loss that the parties can be expected to have bargained over in the contract?  The opinion in Lesiak suggests that Nebraska would take a very narrow view of the applicability of the economic loss doctrine in any such situation.

The court also justified its "new" rule that the doctrine applies where "the alleged breach is only of a contractual duty, and no independent tort duty exists."  Id.  (Of course, I have to ask myself, if no independent tort duty exists, why do you need the economic loss doctrine to bar tort claims in the first place?)  The court said that it "serves to 'weed[] out cases involving nothing more than an allegedly negligent failure to perform a purely contractual duty -- a duty that would not otherwise exist.'"  Id. (citation omitted).  Apparently some Nebraska decisions previously had recognized a cause of action for "negligent performance of a contract."   In such cases, the economic loss doctrine would now bar recovery, so long as there was no independent duty in tort.

The Nebraska Supreme Court then sought to apply its newly-demarcated economic loss doctrine to the facts in Lesiak.  It held that the trial court had improperly invoked the doctrine to grant summary judgment to the defendant on the negligence claim:

The question still remains whether the doctrine bars the Lesiaks' negligence claims here.  It does not.  It is true that the alleged breach was of a contractual duty which would not have existed but for the creation of the contractual relationship between the Lesiaks and [the coop].  But the damage allegedly caused by the breach was not purely economic loss; rather, [the coop's] actions allegedly caused damage to the Lesiaks' corn, which qualifies as "other property" -- that is, property other than the property that was sold pursuant to the contract.  Thus, this case is removed from the doctrine's reach.

Id. at *13. So apparently you still can have a cause of action for negligent breach of a contractual duty in Nebraska, so long as the damage is to something other than the product sold in the contract.

In reaching this conclusion, the court specifically rejected the approach of other courts that would view the crop loss as part of the parties' "disappointed commercial expectations" and thus would apply the economic loss doctrine to bar tort claims by reasoning that the parties could best assign the risk among themselves through contractual bargaining, rather than tort.  See id. (rejecting Grams v. Milk Prods., Inc., 699 N.w.2d 167 (Wisc. 2005)).  The Nebraska Supremes explained:

[A]lmost nothing would qualify as "other property" under the "disappointed expectations" test.  This is because the "disappointed expectations" test precludes tort remedies whenever the purchaser should have anticipated the occurrence of the damage at issue -- in essence, whenever the occurrence of the damage was reasonably foreseeable.  Thus, under this test, if "other property" damage occurs, but it was foreseeable at the time of contracting, then all tort theories would be precluded.  Therefore, the only circumstance in which tort theories would not be precluded would be when the damages were not foreseeable.  But, of course, then a plaintiff would likely have no remedy in tort either.  In effect then, the "disappointed expectations" test eliminates tort remedies for damage to "other property," but that type of damage has traditionally been recoverable in tort.

. . . But where the damages were never bargained for and are not expressly dealt with in the contract, it makes no sense to preclude a party's traditional tort remedies.

Id. at *13 - *14.

The opinion in Lesiak certainly piques one's curiosity as to what the provisions of the underlying contract were and if there was a way in which the entire economic loss discussion could have been avoided.  But for now, it is enough to know that Nebraska has squarely placed itself in the restrictive camp when it comes to the application of the economic loss doctrine to bar tort claims -- even negligent breach of contract.

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In the field of products liability, one often sees courts bend the rules beyond recognition in trying to "save" a plaintiff's claim, particularly in cases where the law and facts otherwise would dictate what many might view as hard results.  I was encouraged to read Batiste v. Brown, 2012 WL 206289 (La. App. -- 5th Cir. Jan 24, 2012), in which the court affirmed summary judgment on basic legal defenses without engaging in such legal machinations.

In Batiste, the plaintiff was injured on the job, which meant that his sole remedy vis a vis his employer was workers' compensation.  Plaintiff worked at a plant that melted scrap metal down into more refined metal.  Part of the process was using graphite electrodes -- 3,000-pound, 12-foot-long cylinders -- that hang from the roof and get consumed at the rate of about one a day.  As a result, the electrodes had to be replaced.  

Plaintiff's job was to climb up above the furnace and align a new electrode above the old one and screw the new one into the old one.  To do this, he used a "chain wrench" which was a 4-foot handle with a chain attached to it.  He would wrap the chain around the 3,000-pound electrode, attach it to the wrench handle, and then pull the handle to tighten on the electrode and torque down the screw.  Plaintiff did all of this on a 14-inch beam some 40 feet above the shop floor with no guard rails, no fall protection equipment, and no protective gear.  Plaintiff repeatedly had requested protective railings, and the absence of them was, according to the court, a clear violation of OSHA regulations.

Plaintiff sued his employer, naturally, but could not be assured that he could get around the workers' compensation bar.  Accordingly, he also sued the maker of the electrode and the maker of the chain wrench under Louisiana's Product Liability Act.  The electrode manufacturer, he alleged, was liable because it failed to warn of the potential dangers of installing electrodes by having a worker on a 14-inch beam up some 40 feet above the floor.  The trial court had granted summary judgment on that claim, and the Court of Appeals affirmed.  The deposition testimony reflected that plaintiff and his supervisors were:

all aware of the potential dangers of installing the electrodes by having a worker stand on a 14-inch wide beam 40 feet above the floor with neither railings nor a safety harness to protect him in case of a slip.  These men also testified that they were aware of an alternative procedure whereby the new electrode could be attached to the stub of a consumed electrode on the floor of the work area.  In this procedure, there was no need for a worker to ascend to the top of the furnace to perform this job.  It is thus undisputed that the user or handler of the product had actual knowledge of the dangers associated with installation of it, and therefore, the manufacturer had no duty under the statute to further warn them of these potential hazards. 

Slip op. at p. 5.

As for the design defect claim against the maker of the chain wrench, it too had been thrown out by the trial court on summary judgment.  The court of appeals affirmed.  To begin with, no one had preserved the wrench, and in fact there was no documentary evidence that the employer had ever owned a wrench from the defendant.  In fact, the wrench manufacturer had not been joined into the suit until almost three years after it was first filed.

Aside from the spoliation problems, the experts agreed that the wrench plaintiff said he had used was the wrong tool for such a job -- it had not been designed to provide sufficient torque to screw in electrodes of that size.  Moreover, although plaintiff's expert conjectured that plaintiff fell because the chain slipped after bolts on the wrench had been loosened, the only deposition testimony was that the wrench had been examined right after the fall and the bolts were tight at the time of the accident.  The court of appeals concluded:  "It thus cannot be said that the manufacturer could have foreseen that someone would use the tool to do something for which it was not intended, under circumstances which were not in compliance with OSHA regulations, and which even [plaintiff] knew to be highly dangerous."  Accordingly, the court affirmed summary judgment for the wrench manufacturer.

The court's decision in Batiste is a solid application of basic tort law -- one does not have to warn of obvious dangers, and one does not have to design a product to withstand product misuse.  Some courts might have been tempted to engage in analytic gymnastics to avoid this obvious result because the plaintiff was seriously injured and the employer might have a chance at escaping liability under the workers' compensation statute.  The fact that the Batiste court avoided such subterfuge and properly applied the law to the facts at the pre-trial stage is commendable.

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Yesterday the California Supreme Court released an important unanimous opinion in an asbestos case that limits a manufacturer's liability and duties to its own products -- not the products of other manufacturers.  See O'Neil v. Crane Co., 2012 WL 88533 (Cal. Jan 12, 2012).

In O'Neil, plaintiff's decedent had served on the USS Oriskany, an Essex class, steam-powered aircraft carrier, from 1965 to 1967.  He supervised enlisted men who repaired equipment in the engine and boiler rooms, and thus was exposed to airborne asbestos fibers as the workers cut into the external insulation of the pipes, valves, and gaskets to replace parts.

Two of the companies plaintiff had sued were Crane Co. and Warren Pumps Co.  Crane made valves for Navy ships according to Navy specifications (which required the use of asbestos), and Warren made Pumps for the ship's steam propulsion system according to Navy specifications.  Crane and Warren's parts were incorporated into the ship in 1943, more than 20 years before plaintiff's decedent first came aboard the ship.  It was undisputed that any asbestos-containing parts of the defendants' pumps or valves had been replaced long before 1965, and that plaintiff's decedent therefore did not encounter them.

Plaintiff sued Crane and Warren anyway, asserting at trial that they should be liable because: (1) their products originally had included some asbestos containing components, (2) it was foreseeable that the parts would wear out and be replaced with other asbestos-containing products, and (3) these repair and replacement procedures would release harmful asbestos dust.

The trial court had granted the defendants' motion for non-suit, but the California Court of Appeal had reversed, restating the strict liability rule in this way:  "A manufacturer is liable in strict liability for the dangerous components of its products, and for dangerous products with which its product will necessarily be used."

In a decision that harkens back to the fundamental precepts underlying strict liability and the whole concept of product liability, the California Supreme Court reversed.  In a series of very quotable passages, the court hewed to the notion that liability must be tied to the product that the manufacturer made, and that manufacturers have no duties to end users that arise from the use of other manufacturers' products.

With respect to strict liability claims, the court held that there could be no strict liability design claim because the alleged design defect in Crane's and Warren's products -- the inclusion of asbestos-containing gaskets -- was not a legal cause of Mr. O'Neil's injury because these asbestos-containing parts were not on the ship by the time Mr. O'Neil got there.  As for the strict liability failure to warn claim, the court held that defendants had no duty to warn of risks arising from other manufacturers' products, namely other asbestos-containing valves and insulation that the Navy used with Crane's and Warren's products.

In a section of the opinion entitled "No Liability Outside a Defective Product's Chain of Distribution," the California Supreme Court explained:

From the outset, strict products liability in California has always been premised on harm caused by deficiencies in the defendant's own product. . . .

Strict liability encompasses all injuries caused by a defective product, even those traceable to a defective component part supplied by another.  However, the reach of strict liability is not limitless.  We have never held that strict liability extends to harm from entirely distinct products that the consumer can be expected to use with, or in, the defendant's nondefective product.  Instead, we have consistently adhered to the Greenman formulation requiring proof that the plaintiff suffered injury caused by a defect in the defendant's own product.  Regardless of a defendant's position in the chain of distribution, "the basis for his liability remains that he has marketed or distributed a defective product" and that product caused the plaintiff's injury.

* * *

In this case, it is undisputed that O'Neil was exposed to no asbestos from a product made by the defendants.  Although he was exposed to potentially high levels of asbestos dust released from insulation the Navy had applied to the exterior of the pumps and valves, Crane and Warren did not manufacture or sell this external insulation.  They did not mandate or advise that it be used with their products.  O'Neil was also exposed to asbestos from the replacement gaskets and packing inside the pumps and valves.  Yet, uncontroverted evidence established that these internal components were not the original parts supplied by Crane and Warren.  They were replacement parts the Navy had purchased from other sources.

It is fundamental that the imposition of liability requires a showing that the plaintiff's injuries were caused by an act of the defendant or an instrumentality under the defendant's control.

Id. at pp. 4-5 (citations omitted).

The California Supreme Court similarly rejected any duty to warn about dangers inherent in somebody else's products:

Generally speaking, manufacturers have a duty to warn consumers about the hazards in their products.  The requirement's purpose is to inform consumers about a product's hazards and faults of which they are unaware, so that they can refrain from using the product altogether or evade the danger by careful use.  Typically, under California law, we hold manufacturers strictly liable for injuries caused by their failure to warn of dangers that were known to the scientific community at the time they manufactured and distributed their product.  However, we have never held that a manufacturer's duty to warn extends to hazards arising exclusively from other manufacturers' products.  A line of Court of Appeal cases holds instead that the duty to warn is limited to risks arising from the manufacturer's own product.

Id. at p. 6 (citations omitted).

The court proceeded to address a number of California and out-of-state authorities.  Ultimately, the court refused to adopt the plaintiff's argument, which focused exclusively on the foreseeability of the harm alone:

We reaffirm that a product manufacturer generally may not be held strictly liable for harm caused by another manufacturer's product.  The only exceptions to this rule arise when the defendant bears some direct responsibility for the harm, either because the defendant's own product contributed substantially to the harm or because the defendant participated substantially in creating a harmful combined use of the products.

. . . However, the foreseeability of harm, standing alone, is not a sufficient basis for imposing strict liability on the manufacturer of a nondefective product, or one whose arguably defective product does not actually cause harm. . . .

The question whether to apply strict liability in a new setting is largely determined by the policies underlying the doctrine.  The conclusion we reach here is most consistent with the policies the strict liability doctrine serves.  Although "an important goal of strict liability is to spread the risks and costs of injury to those most able to bear them," "it was never the intention of the drafters of the doctrine to make the manufacturer or distributor the insurer of the safety of their products.  It was never their intention to impose absolute liability." . . .  [P]roduct manufacturers "generally have no 'continuing business relationship'" with each other.  This means that a manufacturer cannot be expected to exert pressure on other manufacturers to make their products safe and will not be able to share the costs of ensuring product safety with these other manufacturers.  It is also unfair to require manufacturers of nondefective products to shoulder a burden of liability when they derived no economic benefit from the sale of the products that injured the plaintiff.

A contrary rule would . . . impose an excessive and unrealistic burden on manufacturers.  Perversely, such an expanded duty could also undermine consumer safety by inundating users with excessive warnings.  "To warn of all potential dangers would warn of nothing."

Id. at 13-14 (citations omitted).

The court also rejected the notion of imposing any duty to warn in negligence:

Assuming that a manufacturer can "reasonably be expected to foresee the risk of latent disease arising from products supplied by others that may be used with the manufacturer's product years or decades after the product leaves the manufacturer's control," we nevertheless conclude strong policy considerations counsel against imposing a duty of care on pump and valve manufacturers to prevent asbestos-related disease.

* * *

In short, expansion of the duty of care as urged here would impose an obligation to compensate on those whose products caused plaintiffs no harm.  To do so would exceed the boundaries established over decades of product liability law.  "'[S]ocial policy must at some point intervene to delimit liability' even for foreseeable injury . . . ."  The same policy considerations that militate against imposing strict liability in this situation apply with equal force in the context of negligence.

Id. at 15 (citations omitted).

The court's opinion in O'Neil is a forceful reminder that liability in this field of law must be grounded in the actual sale or distribution of a defective product that actually causes harm.  To go beyond that -- chasing some form of "foreseeability" -- leaves liability untethered to reality and allows for defendants to be saddled with liability for products and situations far outside of their control.

O'Neil, of course, involved one plaintiff.  But there are thousands of asbestos cases out there in which defendants like Crane and Warren are sued every day, despite the fact that their products did not -- and could not -- have caused the plaintiff's harm.  The sheer cost of defending these actions through pleadings, motions practice, and, ultimately, trial, is enormous.  That's why O'Neil, which sets a bright-line rule of non-liability as a matter of law, is so important.  Such defendants should now be dropped from these suits entirely, and where they are not, they should be able to move to dismiss and seek costs.

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Every once in a while you come across a simple case that is a nice reminder of a basic tort concept.  Today's case is Peart v. Dorel Juvenile Group, Inc., 2012 WL 11022 (5th Cir. Jan. 4, 2012), which serves as an excellent reminder about the concept of causation.

Yolanda Peart was a Stein Mart employee who was injured stocking purses at the Metairie store.  She had been using a folding step stool to reach the upper shelves.  Yolanda was -- like me -- "big boned."  She weighed more than 250 pounds.  The warning label on the stool said:

CAUTION KEEP BODY CENTERED BETWEEN THE SIDE RAILS.  DO NOT OVER-REACH.  SET ALL FOUR FEET ON FIRM LEVEL SURFACE.  WEAR SLIP-RESISTANT SHOES.

Light Household Duty Rating Working Load:  200 lbs.

Id. at *1.  Although Yolanda filed suit alleging defects in design, manufacture, and warnings, she ultimately abandoned all theories of liability except one:  that the warning was defective because it did not warn that the stool had a limited useful life and that it should be regularly inspected.

The trial court granted summary judgment, and the Fifth Circuit affirmed, based on this simple fact:  Yolanda testified that she never read the warning labels.

As the Fifth Circuit explained, Yolanda bore the burden of proof on causation, i.e., that but-for the inadequate warning, the accident would not have occurred.  But if she never read the warnings, it doesn't matter what the warnings said -- they never could have prevented her injury because she never would have read them.

Too often, courts try to avoid a seemingly harsh result by refusing to apply this simple "but-for" causation test.  But the Fifth Circuit got it exactly right, and this case is a good reminder for defense lawyers at the start of a new year to pay attention to the basics.

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A federal court recently issued a decision holding that a publisher is not a "seller" and thus is not liable for product liability claims brought by the purchaser of a product advertised on the publisher's website.  See Inman v. Technicolor USA, Inc., 2011 WL 5829024 (W.D. Pa. Nov. 18, 2011).  This decision reminds us of the all-important duty determination in product liability and warranty cases:   the manufacturer and seller of a product may owe duties to the product purchaser, but not others who are not in the chain of distribution of the product.  This apt reminder -- coming in a case about product sales on eBay -- is particularly useful because in other contexts, plaintiffs seeking to avoid federal diversity jurisdiction are attempting to fraudulently join companies that publish information about products as defendants in product liability cases.  But, as Inman holds, publishers are not liable in product liability or warranty because they are not sellers of the allegedly defective product and thus owe no duty to the plaintiff.

In Inman, the plaintiff bought vacuum tubes from various sellers on the on-line auction site eBay over the course of 8 years.  These tubes allegedly contained mercury, and plaintiff claimed personal injury from using them. 

Plaintiff sued various sellers and eBay in strict liability, negligence, and breach of express and implied warranties.

eBay filed a motion to dismiss.  Applying Twiqbal, the court proceeded through a three-part analysis:  first, laying out the elements of the claim, then identifying the bare allegations not entitled to a presumption of truth, and then determining whether the well-pleaded facts meet the elements of the causes of action.  2011 WL 5829024 at *3.

The court reviewed Pennsylvania law, noting that there can be no strict liability for one who is not a "seller" of a product.  The status of "seller" "depends on the relationship between the defendant, the defective product, and the chain of distribution."  The court concluded that plaintiff had failed to plead that eBay was anything approaching a seller:

[Plaintiff] has not alleged that eBay, at any time, had anything more than a fleeting connection to the allegedly defective products.  He has not alleged that eBay ever had physical possession of the products, that they were moved or stored in a facility owned by eBay, or any other facts to suggest that holding eBay responsible would incentivize safety, that eBay is the only member of the marketing chain available, or that eBay is in a better position than [plaintiff] to prevent the circulation of such defective vacuum tubes.

Id. at *6.

The court assumed, for the sake of argument, that the complaint pled a valid negligence claim.  It then analyzed the federal Communications Decency Act, which provides that :  "No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider."  47 U.S.C. sec. 230(c)(1).  The court determined that the immunity provided by this section applied to eBay, which simply published on the web a site where buyers and sellers could meet to make deals.  In doing so, it relied on precedents holding that an auctioneer is not subject to liability under the CDA.  (Notably, there were similar cases in strict liability holding that auctioneers are not "sellers" of a product for the purposes of strict liability under Section 402A of the Restatement (Second) of Torts.)

As a result of its conclusions, the court dismissed the complaint, giving plaintiff an opportunity to replead.

Inman is not a groundbreaking opinion.  But it's simple application of the principle that in product liability, duties only flow from one's status as a seller makes Inman potentially useful in a variety of contexts.

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District Judge Dennis M. Cavanaugh recently issued an opinion in a consumer warranty class action that provides a good illustration of basic principles of warranty law.  In Suddreth v. Mercedes-Benz, LLC, Civ. A. No. 10-CV-05130 (DMC-JAD), Slip op. (D.N.J. Oct. 31, 2011), the plaintiffs -- owners of 2006 Mercedes ML 350 cars -- brought a putative class action against Mercedes, claiming that their soccer mom cars were defective because the balance shaft gear had a tendency to wear out prematurely, causing the "check engine" light to illuminate and the car to misfire or stop running.  Mercedes had issued a technical service bulletin about the problem in 2007, and it changed the design of its engine in 2009.  

Mercedes moved to dismiss the lawsuit, and Judge Cavanaugh ultimately granted the motion.

Mercedes moved to dismiss the express warranty cause of action on the ground that the failures in plaintiffs' vehicles occurred outside of the 4-year/50,000 mile warranty.  Plaintiffs argued that the "defect" was latent in the vehicle during the warranty period, but the court noted that "[c]ourts have consistently rejected claims that a latent defect was present in a vehicle from the date of manufacture, when that defect did not manifest itself until outside of the warranty period."  Slip op. at 6 (citations omitted). 

Plaintiffs also argued that the warranty was unconscionable because it did not cover the expected useful life of the balance shaft gear.  The court rejected that argument, too.  It noted that merely knowing that a product might fail after the expiration of the warranty is not enough to make a limited warranty unconscionable.  Slip op. at 7.  Moreover, plaintiffs' use of their vehicles during the warranty period without failure simply cannot be classified as "nominal" use of the product.  Slip op. at 8.

As for the breach of implied warranty claim, the court focused on the fact that plaintiffs drove their cars for the full warranty period without incident:  "It is simply not plausible that a motor vehicle could be classified as not merchantable when it has been used for its intended purpose for 4 years and 50,000 miles."  Slip op. at 9.

Plaintiffs also had sued under various state consumer fraud statutes, arguing that Mercedes's failure to disclose these "known" defects was an unfair practice that violated the statute.  The court, analyzing the New Jersey Consumer Fraud Act, noted that where an allegedly defective product is alleged to have been under warranty, a claim for a defect that manifests after the warranty period cannot establish liability under the NJCFA unless "the manufacturer knew with certainty that the product at issue or one of its components was going to fail."  Slip op. at 10.  Because Mercedes had no certainty that the gear would fail, there was no liability under the NJCFA.  As for the other states' statutes, the court also relied on the fact that there was no evidence that Mercedes knew the gear's propensity to fail until after it had sold the cars.  It also held that the Massachusetts plaintiff's failure to provide statutory notice defeated his claim.

The court also dismissed claims for strict liability and negligence, relying on the economic loss doctrine.  Slip op. at 11.  And it dismissed the unjust enrichment claim, noting that the failure of the other causes of action that had alleged wrongful conduct meant that the unjust enrichment claim must be dismissed as well.

The decision in Suddreth makes it very clear that when you buy a product under a limited warranty and the product performs for the full life of the warranty, you have no cause of action if it subsequently requires repair.  No amount of creative lawyering about "latent defects" that allegedly existed "unmanifested" during the warranty period should change this basic fact.

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In the decision du jour, a homeowner was injured when one of his in-laws (who was providing free landscaping for the homeowner) dropped a skid loader's heavy bucket on the foot of the homeowner, who was also working on the landscaping project.  Domagala v. Rolland, 2011 WL 5061523 (Minn. Oct. 26, 2011).  There are a number of possible lessons to be learned from this case.  Never hire your in-laws to do work around your house.  Avoid yard work at all costs.  Never trust your in-laws around heavy equipment.  And you get what you pay for.

The lesson the Minnesota Supreme Court chose to teach from this case is when a duty to warn may arise and the difference between misfeasance and nonfeasance.  Although this isn't a mass tort case, it's a useful reminder on these basic tort issues.

The defendant had brought a skid loader onto the plaintiff's property to do landscaping.  It had various attachments, including a bucket that was secured to the skid loader by two pins.  When the pins were released, the bucket could be removed and switched for another attachment.  Sometimes the pins would stick because of debris.  The defendant would attempt to dislodge the debris by jiggling the controls, thereby shaking the bucket.  This presented the risk that an elevated bucket could become dislodged from the skid loader and fall to the ground.  It did -- at a time when the plaintiff was near the bucket to remove a rock.  The bucket fell on his foot, causing injuries requiring the removal of a number of toes.

At trial, the jury had been instructed that the defendant had no special relationship with the plaintiff, and thus owed him no duty to warn.  It was also instructed on Restatement (Second) of Torts section 321, which provides that a person who creates an unreasonable risk of physical harm to another must use reasonable care to prevent injury.  The jury returned a verdict finding the defendant not to have been negligent.  Plaintiff appealed, challenging the "no duty to warn" instruction.

The Minnesota Supreme Court first gave a primer on basic negligence law:

The distinction between the specific duty to warn and exercising reasonable care by giving a warning likely stems from the historical divergence of liability for misfeasance and nonfeasance.  Misfeasance is "active misconduct working positive injury to others" while nonfeasance, or nonaction, is "passive inaction or a failure to take steps to protect [others] from harm."  Inaction by a defendant -- such as a failure to warn -- constitutes negligence only when the defendant has a duty to act for the protection of others.

A duty to act with reasonable care for the protection of others arises in two instances implicated in this case.  First, echoing the principles of liability for misfeasance, general negligence law imposes a duty of reasonable care when the defendant's own conduct creates a foreseeable risk of injury to a foreseeable plaintiff.

Second, a defendant owes a duty to protect a plaintiff when action by someone other than the defendant creates a foreseeable risk of harm to the plaintiff and the defendant and the plaintiff stand in a special relationship.  In other words, although a defendant generally does not have a duty "to warn or protect others from harm caused by a third party's conduct," an exception to this rule exists when the parties are in a special relationship and the harm to the plaintiff is foreseeable.

Id. at 5 (citations omitted).

The court noted that the parties had stipulated that they were not in a special relationship.  Thus, it held, the defendant owed plaintiff no duty to warn about risks of harm created by others.  But he still owed a duty of reasonable care to prevent harm resulting from risks that he created himself.  The court noted that the exercise of that "reasonable care" could involve taking physical precautions, but it also could have involved simply warning the plaintiff of the risk and telling him to stay away from the bucket.  It was up to the jury to determine precisely how the duty of care could be reasonably discharged, but it confirmed that a warning was at least one option the jury could consider.  Accordingly, the jury instruction about there being no duty to warn was misleading.

In the course of this discussion, the court noted that many courts have refused to follow section 321 of the Restatement (Second) because it does not address policy concerns that are typically considered as part of the duty analysis.  The court expressly declined to adopt section 321, and instead relied on its standard five-factor test for determining whether a duty to exercise reasonable care exists.  See id. at *8.

In reviewing the "no duty to protect others" jury instruction, the Minnesota Supreme Court indicated that "a correct statement of the law" would read as follows:

A person generally has no duty to act for the protection of another person when the harm was created by a third party.  No duty to protect against harms created by others exists in this matter and you must not consider such a duty in your deliberation in this case.

Id. at *11 (emphasis in original).  Without the qualifying language, the court held, the instruction would contradict "a basic tenet of negligence law:  when a defendant's conduct creates a foreseeable risk of injury to another, the defendant has an affirmative duty to exercise reasonable care to avoid the injury."  Id.

The opinion in Domagala makes it plain that MInnesota law does not impose a duty to warn on people unless they have done something to affirmatively create a risk of harm, or they are in a special relationship with the plaintiff.  Its discussion of misfeasance and nonfeasance is useful, and its rejection of Restatement (Second) section 321 for lack of adequate public policy considerations is notable. 

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If I had any competency at all with computers, I would have some background music for this post:  the 1980 hit "One in a Million You" by Larry Graham (former bassist for Sly and the Family Stone and the father of the slap bass style of playing).

Featured today is the Sixth Circuit's recent decision in Hirsch v. CSX Transportation, Inc., No. 09-4548 (6th Cir. Sept. 8, 2011), in which some residents of Painesville, Ohio brought a class action against a railroad for damages allegedly resulting from a train derailment and three-day fire during which 1,300 people were evacuated from homes within a half-mile radius of the crash.  The class brought claims for nuisance, strict liability, trespass, negligence and medical monitoring.  The trial court granted a motion to dismiss the first three claims, but allowed discovery to go forward on the negligence claim and medical monitoring remedy.

CSX had stipulated to a breach of duty when the train derailed, so the only remaining elements of a negligence claim were proximate cause and injury.  The defendant moved for summary judgment, which the trial court granted.  Plaintiffs had at least four experts to advance their theory that class members had been exposed to dioxin from the fire at levels above the EPA's threshold of acceptability, thereby increasing their cancer risk by one in a million.

The Sixth Circuit affirmed the grant of summary judgment.  It began by noting the procedural posture of the case.  The defendants had not challenged the admissibility of plaintiffs' expert testimony under Daubert.  Rather, the district court had granted summary judgment based on the defendant's challenge to the sufficiency of the expert evidence.  As the court noted, "[e]ven where an expert's evidence is ruled admissible under the Daubert standards, a district court remains free to decide that the evidence amounts to no more than a mere scintilla."  Slip op. at 4-5.

Plaintiff's expert opined that although the class members had not sustained any physical injury to date, their relative risk of developing cancer had been increased by one chance in a million.  The Sixth Circuit held that this slight increase in cancer risk was not enough for a reasonable physician to order a medical surveillance program.

Even the "one-in-a-million" opinion was based on speculation about the amount of exposure to dioxin, as well as its source.  (Dioxin occurs naturally and exists in the environment at background levels.)  The court explained:

[W]e are left with a report speculating (based on speculation) that the Plaintiffs might have been exposed to quantities of dioxin somewhere in the ballpark of 43.9 ppt, and that their risk therefore might (or might not) be somewhere around 50% of a one in a million additional risk of developing cancer. . . .

. . . If something has a one-in-a-million chance of causing cancer, then it will not cause cancer in 999,999.  For some perspective, the National Safety Council estimates a person's lifetime risk of dying in a motor vehicle accident as 1 in 88.  The lifetime risk of dying in "air and space transport accidents" is roughly 1 in 7,000.  The risk of being killed by lightning is roughly 1 in 84,000, while the risk of being killed in a "fireworks discharge" stands at around 1 in 386,000.  These risks--of death, not disease--are all much smaller than what the plaintiffs allege in this case:  lifetime odds of developing cancer at 50% of 1 in 1,000,000.  To even approach that number, we can look at the average person's risk of dying from bathtub drowning in any given year (1 in 840,000).

Slip op. at 6-7 (citations omitted).

The Sixth Circuit concluded that "the Plaintiffs have alleged only a risk that borders on legal insignificance, have failed to produce evidence establishing even this hypothetical risk with any degree of certainty, and have demanded a jury trial based upon their expert's review of this evidence and conclusory statement of the relevant legal standard."  Slip op. at 8.  Accordingly, it affirmed the summary judgment for the defendant.

The Hirsch opinion provides a couple of excellent resources for risk information.  One is the National Safety Council's "Injury Facts," and the other is the Harvard Center for Risk Analysis.

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The good folks at Drug & Device Law beat me to the 11th Circuit's recent unpublished per curiam decision in Rounds v. Genzyme Corp., No. 11-11025 (11th Cir. Sept. 8, 2011), but I felt compelled to at least mention it to you anyway.  Ms. Rounds had knee trouble and was treated with a biologic product called Carticel, which "uses the body's own cultured cells to regenerate the articular cartilage in a knee during a surgical procedure called autologous chrodrocyte implantation ('ACI')."  Slip op. at 2-3.

Ms. Rounds required subsequent medical treatment and additional knee surgeries after using Carticel, so she sued the manufacturer in negligence.  She claimed that the manufacturer failed to properly train her doctor to determine who is and is not a proper candidate for Carticel treatment.  The defendant moved to dismiss based on the learned intermediary doctrine.  The trial court granted dismissal, and the 11th Circuit affirmed, citing the package insert.

Rounds is notable for a few reasons.  First, it applies the learned intermediary doctrine to a biologic that is not really a drug or device, per se.  The court reasoned in a footnote that the doctrine applies to all prescription products that require the intervention and assistance of a physician.  See slip op. at n.2.  That's hardly controversial, but notable nonetheless.

Second, the court adjudicated the adequacy of the warning to the physician as a matter of law, rejecting the plaintiff's argument that it instead was a fact issue for the jury.  The package insert identified people with certain conditions -- such as osteoarthritis or a hypersensitivity to gentamicin -- as unsuitable for treatment with Carticel, and it cautioned:  "The necessity of subsequent surgical procedures, primarily arthroscopic, following Carticel implantation is common.  In the STAR study, 49% of patients underwent a subsequent surgical procedure, irrespective of relationship to Carticel."  Slip op. at 6.  These instructions, according to the court, were clear, accurate, and unambiguous, thereby making the adequacy of the warning adjudicable as a matter of law.

Third, and perhaps most important, the court did not fall for the plaintiff's attempt to dodge the learned intermediary bullet by characterizing the issue as one of negligent training, rather than a failure to warn.  Apparently the manufacturer had represented that it had trained those doctors performing ACI procedures with Carticel.  Plaintiff argued that the manufacturer had failed to adequately train her doctor to know who should not receive treatment with Carticel.  The 11th Circuit rejected this characterization, holding that the learned intermediary doctrine still applied:

[T]his is a distinction without a difference -- especially since the Rounds have not alleged that Genzyme gave inadequate training regarding the physical implementation of the procedure itself, but rather in how he should select potential candidates for Carticel.  Thus, Genzyme satisfied its duty to Dr. Jurbala by providing clear, unambiguous information concerning the contraindications for Carticel, as well as the risks associated with it.  Whether Genzyme was 'training' or 'warning' Dr. Jurbala of these risks when it provided him the package insert is, as the district court recognized, an issue of semantics only.  As a matter of law Genzyme discharged its duty to advise Dr. Jurbala of the risks associated with Carticel by providing clear, unambiguous information about these risks in the Carticel package insert.  Dr. Jurbala then owed a duty to Denise Rounds to read the package insert and exercise judgment in discussing those risks with Ms. Rounds and in using the Carticel product to treat Ms. Rounds.

Slip op. at 8-9.

Fortunately, the 11th Circuit immediately saw through the plaintiffs' attempt to turn a basic failure to warn case that was barred by the learned intermediary doctrine into a "negligent training" case that purportedly was not.  Let's hope that other courts faced with similar fanciful descriptions of plaintiffs' claims are equally discerning.

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Unless Irene decides otherwise this weekend, I have a boat docked on Long Island.  She's a picnic boat and, at under 30 feet, the smallest craft in the marina.  She's basically a means of transportation to a restaurant or bar, and has never been out of the immediate environs of the Peconic Bay, Gardiner's Bay, and Long Island Sound.  And yes, she's a motorboat.  (I'd never have the patience to sail.)  The enormous yachts in the marina -- and there are many -- no doubt taunt my boat when no one is around.  To look at her is to know that she is a mere dalliance, and that her skipper is no great (or ancient) mariner.  It's precisely because she so obviously is what she is that I named her Res Ipsa.

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Longtime readers of this blog may recall a post from a few years ago in which I reported on a jury verdict in which the maker of Louisville Slugger bats was held liable for failing to warn that a baseball hit with an aluminum bat can travel faster and with more force than a ball hit with a wooden bat.  The jury's verdict was puzzling, since the jurors held that the bat itself was not defectively designed.  Rather, liability was premised solely on a failure to warn.

Well, hard cases make bad law.  Winterbottom v. Wright (1842) M&W 109.  A few weeks ago the Montana Supreme Court affirmed the judgment against the bat maker, writing some dubious principles into Montana's law books.  See Patch v. Hillerich & Bradsby Co., 2011 MT 175 (July 21, 2011).

No one can deny that this was an extremely tragic case; a baseball struck an 18-year-old pitcher in the temple and killed him during a baseball game.  The all-too-human desire to award compensation for such a devastating loss is strong.  But the way in which the Montana Supreme Court allowed the jury's verdict to stand fundamentally undermines failure to warn law in Montana.

First, it's important to note that aluminum bats are not defectively designed products.  The jury didn't think so.  The American Legion didn't think so, as they authorized the bats for use in their league games.  And the coaches clearly didn't think so.  This was not a jury verdict that was premised on the notion that aluminum bats should not have been used in the first instance.

A failure to warn cause of action requires that there be:  (1) an information deficit -- i.e., something that the user did not know; (2) a duty on the part of the seller to inform the user -- i.e., to eliminate that information deficit; (3) a failure to meet that duty; and (4) causation -- the breach of the duty must have been an actual cause of the injury.

Here, the problem with the jury's verdict -- and the Montana Supreme Court's twisted opinion affirming it -- is that there was no information deficit and no "causation," as there was nothing that the manufacturer could have said that would have changed the players' use of the bat.  Arguing that the warnings should have resulted in the bat being banned from use in league games is tantamount to finding a design defect -- which is something that the jury did not do.

It is beyond cavil that there was no information deficit regarding the potential for serious injury.  Although aluminum bats may allow players to hit balls faster, harder and further than wooden bats (without the additional safety risk of the bat breaking, like wooden bats can do), they are specifically designed to minimize the bat speed advantage of aluminum over wood.  And certainly not all hits from aluminum bats are faster than wooden bats.  Indeed, as my prior post had noted, the ball that struck Brandon Patch was measured at 99.8 miles per hour, while nearly every home run hit with a wooden bat exceeds 100 miles per hour.  Even with wooden bats, a baseball that is hit hard travels at speeds that can cause serious bodily injury.

Baseball fans know this, as stadium signs and ticket stubs warn of injury from baseballs.  Pitchers definitely know this.  Accordingly, there was nothing to warn the players about.  They knew the sport of baseball presents a risk of serious injury from being struck by a ball regardless of the bat used.

The Montana Supreme Court, in its opinion, hides behind the notion that the "workability" of a warning is a jury question, but it never squarely addresses the fact that there simply was no information deficit that a warning could correct.  Indeed, it never even acknowledges what Justice Rice notes in his concurrence:  the plaintiffs never articulated for the jury what facts or instructions an "adequate" warning would contain. 

Again, the court discusses the red herring that a warning could have been provided in places other than a sticker on the bat -- such as by putting warnings in ads or media releases.  And it opines that "[s]uch warnings . . . would have communicated to all players the potential risk of harm associated with H&B's bat's increased exit speed."  Slip op. at 8.  But the court misses the fundamental point that plaintiffs failed to meet their burden to articulate the substance of what an adequate warning should have said that wasn't already known by the players.  They already knew that balls hit hard -- by aluminum bats, and even by wooden bats -- travel at speeds that can cause serious bodily harm.

The Montana Supreme Court also concocts an exception to the "causation" requirement, which requires a plaintiff to prove that the proposed warning would have altered the user's conduct in a way that would have avoided the injury.  Here, the court posits that because Brandon Patch is deceased, it would be "unfair" and "unjust" to apply a "self-serving 'magic words' requirement here."  Slip op. at 11.  Thus, the court applies a heeding presumption, holding that the jury could presume that Brandon "would have heeded a warning had one been given."  Id.  In fact, it articulates a rule of law for all products liability failure to warn claims where the product user is deceased, that "'the jury may be permitted to infer that a warning would have been heeded and that the failure to warn was a proximate cause of the injury.'"  Id. (citation omitted).

Of course, the problem is that there was no realistic way for Brandon to "heed" the plaintiffs' proposed unarticulated warning that fast balls hit by aluminum bats can cause serious injury.  What was he to do, given that aluminum bats were used in the league?  Urge the batter to hit the ball with less force?  As the pitcher, he already faced the same risk of injury from balls hit by wooden bats.  At best, plaintiffs might have suggested -- although it appears that they did not -- that "heeding" the warning would have meant not using the aluminum bat at all in league games.  But that is tantamount to a finding that the risks of the design outweigh its benefits and, as such, that conclusion would be wholly irreconcilable with the jury's determination that the bat was not defectively designed.

By not requiring the plaintiffs to identify the information deficit and specify precisely what warning should have been conveyed, and then ignoring the causation requirement by using a presumption that an unspecified warning would have been "heeded," the Montana Supreme Court appears to have bent the law to achieve a desired result.  But in doing so, it has created a problem that will recur in product liability cases in that state for years to come.

It also bears noting that the Patch case presented a question on the applicability of the assumption of risk defense.  By statute, the legislature has declared that there is no liability where "'[t]he user or consumer of the product discovered the defect or the defect was open and obvious and the user or consumer unreasonably made use of the product and was injured by it.'"  Slip op. at 12 (citation omitted).  That statute was subsequently interpreted by the Montana Supreme Court as not applying without evidence that, using a subjective standard, the victim knew he would suffer serious injury or death and still voluntarily exposed himself to the danger.  What does not appear to have been considered by the court prior to Patch was whether the assumption of risk defense would apply where the risk of harm was common knowledge.  The court in Patch reflexively applied the subjective standard, arguing that there was no evidence in the record of what Brandon knew.

This stands in stark contrast to the general rule applicable to spectators at baseball games.  See Walter T. Champion, Jr., Fundamentals of Sports Law, Section 6.3 (Nov. 2010) ("[T]he usual rule is that a spectator cannot recover for ordinary risks inherent to the sport."); Thurmond v. Prince William Professional Baseball Club, Inc., 265 Va. 59, 574 S.E.2d 246 (Va. 2003) (despite the subjective nature of the assumption of risk defense generally, surveying cases from across the nation to conclude with them that "as a matter of law, a spectator assumes the normal risks of watching a baseball game, which includes the danger of being hit by a ball batted into an unscreened spectator area").  If this is the rule for baseball spectators, one can imagine how obvious most courts would find the dangers to be to actual players. 

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Lest any of you think that who bears the burden of proof doesn't really matter, take heed of the recent decision in Chow v. Reckitt  & Colman, Inc., No. 81 (N.Y. May 10, 2011) by New York's highest court, the Court of Appeals. 

In Chow, a restaurant employee who did not speak English sued a manufacturer whose product was marketed and used to unclog drains.  The product correctly warned that the use of lye (sodium hydroxide) presented risks of burns, and instructed users to use rubber gloves and protective eyewear when using the product.  It also cautioned against letting the lye come in contact with aluminum utensils.

But the plaintiff never read the warnings and instructions.  Instead, he used the product on a clogged floor drain after having watched others use the product in the past.  Plaintiff poured roughly three teaspoons into an aluminum container, and then poured three cups of cold water into that container.  The mixture of aluminum, lye and water created an acid that gave off hydrogen.  When plaintiff -- who was not wearing any safety gear -- poured the solution down the drain, it splashed back onto plaintiff's face, causing serious burns and blindness in one eye.

There is no question that plaintiff failed to heed warnings and follow instructions that would have prevented his injuries.  Indeed, the trial court granted summary judgment on the failure to warn cause of action, and that was not challenged on appeal.

But the trial court and the Appellate Division also had ruled that the defendant was entitled to summary judgment on plaintiff's strict liability design defect claim.  The defendant had submitted an attorney affidavit indicating that the product is 100% lye, that lye is commonly known to be dangerous, and that any "alternative design" of the product that changed the chemical composition of the product would not have been the same product:  lye.

The Court of Appeals, however, held that this was not enough to warrant summary judgment because under New York law, a product with adequate warnings still "may be so dangerous, and its misuse may be so foreseeable, that a factfinder employing the required risk-utility analysis our case law has established could reasonably conclude that 'the utility of the product did not outweigh the risk inherent in marketing' it."  Slip op. at 6 (citation omitted).  It was the defendant's burden, the court held, establish in the first instance that "it was not feasible to design a safer, similarly effective and reasonably priced alternative product."  Id. at 7.  What the court wanted from the defendant in the first instance was proof that its product was reasonably safe for its intended use.

This sounds odd to most federal court practitioners, who are used to moving for summary judgment based on the plaintiff's inability to proffer evidence on an element of a cause of action upon which he or she bears the ultimate burden of proof at trial.  Judge Robert Smith filed a concurrence that explained the difference between the summary judgment rule in New York state courts as compared with the rule that applies in federal (and most other states') courts.  Under Celotex Corp. v. Catrett, 477 U.S. 317 (1986), federal litigants can merely point to the opposing party's lack of evidence to prove an element that he or she must prove at trial.  But in New York, the initial burden of making an evidentiary showing rests on the moving party, and thus the manufacturer was required to provide evidence establishing that the design was reasonably safe for its intended use, regardless of the plaintiff's lack of proof that the design was defective.  Judge Smith explained that the plaintiff's expert, in an affidavit responding to the defendant's summary judgment motion:

proposed several products that he called "safer" alternatives to lye, but he did not show that any alternative capable of preventing plaintiff's accident would perform as well as lye at a reasonable cost.  Describing his principal proposal -- a 3% to 5% solution of lye -- the expert admitted that it would take "somewhat longer to do the job" of unclogging drains, and did not say how much longer.

If a record identical to the present one were developed at trial, plaintiff would fail to meet his burden of proof and the court would be required to direct a verdict for defendants.  One might think, therefore, that the record would entitle defendants to summary judgment.  But one who thought that would be wrong under New York law, because the initial burden to make an evidentiary showing on summary judgment rests on the moving party. . . .

. . . The [defendant's] burden of making the necessary evidentiary showing might not have been hard to meet:  an affidavit from someone knowledgeable in the industry -- either a retained expert or an employee of one of the defendants -- could have done it.  But the burden was not met. . . .

. . . If we were writing on a clean slate, I might prefer the Celotex rule to ours, but we are not, and I am not urging a change in our law.  I am urging, however, that parties moving for summary judgment in the future be alert to the burden that New York law places on a moving party.

Concurrence at 2-4 (citations omitted).

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The Fourth Circuit recently issued an opinion reflecting the conservative approach that is required when federal courts sitting in diversity are called upon to predict how the state supreme court would rule on controlling issues of state tort law.

In Rhodes v. E.I.DuPont de Nemours & Co., 2011 WL 1335799 (4th Cir. Apr. 8, 2011), customers of the Parkersburg, West Virginia City Water Department sued the defendant in a putative class action for contaminating the public water supply with perfluorooctanoic acid (PFOA).  Thankfully, none of the class representatives had become ill, but their blood did reflect higher-than-normal levels of PFOA, which they alleged had been associated with an increased risk of liver disease, cholesterol abnormalities, and certain cancers.

The plaintiffs originally asserted a variety of causes of action:  negligence, gross negligence, battery, trespass, private nuisance, and the separate tort of medical monitoring.  The district court held that the medical monitoring claim was not susceptible to classwide proof.  It also denied class certification under the traditional common law tort claims.  Plaintiffs then amended their complaint to add a public nuisance claim. 

Subsequently, the district court granted summary judgment to the defendant on all of the traditional tort claims for lack of injury.  But it denied summary judgment on the individual claims for the "new" tort of medical monitoring.  So that they could appeal immediately, without having to wait for their remaining individual claims to be litigated, the plaintiffs voluntarily dismissed their individual medical monitoring claims.

On appeal, the Fourth Circuit dealt first with the class claims for negligence and gross negligence.   It concluded that they must be dismissed because they require a plaintiff to produce evidence of a health detriment that actually has occurred or "is reasonably certain to occur due to a present harm."  2011 WL 1335799 at *3 (citation omitted).

With respect to the claim for battery, the Fourth Circuit held that the mere presence of PFOA in the plaintiffs' blood was not a battery because it did not cause any "physical impairment."  Id.  Plaintiffs argued that the West Virginia Supreme Court would waive any impairment requirement in such a situation, but the Fourth Circuit refused to engage in such speculation:

The West Virginia Supreme Court of Appeals has not adopted this view and, in fact, expressly has required that a plaintiff alleging battery demonstrate "actual physical impairment."  Also, the West Virginia Supreme Court of Appeals has not embraced the alternative definition of battery embraced by the plaintiffs, battery based on "offensive contact," as provided in Section 18 of the Restatement.

In the absence of such action by the highest state court in West Virginia, our role in the exercise of our diversity jurisdiction is limited.  A federal court acting under its diversity jurisdiction should respond conservatively when asked to discern governing principles of state law.  Therefore, in a diversity case, a federal court should not interpret state law in a manner that may appear desirable to the federal court, but has not been approved by the state whose law is at issue.

Id. at *4 (citations omitted; emphasis added).

Analyzing the trespass claim, the Fourth Circuit concluded that the plaintiffs had failed to produce evidence showing the PFOA in the water had damaged or interfered with the plaintiffs' possession, use or enjoyment of the property.

The court also rejected the private nuisance claim, understanding that the legal interest asserted -- public access to clean drinking water -- was a pubic one, not a private one, and thus incapable of supporting a private nuisance claim.  Id. at *4-*5.

As for the public nuisance claim, the court held that plaintiffs lacked standing because they did not have a "special" injury that was different in both character and degree from the general public.  (Traditionally, the right to assert public nuisance claims was left to the sovereign.  Over time, it developed that individuals also could assert such claims on the public's behalf, but only where they had a "special" injury that could ensure that they would vigorously prosecute the claim.)  Plaintiffs argued that West Virginia would follow the Restatement, which would create an exception to the "special injury" requirement for class action plaintiffs.  The Fourth Circuit held that it was enough for them that the West Virginia Supreme Court had not adopted this approach:  "We decline to recognize such an exception in the first instance because, as we have stated, a federal court in the exercise of its diversity jurisdiction should act conservatively when asked to predict how a state court would proceed on a novel issue of state law."  2011 WL 1335799 at *6 (citation omitted).

The Fourth Circuit next considered the plaintiffs' arguments that they could obtain medical monitoring as an element of relief on their traditional tort claims even if they did not meet the "injury" requirement.  The Fourth Circuit rejected this approach outright, pointing to the West Virginia Supreme Court's decision that created a separate tort of medical monitoring.  In that decision, the court had held that the "injury" necessary to support an independent medical monitoring claim was "a 'significantly increased risk of contracting a particular disease relative to what would be the case in the absence of exposure.'"  Id. at *7 (citation omitted).  It did not re-define "injury" as something less for the traditional torts and, in fact, if it had done so, it would not have needed to create a separate, independent tort of "medical monitoring" in the first place.

The Fourth Circuit then dealt with the final issue on appeal:  whether the plaintiffs' voluntary dismissal of their individual medical monitoring claims precluded them from challenging the district court's decision that the independent "medical monitoring" claim could not be certified as a class action.  After surveying the variety of approaches courts have taken to the question of voluntary dismissals designed to elude the problem of  interlocutory appeals, the court followed basic standing principles to hold that voluntary dismissal of a cause of action barred appeal of the decision not to certify a class on that cause of action:

Applying the principles set forth by the Supreme Court, we conclude that when a  putative class plaintiff voluntarily dimsisses the individual claims underlying a request for class certification, as happened in this case, there is no longer a "self-interested party advocating" for class treatment in the manner necessary to satisfy Article III standing requirements.  Thus, we hold that we lack jurisdiction to decide the issue whether the district court abused its discretion in denying the plaintiff's request for class certification of their medical monitoring claims.

Id. at *9 (citation omitted).

The Fourth Circuit's decision in Rhodes is a strong example of a federal court showing deference to state sovereignty by refusing to invent new tort rules and causes of action that have not been recognized by the state's high court, and by declining to allow people who have surrendered their claims for strategic reasons to continue to assert the aggregated claims of a large number of the state's citizens.

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Yesterday's featured case involved the question of duty.  Sticking with that theme, I thought I'd bring to your attention another duty case, this time in the tort context.

One of the first lessons I learned in Torts class is the notion that foreseeability does not define the scope of the legal duty in tort.  For example, if I negligently caused an auto accident such that the highway patrol had to shut down the Long Island Expressway, it is certainly foreseeable that people in the cars behind me might miss a business meeting, fail to deliver a pizza on time, or miss their own wedding.  But tort law does not impose a duty on me to avoid those consequences for other people, even though they may result in financial loss.  Rather, tort law imposes a duty on me only to avoid negligently causing injury to a person or property.  Without personal injury or property damage, the fact that one of the drivers behind me was inconvenienced (or even financially impacted) simply does not give rise to a legal claim. 

In Sanders v. Norfolk So. Ry. Co., 2010 WL 4386881 (4th Cir. Nov. 5, 2010) (unpublished per curiam affirmance), the Fourth Circuit was squarely faced with the duty question.  (I should note that some of my colleagues were involved in this case.)  A train had derailed in a small town, causing a chlorine leak.  People within a one-mile radius were under a mandatory temporary evacuation order, and people within a two mile radius were under a temporary "shelter in place" order.  (The railroad quickly agreed to a class action settlement for those who were directly impacted.) 

But people who lived within a two-to-five mile radius of the crash site wanted a payday, too, so they filed a putative class action suit.  The defendant moved to dismiss, the trial court granted the motion, and the Fourth Circuit agreed.  The Fourth Circuit explained that:

South Carolina recognizes reasonable limitations on tort liability in negligence actions where the plaintiffs have suffered no personal injury and have no direct relationship with the tortfeasor. . . .

. . . While Appellants may have properly pled that their injuries were foreseeable, foreseeability alone may not give rise to a duty under South Carolina law. . . . 

Here, the only injuries alleged by Appellants are those directly related to their non-mandatory evacuation or temporary retreat from their homes.  While these harms may have been foreseeable by [the defendant], we agree with the district court that they are too remote to warrant a finding of legal duty.

Id. at *2 (citations omitted).

Similarly, the court affirmed the dismissal of the nuisance claims.  Dismissal of the public nuisance claim was proper because the plaintiffs had not alleged that their real or personal property was damaged by the accidental chlorine gas release.  And dismissal of the private nuisance claim was proper because the "release was a singular event and did not continuously keep them out of their homes."  Id. at *3.

Sanders is a reminder that foreseeability is not the equivalent of duty in tort law, and that the duty concept serves to cut off liability for harms that are simply too remote or attenuated from the challenged conduct.

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Regular readers of this blog know that there are a plethora of decisions dismissing class actions brought by so-called "third party payors" (e.g., union health and benefit plans) to recover sums they paid for medicines that their members took.  Typically, courts hold that the injury in such cases is simply too remote for the third party payors to have standing.  Put differently, courts hold that the defendant's challenged conduct is not the direct cause of these third party payors' "injuries" because the decision to prescribe and take the medicine was a result of the independent conduct of prescribing physicians and their patients.

Last week the MDL court in the Yaz Marketing, Sales Practices and Products Liability Litigation reached the same conclusion after canvassing the case law.  See Philadelphia Firefighters Union Local No. 22 Health and Welfare Fund v. Bayer Healthcare Pharmaceuticals, Inc., 3:09-cv-20071-DRH-PMF, Slip op. (S.D. Ill. Aug. 5, 2010).

The class definition in Philadephia Firefighters was as broad as could be:  "'[a]ll third party payors in the United States and its territories that purchased, reimbursed, and/or paid for all or part of the cost of YAZ dispensed pursuant to prescriptions in the United States.'"  Id. at 2.  Plaintiffs pled causes of action under RICO, as well as common law negligence, fraud, misrepresentation, and unjust enrichment.  (Notably, plaintiffs did not plead state consumer fraud statutes.  Presumably this was because the state consumer fraud statutes are simply too different to be adjudicated in a single class.)  Plaintiffs' theory of the case was that although Yaz was approved by the FDA as an oral contraceptive and to treat moderate acne and Premenstrual Dysphoric Disorder (PMDD), the defendant had promoted Yaz to treat off-label conditions like mild acne and Premenstrual Syndrome (PMS) without telling people about the substantially increased risks of heart and gallbladder problems from the medicine.  This allegedly caused the market for Yaz to expand and allowed the defendant to maintain a "falsely inflated price" for Yaz.  Id. at 6.

The court began its analysis by considering whether the plaintiffs had the necessary standing to assert a RICO claim under federal law.  Reciting the Supreme Court case law, the court observed that RICO requires plaintiffs to show not only that defendant's conduct was a "but-for" cause of their injuries, but also that it is the proximate cause as well.  In other words, there must be a direct relationship between the injury asserted and the injurious conduct alleged.

The court surveyed a majority of the third party payor opinions, concluding that the injury to third party payors is simply too remote and speculative to meet RICO's direct injury requirement.  The court adopted the reasoning of Ironworkers Local Union No. 68 v. Astrazeneca Pharmaceuticals LP, 585 F. Supp. 2d 1339 (M.D. Fla. 2008), explaining:

[P]hysicians use independent medical judgment to decide whether to prescribe the subject drug to a particular patient and that judgment can be influenced by any number of factors.  Accordingly, establishing that the third party payor's injuries were caused by the alleged misconduct would require an inquiry into each doctor patient relationship to determine whether the physician was influenced by the alleged misrepresentations and to what extent.

Philadelphia Firefighters, Slip op. at 16.

The court concluded that "multiple steps separate the alleged wrongful conduct . . . and the alleged injuries . . . including patient preference, the independent judgment of the prescribing physician, and the reimbursement decision rendered by the third party payor and its benefits manager."  Id. at 18.  Accordingly, the complaint flunked RICO's direct injury requirement.

The court applied the same analysis to plaintiffs' common law causes of action, finding no proximate causation for negligence, misrepresentation or fraud.  As for unjust enrichment, the court reasoned that because that theory was based on an underlying tort, and no tort cause of action had been sufficiently pled, the unjust enrichment complaint also failed as a matter of law.

Philadelphia Firefighters is a strong opinion that confirms what already has become quite clear:  although plaintiffs lawyers have gravitated toward these claims as a way to possibly avoid learned intermediary and causation defenses, the overwhelming weight of authority is that third party payors stand far too remote from the medical treatment decisions to plead proximate causation.

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Every once in a while you encounter an opinion that surprises you enough that you say:  "Wh-wh-what did they just say?"  I read one this morning:  Lance v. Wyeth, 2010 Pa. Super. 137 (Aug. 2, 2010). 

Lance arises out of diet drug litigation.  Plaintiff's decedent had taken Redux for a period of time while it was approved by the FDA and still on the market.  She was diagnosed with primary pulmonary hypertension seven years later and subsequently died.  Plaintiff filed suit alleging that Redux caused her decedent's death.

Interestingly, plaintiff did not plead a failure to warn claim, per se -- presumably because she could not allege that plaintiff or her doctor were unaware of the risks or relied on anything that the manufacturer said in prescribing the drug.  The complaint explicitly stated that plaintiff "was making 'No Inadequate Labeling Claims.'"  Slip op. at 7.  She also did not allege a manufacturing defect claim. 

Plaintiff did, however, allege the following four "claims":  (1) that defendant unreasonably put Redux on the market prior to January 1997, (2) that defendant unreasonably refused to withdraw Redux from the market once its testing revealed risks of PPH, (3) that defendant breached the standard of care in failing to adequately test Redux, (4) and that it negligently designed the medicine.

The defendant moved for summary judgment in the trial court, noting that there are three types of product defect:  design defect, manufacturing defect, and failure to warn.  Plaintiff had excluded two, and (defendant argued) there is no cause of action for design defect in the field of pharmaceutical products.  The trial court agreed and granted summary judgment.

The intermediate appellate court, however, partially disagreed, reaching the stunning conclusion that there is such a thing as a cause of action under Pennsylvania law for negligent product design -- but not strict liability design defect -- in pharmaceutical cases.  The court properly cited Hahn v. Richter, 673 A.2d 888 (Pa. 1996) for the proposition that there is no strict liability design defect claim for pharmaceutical products.  See Slip op. at 14.  Hahn had cited Restatement (Second) of Torts Section 402A, comment k as a justification for the rule.  Medicines are "unavoidably unsafe products" that present risks to some people despite their benefits for others, and comment k explains that the seller of such a product that is properly prepared and marketed cannot be held to strict liability for the unfortunate consequences attending use of the product.

But the court in Lance decided that this rule only applies to strict liability, and that it would still be possible for a plaintiff to state a cause of action for design defect in negligence.  Of course, the policy justifications articulated in comment k -- that manufacturers should not be liable for the unavoidable consequences of a medicine so long as they prepare it right and warn about it -- are the same regardless of whether liability sounds in strict liability or negligence.  Indeed, many scholars and, it would appear, the American Law Institute, have concluded that there is no real difference between the tests for design liability in negligence or strict liability.  See Restatement (Third) of Torts, Section 2.  The Lance court, citing decades-old opinions from Idaho and California, reached the opposite conclusion that there is some sort of meaningful difference between strict liability and negligent design claims.  Slip op. at 18-21.

Moreover, saying that a medicine is improperly designed fundamentally implies a feasible alternative design.  And yet if a medicine were designed differently, it would cease to be the same medicine; it would be something completely different.  The design defect construct simply does not work in the pharmaceutical context.  But now there is an intermediate appellate court opinion in Pennsylvania suggesting that such a cause of action exists.

This fact is even more surprising when one considers the rest of the opinion.  The Lance court held that plaintiff's "failure to recall" claim was not cognizable under Pennsylvania law because the state does not recognize a common law duty to recall or retrofit, in large part because the cost of such a duty would be passed on to consumers and have significant economic impact.  But if that's true for a duty to retrofit, what about a duty arising in negligence to design a medicine differently?

Moreover, the court relied on the FDA and its approval of the drug in refusing to recognize a duty to recall.  Slip op. at 24-25.  But once again, if the FDA has approved a medicine and that's good enough to preclude a common law duty to recall, why not defer to the FDA's judgment on the issue of the medicine's design, too?

The court also rejected plaintiffs' other causes of action.  The claim for putting Redux on the market was tantamount to a disallowed strict liability design defect claim, the court held.  And the claim for failure to adequately test Redux was not cognizable under Pennsylvania law, the court explained, because it was simply a design claim repackaged.  Pennsylvania has never recognized an independent tort for failure to adequately test.  Citing Kociemba v. G.D. Searle & Co., 707 F. Supp. 1517 (D. Minn. 1989), the court explained that a "failure to test" claim is really a "failure to discover the defect" claim.  Once a manufacturer discovers a defect, it has a duty either to change the product's design or to adequately warn and instruct about the danger associated with it, the court said, so the "failure to test" claim is really subsumed in the design defect or inadequate warnings claim.  Slip op. at 30.

Given the Lance court's clear-headed reasoning on the remaining legal theories, it is doubly nonplussing how the court concluded that the only cause of action that should survive in this pharmaceutical case is a cause of action for negligent design, when admittedly there can be no strict liability design defect claim and the medicine was at the time approved for sale by the FDA.  Let's hope the Pennsylvania Supreme Court quickly resolves the issue of whether a negligent design claim can be asserted in a pharmaceutical case.

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One of the first lessons that first year law students learn in torts class is that tort liability does not extend to all harms caused by a tortfeasor, and we do not owe duties to the world at large.  Indeed, if it were otherwise, we each would be insurers for harm that we may cause to others, no matter how remote or speculative the claim. 

Rather, tort law imposes concepts such as duty, foreseeability, and proximate causation to limit a tortfeasor’s ultimate liability to certain people to whom he owed a duty who suffered personal injury or property damage proximately caused by the tortfeasor's conduct.  Pure economic harm (such as lost profits) is deemed too remote and speculative to be compensable in negligence without some sort of accompanying physical injury or property damage.   Thus, a driver who causes a traffic accident is not liable to the hundreds of people stuck behind him on a closed freeway who may have missed a meeting, failed to make a delivery, or missed a concert that they had expensive tickets for.  He is liable, however, to the person who was physically injured, and to any other person whose car was damaged in the crash.

Last week the Florida Supreme Court issued an opinion that reflects a serious debate about the limiting principles of tort law.  See Curd v. Mosaic Fertilizer, LLC, 2010 WL 2400384 (Fla. June 17, 2010).  The fact that it comes from a case in which commercial fishermen were seeking damages for pollution of the ocean ensures that we will be hearing more about it in litigation over the Gulf of Mexico oil spill.

In Curd, a fertilizer manufacturer owned a phosphogypsum storage area near a tidal estuary in Florida.  The property had a wastewater storage area that was overfilled, and the dikes around the pond were narrower than they were supposed to be.  State and local authorities warned the company that the facility was in danger of a spill if there were even a few inches of tropical rain.  As predicted, rains came, the dike gave way and pollutants ultimately spilled into Tampa Bay, allegedly killing the fish that commercial fishermen relied upon for their livelihood.

The fishermen sued, asserting common law negligence and a claim under Florida Statute section 376.313, which permits people to bring a private cause of action for damages from the discharge of pollutants.  The intermediate court of appeal had held that the fishermen could not sue, as they had not suffered personal injury or property damage.  After all, they did not own the fish in the sea.

The Florida Supremes reversed.  Analyzing the plain language of the statute, they held that "damages" were not only physical injury and property damage, but also damage to the environment, including living creatures.  The statute allowed anyone to sue for such harm.  Moreover, following some earlier precedents, the court held that the liability under the statute was strict liability, and certain affirmative defenses ordinarily available at common law would be unavailable against the statutory claim.  The court reasoned that the Legislature created a remedial scheme that should be liberally construed to allow any person who could demonstrate "damage" from a discharge to bring a claim.

The court also rejected the argument that the fishermen’s claim was barred by the economic loss doctrine.  This was not a commercial transaction where warranty law could be expected to govern the parties’ expectations, the court reasoned, and the defendant was not a product manufacturer that had produced a product which injured only itself.  As such, the court held that the principles underlying the economic loss doctrine simply did not apply to the case.

As for the negligence claim, the commercial fishermen, the court noted, were not like the public at large, in that they had a license from the state to regularly harvest the fish in Tampa Bay for profit.  The court cited a series of common law decisions holding that fishermen suffered a special or unique harm – “a diminution or loss of livelihood” – which was not suffered by the public at large.  This was sufficient to form a common law duty, the court reasoned, when combined with the foreseeability of a Tampa Bay release causing harm to Tampa Bay fishermen.

Justice Ricky Polston partially dissented and partially concurred.  He agreed with the majority’s reading of the statute, including the fact that it should be liberally construed:  “If the statute is overly broad as suggested by the [court below], that is an issue for the Legislature to address.” 

But Justice Polston disagreed with the majority when it came to the common law claim for negligence.  He began by noting that the Florida Supreme Court previously had abrogated the traditional tort requirement that a plaintiff suffer a personal injury or property damage.  See Indemnity Ins. Co. v Am. Aviation, Inc., 891 So.2d 532 (Fla. 2004) (“in general, actionable conduct that frustrates economic interests should not go uncompensated solely because the harm is unaccompanied by injury to a person or other property”).  In light of this radical departure from traditional tort law, Justice Polston argued that “the function of the duty element takes on a greater role to filter out the unwarranted claims.” 

According to Justice Polston:

Commercial fishermen in Florida do not have a ‘special’ interest within the ‘zone of risk’ the majority finds [the defendant] to have created.  Rather, commercial fishermen are few among the tens of thousands of Floridians who earn their living from healthy ocean waters.  For example, in 2006, beach tourism alone contributed $24.1 billion to the state’s economy and provided 275,630 Floridians with jobs, earning them $7.7 billion. . . .

Although the majority rules that the commercial fishermen’s state licenses set them apart from the general population, if every state-licensed Floridian has a ‘special’ or ‘unique’ interest, then it seems there is endless ‘foreseeable’ liability.  Commercial fisherman are a small group among thousands of licensed Floridians who can claim economic damages from pollution of coastal waters.  For example, hotels and restaurants near the beach, seafood truck drivers, beach community realtors, and yacht salesmen are all licensed by the State to conduct commercial activities that may be negatively affected by the pollution of coastal waters.  Because the commercial fishermen have not demonstrated that [the defendant] owed a specific, unique duty to protect their purely economic interests, I would disallow common law recovery in order to avoid subjecting defendants to limitless liability to an indeterminate number of individuals conceivably injured by any negligence.

This question – what constitutes a “special interest” that would give rise to a duty over and above any so-called duty to the general public – will no doubt be hotly litigated in the wake of the Gulf of Mexico oil spill.  Notably, the Curd opinion may not have answered that question as broadly as plaintiffs may think.  As Justice Polston pointed out at the beginning of his partial concurrence, the majority deliberately limited the scope of its opinion.  Although the putative class included all persons engaged in the catch or sale of fish, the opinion is limited to commercial fishermen and “does not extend to distributors, seafood restaurants, fisheries, fish brokers, or the like who may have been affected by [the defendant’s] pollution,” Justice Polston observed.  The opinion also was limited to the depletion of marine life and did not cover the “harm to reputation as alleged in the petitioner’s complaint and mentioned by the [intermediate court of appeal].”  Thus, even in Florida, defendants still may have strong arguments regarding the limiting principles of duty, foreseeability and proximate cause. 

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A recent decision from the California Court of Appeal suggests that defendants that are served with a new lawsuit must be especially careful when evaluating whether a forum non conveniens motion may be made.  In Martinez v. Ford Motor Co., B214955, Slip op. (Cal. App. -- 2d Dist. May 27, 2010), the court held that the defendant was effectively estopped from asserting a forum non conveniens motion because it had conducted merits discovery and thereby taken advantage of the California forum's benefits.

In Martinez, the plaintiffs alleged that the tread on a Ford Explorer's rear tire (made by Cooper Tire) separated from the wheel, causing a fatal accident in Mexico.  Plaintiffs sued in strict liability and negligence, as well as negligent infliction of emotional distress.  Plaintiffs sued, inter alia, the vehicle manufacturer (Ford) and the tire manufacturer (Cooper Tire).

The complaint did not disclose within its four corners the plaintiffs' citizenship -- and defendants' initial answers did not assert a forum non conveniens defense.  Ford did not object to Cooper Tire's motion to transfer the case from San Diego, where plaintiffs had filed it, to Los Angeles, which was home to the coordinated proceedings involving litigation over alleged defects in Cooper Tire's products.

Ford then served discovery on plaintiffs, including "form interrogatories," requests for production, special interrogatories, and requests for inspection.  Cooper Tire served on plaintiffs a 28-page plaintiff fact sheet for completion that was being used by the trial court in the coordination proceeding.  The scope of the discovery was broad and covered the entire defense of the claim.  As the Court of Appeal characterized it: 

All told, Ford and Cooper Tire propounded more than 1400 pages of written discovery on appellants.  Appellants' responses spanned more than 650 pages.  Additionally, Cooper Tire took possession of the tires at issue by July 2007.

Slip op. at 8.

After a failed mediation attempt, Ford moved for forum non conveniens dismissal, and Cooper Tire joined.  Mexico was the proper forum, they argued, because it was where the accident occurred, the residence of the parties, where the plaintiffs and decedents were treated, and where the investigation was conducted.  There was no special connection to California, other than two minor defendants who had defaulted.

Plaintiffs resisted the motion, arguing that it was unfair for defendants to take discovery and then move for forum non conveniens dismissal because there is no such thing as discovery in Mexico.  Accordingly, they argued, the defendants would be advantaged from the discovery they obtained prior to moving for forum non conveniens dismissal.  The trial court granted the defendants' motion.

But the Court of Appeals bought plaintiffs' argument.  Despite the fact that plaintiffs clearly had been forum shopping by filing suit in California and had the same opportunity to conduct discovery against defendants as defendants had had to conduct discovery against them, the Court of Appeals effectively used a form of equitable estoppel against defendants to order the trial court to deny their motion:

A party abuses the legal process when it takes advantage of California's laws and legal processes to propound discovery beyond the scope of establishing the grounds for a forum non conveniens motion and then, after getting its discovery, asserts California is an inconvenient forum.  The inequity of respondents' pretrial maneuvers is especially pronounced given that Cooper Tire, with Ford's acquiescence, transferred appellants' complaint from appellants' chosen jurisdiction -- San Diego County where the Ford Explorer was purchased and the allegedly defective tire supplied -- to the coordination proceedings in Los Angeles.  Respondents' successful transfer of appellants' complaint to Los Angeles conflicts with their assertion that California is an inconvenient forum because the coordination proceedings presuppose the efficiency and convenience of trying multiple cases that share "the common glue" that tires designed and manufactured by Cooper Tire caused the injuries alleged in the coordinated lawsuits.

Slip op. at 10-11.

The Court of Appeal batted aside the many cases defendants cited in which cases proceeded for more than a year before a forum non conveniens motion was made.  Here, the Court of Appeals said, the sheer breadth of discovery served by the defendants invalidated any right to seek forum non conveniens dismissal.  The court also noted that although the complaint did not indicate the citizenship of the parties, the death certificates -- which were exhibits to the complaint -- identified the decedents and the relatives as Mexican.

Particularly disturbing is the Court of Appeals' singular focus on discovery, and complete lack of analysis of the factors regarding trial.  Clearly, all of the witnesses with any connection to the accident reside in Mexico -- not California -- and would be beyond the subpoena power of a California court.  Moreover, where the product allegedly failed in Mexico, the plaintiffs were injured in Mexico, and were treated in Mexico, it seems likely that Mexican law -- not California law -- would apply, thereby forcing the trial court to learn another country's law.  The Court of Appeal failed even to consider such trial-related issues.

The Martinez decision is a cautionary tale, as it is easy to see how a defendant could issue broad form discovery requests automatically in response to a new complaint where the applicability of forum non conveniens is not obvious.  The Martinez decision suggests that the defendants should have intuited that forum non conveniens might be an issue and then targeted discovery solely at that issue as an initial matter.  It also is troubling because it suggests that merely going along with a defendant's motion to transfer a case to a consolidation court can prejudice the ability to make a forum non conveniens motion.

In light of Martinez, defendants in California courts should pay special attention at the outset to whether there is any possible factual scenario in which forum non conveniens could apply to the case.  If there is, you may not want to transfer the case or serve merits discovery until you have investigated forum non conveniens further and moved to dismiss on such grounds.

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Recently the Tenth Circuit affirmed dismissal of strict liability and negligence claims arising out of a plane crash because the damages sought -- the value of the plane itself -- implicated the economic loss doctrine.  See Mountain Bird, Inc. v. Goodrich Corp., No. 09-3017, Slip op. (10th Cir. Mar. 23, 2010).  In Mountain Bird, an air cargo company bought a Cessna with a special de-icing system.  Nearly five years later, the plane crashed in Idaho, killing the pilot and one passenger, and destroying the plane. 

The air cargo company alleged the crash was caused by ice accumulation and sued the manufacturer of the de-icing system and Cessna (the manufacturer of the plane) in strict liability and nelgigence for $1.4 million -- the value of the plane.  The District of Kansas had dismissed the claim pursuant to Idaho's economic loss doctrine, which bars the buyer of a product from recovering economic loss -- such as the value of repair or replacement of the product -- caused by an alleged defect in the product.  Slip op.at 3.  The court explained that the doctrine is designed to maintain the boundary between contract law and tort law.

The plaintiff alleged that its claims were rescued by three exceptions to the economic loss rule:  (1) the "special relationship" exception, (2) the "unique circumstances" exception, and (3) the "parasitic loss" exception.  The Tenth Circuit rejected all three.

Idaho -- like most states -- narrowly construes the "special relationship" exception, finding such a relationship only where a quasi-professional performs personal services or where an entity holds itself out to the public as having special expertise that induces reliance.  Neither was the case here.  Plaintiff tried to argue that Cessna held itself as having expertise because it marketed an airplane with a government-certified de-icer.  The court disagreed: 

Neither the affidavit nor the specification document says anything about Cessna conducting a certification; each simply notes that the plane was certified.  As Cessna persuasively argues, we would not infer that a car manufacturer held itself out as a vehicle safety certification expert by advertising that its cars complied with federal safety regulations.  To do so would permit the special relationship exception to swallow the rule by allowing tort claims to proceed against every manufacturer of a regulated product.

Id. at 7.

The court also refused to conclude that unique circumstances require a different allocation of risk.  Indeed, no Idaho court had ever applied the unique circumstances exception.  The court held that the trial court had properly concluded that companies buy planes all the time, and thus they should remain free to allocate the risk of loss as they see fit.

Finally, the court held that the exception involving economic loss which is "parasitic to an injury to person or property" was inapplicable because the physical injury in this case -- the death of two people -- did not occur to the air cargo company, but rather to other individuals.  Physical injury to third parties is simply insufficient to satisfy the parasitic loss exception to the economic loss doctrine.  Indeed, the court noted that the Restatement (Third) of Torts expressly requires loss to "'the plaintif's person" or "the plaintiff's property other thann the defective product itself."  Restatement (Third) of Torts, Products Liability, sec. 21(a), (c).

Mountain Bird is just one recent decision in a long line of cases which recognize that parties should be free in contract to allocate the risk of loss to the product if the product fails to perform as warranted.  Making a tort case out of such an economic loss interferes with the parties' own risk allocation.  Absent extraordinary circumstances, where the loss is simply the product itself, the governing principles should be those of warranty and contract, not tort.

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We defense lawyers have grown so accustomed to plaintiffs trying to repackage a products liability claim as one for consumer fraud that we sometimes forget to check a state's products liability statute for potential defenses when the complaint fails to mention it and instead cites the state's consumer fraud act.  But by failing to look at the product liability statute, we may be passing up an important defense, as was demonstrated in Mitchell v. Proctor & Gamble, 2010 WL 728222 (S.D. Ohio Mar. 1, 2010).

The plaintiff in Mitchell brought a putative class action against the maker of an over-the-counter heartburn medicine, Prilosec OTC.  The plaintiff, who said he was the only one who became ill after a buffet-style dinner party, claimed that taking Prilosec OTC predisposed consumers to contracting food-borne illnesses.  His class was defined as all consumers of Prilosec OTC from 2004 to the present.  He asserted causes of action for strict liability failure to warn, negligent failure to warn, violations of Ohio's Consumer Sales Practices Act, breach of express warranty, and breach of implied warranty.

The court first analyzed the defendants' argument that the entire action was preempted by Ohio's Products Liability Act.  The OPLA defined a "products liability claim" as a civil claim seeking recovery for compensatory damages from a manufacturer for death, personal injury, emotional distress, or property damage arising from the product's design, any warning or instruction, or the product's failure to conform to a warranty.  Id. at *2-*3.  The OPLA had eliminated all common-law product liability causes of action.

The plaintiff sought recovery for "treatments for food-borne illnesses," "the purchase price of the product," and the difference between the market value of the product and its actual value.  But the court held that "[plaintiff] cannot separate out his claims from the purview of the OPLA simply by claiming only economic losses.  His claims . . . are products liability claims.  And the injury he is alleged to have suffered relates directly to that product."  Id. at *4.

The court also noted that there was a long line of authority holding that where a plaintiff used the consumer fraud statute (the OCSPA) to assert claims that were primarily rooted in products liability claims, the OPLA preempted those claims, too.  Id.  Accordingly, the court dismissed all of plaintiff's claims without prejudice for him to plead a proper claim under the OPLA, which he had not previously cited.  Thus, an unpled product liability statute proved to be the Defendant's best weapon to defeat a host of consumer fraud claims. 

In dicta, the court also commented on the inadequacy of the factual pleadings under the Rule 8 standard of Twombly/Iqbal.  Plaintiff alleged that he attended a dinner, that he had been taking Prilosec, and that he was the only one who became sick.  That, the court held was not enough:

Nowhere in [plaintiff's] factual allegations does he connect his assertion that Prilosec OTC increase the risk of foodborne illness with the circumstances surrounding his illness.  Thus, his Amended Complaint is full of "naked assertions" that are lacking "further factual enhancement."  This Court cannot make inference upon inferences to provide the factual enhancement to [plaintiff's] claims.

Id. at *5 (citations omitted).

Ultimately, the court held that plaintiff should have another chance to plead an OPLA claim with sufficient factual particularity.  But it was clear from Mitchell that both the common law and OCSPA claims were preempted -- proving once again that it pays to check statutes that are not cited in the complaint when making decisions about motions to dismiss and affirmative defenses.

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A recent report and recommendation from a US Magistrate Judge raises the question:  Does a group of patients who were exposed to pathogens but never developed a disease have a cause of action?

In Descoteau v. Analogic Corp., 2010 WL 325933 (D. Me. Jan. 21, 2010), Magistrate Judge John Rich III suggests that they do, although he clearly seems to stretch Maine law in order to find a cause of action for a bad factual situation.  If this report and recommendation is affirmed by the District Court, it will not be the first time hard facts have made bad law.

The facts are not pretty.  Plaintiff is one of some 23,000 veterans who were potentially exposed to HIV, Hepatitis B, Hepatitis C, and other bloodborne viral pathogens when they underwent diagnostic procedures and biopsies at VA hospitals using a rectal probe made by the defendants.  Both the operation manual for the rectal probe -- as well as the oral instructions from the device representative who demonstrated it at the VA hospital that treated plaintiff -- indicated that the probe could be cleaned by flushing it with a syringe full of detergent and water.  Years after the hospital bought and began using the defendants' rectal probe, the hospital's staff discovered that blood and fecal matter remained in the probe even after it had been cleaned according to the manufacturer's instructions -- without using a brush.  The VA conducted a systemwide review and notified some 23,000 veterans nationwide of the potential exposure and their need to receive testing for bloodborne pathogens and disease.  Plaintiff received his notice on April 14, 2006, was tested on April 27, 2006, and was notified that fortunately his test results were negative on May 11, 2006.  Plaintiff sued on behalf of a class of 528 veterans who were potentially exposed to bloodborne pathogens at the Togus VA Medical Center in Augusta, Maine, asserting causes of action for strict liability and negligent infliction of emotional distress.

The defendants moved to dismiss, asserting Maine's 6-year statute of limitations, arguing that plaintiff's original diagnostic procedure occurred more than six years prior to his filing suit.  The Magistrate Judge easily dispatched of that challenge, holding that plaintiff's cause of action for emotional distress did not accrue until he was notified in 2006 that he might be infected.  Thus, the suit was well within the statute of limitations.

Defendants also moved to dismiss the strict liability count, citing the language of Maine's strict liability statute, which provides:

One who sells any goods or products in a defective condition unreasonably dangerous to the user or consumer or to his property is subject to liability for physical harm thereby caused to a person whom the manufacturer, seller, or supplier might reasonably have expected to use, consume or be affected by the goods, or to his property, if the seller is engaged in the business of selling such a product and it is expected to and does reach the user or consumer without significant change in the condition in which it was sold. 

Id. at *5 (quoting statute).

The defendant argued that a prerequisite to a strict liability claim is physical harm or impairment, and that plaintiff -- who contracted no disease and suffered no impairment -- thus could not bring a claim.  Plaintiff argued, however, that the needle stick required for the HIV and Hepatitis testing qualified as "physical harm" sufficient to support a strict liability claim.  The court -- striving to find a cause of action for an obviously-inconvenienced plaintiff -- bought the argument, observing that "[t]he defendants cite no authority in support of the proposition that a needle stick or blood draw constitutes insufficient physical harm, as a matter of law, to support a strict liability claim, and I find none."  Id.

But the rule of strict liability is not available for all types of harm; rather, it is reserved for physical injury and damage to property.  The Restatement defines physical injury as a "detrimental change in the physical condition of a person's body."  Id. at n.4.  The court's stretching of the definition of physical injury to encompass a subsequent needle stick effectively reads the physical injury element out of the statute.  Nevertheless, the court recommended that the strict liability claim should survive the motion to dismiss.

The defendants also moved to dismiss the negligent infliction of emotional distress ("NIED") claim.  The court began by opining that the plaintiff had sufficiently alleged a count for negligence for physical injury (i.e., the needle stick).  But as for emotional distress, the court was bound by Maine precedent that reserves the cause of action for defendants who are in a special relationship with the plaintiff.  Maine courts have found such special relationships in very limited circumstances (e.g., doctor-patient, counselor-patient, hospital-decedent's family).  Id. at *6.  The court held that because its research had not uncovered an instance where the Maine courts had found a special relationship between a manufacturer and an end user, the NIED claim must be dismissed.

It remains to be seen whether the District Court will adopt the report and recommendation in Descoteau, which effectively reads the physical injury requirement out of Maine's strict liability statute and thereby would impose upon manufacturers strict liability for purely emotional harm.  Even if it did, however, it is difficult to fathom how 528 people's emotional harm could be adjudicated on a classwide basis consistent with the requirements of Rule 23.

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American courts generally approach emotional distress claims with caution.  Typically, they require a physical manifestation of the emotional distress, or that the plaintiff have been touched physically by the tortfeasor or been in the "zone of danger," or they require expert proof.

Yesterday the Illinois Supreme Court decided in a medical negligence case that Illinois imposes no such requirement.  See Thornton v. Garcini, Docket No. 107028, Slip op. (Ill. Oct. 29, 2009).  Rather, the rule in Illinois now appears to be that claims for negligent infliction of emotional distress do not require physical symptoms or expert proof.  This holding appears to reverse prior holdings in Corgan v. Muehling, 143 Ill. 2d 296 (1991) and Hiscott v. Peters, 324 Ill. App. 3d 114 (2001), which had seemed to impose the requirement of medical expert testimony in exchange for having abandoned the "physical injury" requirement.  Thornton, Slip op. at 6 ("we overrule the portions of Hiscott limiting Corgan to its facts and requiring all claims for severe emotional distress to be supported by expert proof"). 

Now, Illinois law is that the "absence of medical testimony does not preclude testimony for emotional distress," but rather that it goes to the weight of the evidence.  Id.

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According to the Helena, Montana Independent Record, the makers of the Louisville Slugger line of bats was held liable yesterday for the death of a an 18-year-old pitcher who was hit in the head by a ball that the batter had hit with an approved aluminum Louisville Slugger bat.  Plaintiff's theory was that the aluminum bats were defective because they only give the pitcher an average of 400 milliseconds to respond in a defensive stance.  Plaintiff also argued that the manufacturer failed to warn about this alleged hazard.

In an earlier article, the Independent Record had reported that a defense lawyer said in his opening that the ball that struck the pitcher was traveling at 99.8 miles per hour, and that nearly every home run hit with a wooden bat exceeds 100 miles per hour.

It apparently took the jury 12 hours of deliberations to conclude that the manufacturer failed to adequately warn, that the failure to warn caused the young pitcher's injury, and that the bat itself was not defectively designed.

I'll freely admit that I was not there to hear the evidence and I have not read the warning that was on the aluminum bat, but it is hard for me to fathom any warning that would have changed the conduct of the pitcher or the batter in a way to prevent this tragic injury. 

The jury awarded $792,000 to the pitcher's estate, and $58,000 to the parents for their emotional distress.  The judge is now considering the issue of punitive damages.

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Today we have in our in-box two cases involving disclaimers of liability.

In Stelluti v. CasaPenn Enterprises, LLC, 2009 WL 3353319 (N.J. Super. -- App. Div. 2009), a woman was injured less than an hour after she joined a local gym and signed a release and disclaimer of liability.  During her first-ever spin class, the handlebars came off of the bicycle and she fell to the floor, sustaining longterm injuries.

The "Waiver and Release Form" that she had signed provided:

You . . . agree that if you engage in any physical exercise or activity, or use any club amenity on the premises or off premises including any sponsored club event, you do so entirely at your own risk. . . . You agree that you are voluntarily participating in these activities and use of the facilities and premises and assume all risks of injury, illness, or death. . . .

This waiver and release of liability includes, without limitation, all injuries which may occur as a result of, (a) your use of all amenities and equipment in the facility and your participation in any activity, class, program, personal training or instruction, (b) the sudden and unforeseen malfunctioning of any equipment, (c) our instruction, training, supervision, or dietary recommendations . . .

To the extent that statute or case law does not prohibit releases for negligence, this release is also for negligence on the part of the Club, its agent, and employees.

That would seem to cover it, right?  Not so fast.  The court began its analysis by noting the general legal duty of health and fitness clubs to provide a safe environment for its members.  It then noted the fact that the contract is one of adhesion, which is disfavored generally in the law.  Using a four-part test, the court analyzed whether the contract was unconscionable.  Although the court had concerns about the context in which the contract was presented to the plaintiff -- without any oral description of it being a release of liability -- it nevertheless concluded that the contract was not unconscionable.  In part this was because plaintiff clearly had the ability to walk away and join another gym or exercise at another venue.

Interpreting the contract, the court concluded that it would only operate to release the gym for ordinary negligence; releasing gross negligence, recklessness and intentional torts would be contrary to public policy, the court opined.  The court ultimately affirmed summary judgment for the defendant because there was only evidence of negligence, at best, of the club in failing to check whether the adjustable handlebars had "locked in" to position.

Across the border in New York, a trial court was faced with the issue whether to enforce a waiver and release signed by a participant in a one-day motorcycle "wheelie" school.  See Estate of Duco v. McCabe, 2009 WL 3384461 (N.Y. Sup. Ct. -- Orange Co. Oct. 20, 2009).  In New York, however, Section 5-326 of the General Obligations Law deems waivers of liability for operators of for-pay amusement or recreational facilities to be void as against public policy.  Thus, one of the first issues was whether a motorcycle "school" operating on a closed portion of an airport was an amusement or recreational facility to which the General Obligations Law applies.  The court concluded that it was not; rather, it was an educational program that would benefit motorcyclists in handling their bikes on the roadways.

Accordingly, the court granted defendant's motion to dismiss, enforcing the release.

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The judicial branch is one of three branches of government, and although it has considerable powers, it has inherent limitations, too.  The doctrine of standing -- requiring an injury and causation as a prerequisite to judicial intervention -- is grounded on the practicalities of institutional competence and a recognition that courts do not have the tools to be effective legislators and regulators.

In Rhodes v. E.I. DuPont de Nemours & Co., 2009 WL 3080188 (S.D. W. Va. Sept. 28, 2009), the court was faced with summary judgment motions that raised those fundamental questions of institutional competence.  In Rhodes, the Defendant was alleged to have periodically released perfluroctanoic acid ("PFOA") from its plant in Wood County, West Virginia.  Plaintiffs claimed that the PFOA contaminated the water supply in the Parkersburg Water District, and they brought a class action asserting negligence, gross negligence, private nuisance, public nuisance, trespass, battery, and medical monitoring.  Plaintiffs alleged that they had no present physical injury; rather, they claimed to have an increased risk of disease.

Before conducting its analysis, the court observed that "[i]ssues of institutional competence . . . caution against judicial involvement in regulatory affairs" because "[c]ourts are designed to remediate, not regulate."  Id. at *1.

The court first analyzed whether the plaintiffs had Article III standing to bring their claims where the only injuries alleged were increased risk of disease.  After summarizing the case law, the court noted that "[e]ven courts that express doubt as to whether injuries premised on increased risk constitute an injury-in-fact acknowledge that such claims are cognizable in the context of environmental harms and toxic exposures."  Id. at *4.  The court thus concluded that plaintiffs had standing to bring their claims.

With respect to the merits of the summary judgment motions, the court first looked at negligence.  The court determined that plaintiffs had provided sufficient evidence to create a material fact question on causation in their expert reports.  (The court refused to rule on the motion to strike the reports because of the timing of their filing.)  But it held that the plaintiffs had not alleged injury sufficient to support their negligence claims.  Unlike for standing, negligence requires proof of either a present injury or "'reasonably certain' future injury."  Id. at *11.  Because plaintiffs could not prove that their potential future injuries were "reasonably certain" to occur, their negligence claim for damages failed.

Next, the court analyzed nuisance law.  It held that plaintiffs' private nuisance claim failed because the complaint did not allege an interference with the private use and enjoyment of land, but rather alleged interference with the public water supply.  (The contamination did not reach the groundwater beneath the plaintiffs' property.)  Id. at *11-*12. 

And it held that the public nuisance claim failed because the plaintiffs did not meet the special standing requirement applicable to such claims.  Ordinarily, the government is the one to file and prosecute a public nuisance claim.  West Virginia -- and most other states -- requires that private plaintiffs who seek to assert a public nuisance claim must establish that they have suffered a "special injury" different in type and degree from the segment of the public impacted by the public nuisance.  The court observed that the plaintiffs here only suffered an increased risk of disease, which is the same type of injury allegedly suffered by the other consumers of the municipal water supply.  Thus, they failed to meet the "special injury" standing requirement for public nuisance.  Id. at *13.

The court granted summary judgment on the trespass claim because there was no "invasion" of plaintiffs' property that interfered plaintiffs' use and enjoyment.  The PFOA was not alleged to have actually reached plaintiffs' property.

The court also granted summary judgment on the battery claim because plaintiffs have not alleged a present physical injury, and thus have failed to meet the element of "harmful contact."  The court opined that "[a]bsent any such demonstration that their contact with PFOA caused them harm, or that the PFOA present in their blood has altered the structure or function of some body part, the plaintiffs cannot sustain their battery claim based on the mere presence of PFOA in their blood."  Id. at *16.

But the court refused to grant summary judgment on the medical monitoring claim.  Under the decision in Bower v. Westinghouse Electric Corp., 522 S.E.2d 424 (W. Va. 1999), a medical monitoring plaintiff must prove that:

(1) he or she has, relative to the general population, been significantly exposed; (2) to a proven hazardous substance; (3) through the tortious conduct of the defendant; (4) as a proximate result of the exposure, plaintiff has suffered an increased risk of contracting a serious latent disease; (5) the increased risk of disease makes it reasonably necessary for the plaintiff to undergo periodic diagnostic medical examinations different from what would be prescribed in the absence of exposure; and (6) monitoring procedures exist that make the early detection of a disease possible.

522 S.E.2d at 432-33.

The court discussed the trend after Bower generally rejecting medical monitoring claims, but then applied Bower to conclude that the negligence allegations and the evidence of increased risk of disease created a disputed issue of fact regarding the medical monitoring claim.  Rhodes, 2009 WL 3080188 at *19-*21.  Thus, although plaintiffs lacked an injury sufficient to assert a negligence claim, they could proceed to trial on the medical monitoring claim.

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Increasingly, foreign plaintiffs want to use US courts to adjudicate disputes that arose overseas.  The Texas Court of Appeals' decision in Lalila v. Parker Drilling Co., 2009 WL 618248 (Tex. App. -- Houston [1st Dist.] Mar. 12, 2009), is a good example of a court's use of the doctrine of forum non conveniens to control its docket and avoid adjudication of such disputes.

In Lalila, 766 Bangladeshis sued a number of defendants in Texas state court over two gas well explosions in Tangratila, Bangladesh, asserting causes of action in negligence, nuisance, trespass, and conversion.  The Texas defendants moved to dismiss for forum non conveniens.  The trial court granted the motion, which the appellate court reviewed for abuse of discretion.

Texas is one of the few states to have codified the rules relating to forum non conveniens.  That statute provides that if an act or omission occurring in Texas was a proximate or producing the injury, then forum non conveniens dismissal is not available.  The court noted, however, that both proximate and producing cause require "causation in fact," which "means the defendant's act or omission was a substantial factor in bringing about the plaintiff's injury, which would not otherwise have occurred."  The court reviewed the various acts that plaintiffs alleged occurred in Texas (design of the rig and parts, negligent supervision of the gas well project), concluding that plaintiffs' complaint never connected them up to the injuries suffered in Bangladesh in such a way as to meet the "causation in fact" requirement.

The court then proceeded to evaluate Bangladesh as a forum.  The court rejected plaintiff's criticism of the courts as corrupt, saying the evidence was based on hearsay from only three Bangladeshi attorneys.  The court gave little weight to the fact that Bangladeshi courts do not have a class action procedure, noting that it has joinder and is a judicial system based on English common law that has the types of torts asserted by Lalila.

The court also noted the legal inability and prohibitive costs of bringing witnesses from Bangladesh and translating their testimony, as well as the fact that the vast majority of evidence resides in Bangladesh.  The court concluded that the balance of public and private interests clearly weighed in favor of Bangladesh.  And thus, the court concluded that the trial court did not abuse its discretion in dismissing the case for foreign non conveniens.

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One of the most fascinating things about practicing mass tort litigation is when these cases intersect with international law and policy, as they did recently in O'Bryan v. See, 2009 WL 305342 (6th Cir. Feb. 10, 2009).  There, the Sixth Circuit -- in a precedent-setting opinion -- allowed some mass tort causes of action to be pursued against the highest authority in the Roman Catholic Church.

In O'Bryan, three Kentucky residents brought a class action suit against the Holy See for injuries suffered by all of those who were allegedly "sexually abused, molested and assaulted by a Roman Catholic priest . . . while they were under the care, custody, authority, control and influence of an abusive Roman Catholic priest, which authority was granted to him by the Defendant, Holy See."  Id. at *1.  This lawsuit differed from many previous sexual abuse lawsuits in that it did not bother naming individual dioceses or priests.  Rather, following the advice once given to Bob Woodward, plaintiffs sought to "follow the money" to thereby reach the Big Kahuna. 

There was only one problem:  the Holy See is a State that the United States has recognized as a foreign sovereign since 1984.  Id.  As such, the defendant argued that it was immune from suit (and the court lacked subject matter jurisdiction) under the Foreign Sovereign Immunities Act, 28 U.S.C. sec. 1602.  Even the US government appeared in this lawsuit arguing on the Holy See's behalf.

But, of course, the Holy See is not just a foreign principality.  In a passage that brings to mind the migraine-inducing lessons on the nature of the Holy Trinity that I endured in Sunday School, the Sixth Circuit explained:  "The Holy See is both a foreign state and an unincorporated association and the central government of an international religious organization, the Roman Catholic Church."  Id. 

And that was basically plaintiffs' point:  they were injured not by the way the foreign state ran its consulate, but rather by how an international religious organization ran its churches in the United States.  For purposes of plaintiffs' lawsuit, the Holy See's contemporaries were not Monaco and Liechtenstein, but rather the Episcopalians and the Lutherans -- neither of which are entitled to sovereign immunity for torts they might commit.

Plaintiffs pled their lawsuit carefully.  First, they alleged that each abusive priest was an agent, servant or employee of the Holy See acting with apparent authority arising from his agency or employment relationship.  Second, they premised their causes of action on the so-called "1962 Policy" -- a privately-circulated document allegedly issued by the Congregation of the Holy Office in Rome and specifically approved by Pope John XXIII that expressly required bishops in the United States "to, among other things, refuse to report childhood sexual abuse committed by priests to criminal or civil authorities, even where such failure to report would itself be a criminal offense."  Id. at *2.  Third, they pled the following causes of action:  violation of customary international law of human rights; negligence; breach of fiduciary duty; and the tort of outrage/intentional infliction of emotional distress.

In response to defendant's FSIA jurisdictional argument, plaintiffs pressed their point that their dispute was with the Holy See as the governing body of a religious organization, not a State.  But the Sixth Circuit wasn't buying it.  There can be no dispute that the United States recognizes the Vatican as a foreign state, and thus the FSIA applies.  Period.

But the FSIA has exceptions that might allow for suit:  (1) waiver of immunity, (2) actions conducted in a commercial capacity, and (3) money damages sought for personal injuries stemming from the State's (or its agent's) tortious conduct within the United States.  The Sixth Circuit proceeded to analyze each of the exceptions in turn.

The first exception was a non-starter, as there was no evidence that The Holy See had voluntarily waived immunity.  As for the commercial activity exception, the Sixth Circuit was also unpersuaded.  The court applied two "limitations" on this exception to conclude that it was not relevant here.  First, the activities plaintiffs alleged were not -- according to the court -- "of the type in which private individuals engage" during commercial activity.  Rather, governance of the church was more akin to the actions of a sovereign.  Second, the court looked to the gravamen of the plaintiff's claims.  Because they were not of a type one would expect from commercial activity -- property damage, breach of contract, copyright infringement, etc. -- this also counseled against finding in favor of a commercial activity exception.

But then the court analyzed the elements of the "tortious act" exception, concluding that some -- but not all -- of plaintiffs' claims had correctly survived the motion to dismiss and were properly the subject of federal jurisdiction.  The alleged acts of sexual abuse were not performed while the tortfeasors were acting within the scope of their employment, so the Sixth Circuit concluded that the Holy See could not be sued for sexual abuse conducted in the United States by its clergy.  Similarly, "any portion of plaintiffs' claims that relies upon acts committed by the Holy See abroad cannot survive."  Id. at *16.   Thus, the Holy See could not be sued simply for promulgating the 1962 policy in Rome.

However, the court held that the Holy See could be properly sued under the "tortious act" exception for the supervisory acts or omissions its agents committed in the United States:

All of plaintiffs' claims also advance theories of liability premised on the conduct of Holy See employees in the United States engaged in the supervision of the allegedly abusive priests.  These portions of plaintiffs' claims meet the four requirements for application of the tortious act exception.

First, . . . plaintiffs have pled both that the relevant archbishops, bishops and other Holy See personnel had knowledge of the alleged sexual abuse of priests and that they failed to act on that knowledge.  In doing so, it would seem that the complaint also pleads that conduct of [these people was] a substantial factor in causing plaintiff's damages, satisfying Kentucky's causation requirements.

In addition, . . . tortious acts committed by [these people] while engaged in the supervision of allegedly abusive priests satisfy the requirements of the FSIA's tortious act exception that the tortious act occur in the United States and within the scope of employment.

* * *

Thus, the portions of plaintiffs' claims that are based upon the conduct of bishops, archbishops, and Holy See personnel while supervising allegedly abusive clergy satisfy all four requirements of the tortious act exception:  this conduct served as a substantial cause of the alleged abuse; the conduct occurred in the United States; the conduct was within the scope of employment; and these individuals were, according to the pleadings, Holy See employees.

Id. at *17.

The court then went count-by-count, delineating what claims were cognizable under the FSIA.

1.  International Law of Human Rights -- The claim failed as to the actual promulgation of the 1962 Policy because it occurred abroad, but survived "as it pertains to the conduct of [the Holy See's] employees who, pursuant to the 1962 Policy, violated the terms of the relevant international laws through their tortious supervisory conduct over the allegedly abusive clergy."  Id. at *18.

2.  Negligence -- Claims of negligence against the Holy See for its own conduct (including negligent hiring) did not survive, but claims of  "failure to warn" and "failure to report" premised on the conduct of Holy See employees in the United States did survive.

3.  Breach of Fiduciary Duty -- This claim only survived for the actions of supervisory employees occurring in the United States.

4.  Tort of Outrage/Intentional Infliction of Emotional Distress -- The claim failed as it pertained to the promulgation of the 1962 Policy and as to the priests' abusive conduct, which did not occur within the scope of their employment.  The claim survived, however, as to the conduct of supervisory employees in the United States who abided by the 1962 Policy. 

It is difficult to predict O'Bryan's ultimate impact on mass tort litigation against the Catholic Church in the United States.  The defendant can be expected to seek rehearing en banc and/or a writ of certiorari from the US Supreme Court.  This case also has serious statute of limitations problems, and it seems unlikely that a court considering class certification really could conclude that the predominance and superiority requirements of Rule 23(b)(3) could be satisfied in a case where the sexual abuse at issue for just the named plaintiffs spans from the 1920s to the 1970s.  Individual issues clearly would predominate.  And yet, O'Bryan stands as a roadmap for how to plead a claim against the Vatican itself, even if only in an individual action. 

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In states like Illinois, which have relatively short (2-year) statutes of limitations for strict liability and negligence, there often is a lot of litigation over the "discovery rule."  The discovery rule is designed to relieve the harshness of a tort statute of limitations by essentially tolling the running of the statute until the plaintiff was put on inquiry notice about her cause of action.  Put differently, "the cause of action accrues [and the statute of limitations begins running] when the plaintiff knows or reasonably should know of an injury and also knows or reasonably should know that the injury was caused by the wrongful acts of another."  Nolan v. Johns-Manville Asbestos, 421 N.E.2d 864, 868 (Ill. 1981).

The court in Orso v. Bayer Corp., 2009 WL 249235 (N.D. Ill. Feb. 2, 2009) recently applied the discovery rule to grant summary judgment on statute of limitations grounds.  In Orso, plaintiff had been using Neo-Synephrine on a daily basis since 1990, despite the product's explicit warning that it should not be used for more than three days.  Plaintiff had visited a doctor in 1991, explaining that without Neo-Synephrine, "if someone were to put their hand over my mouth, I would have died . . . [My nose] is so swollen inside, I can't breathe."  Id. at *1.  The doctor recommended other medication and discussed strategies for giving up the medicine, but plaintiff returned to using it even though the doctor "'thought that [plaintiff] shouldn't be using it."

Nearly a decade later, in September 2000, a second doctor consulted with plaintiff.  He described plaintiff as having "'chronic rhinits with likely addiction (physiologic) to nasal decongestant drops.'"  Id.  The doctor prescribed a substitute medication and warned plaintiff of "rebound congestion," namely, that people coming off of medicines like Neo-Synephrine may develop severe congestion. 

Faced with the evidence, the court quickly concluded that plaintiff had been on inquiry notice much more than 4 years before filing suit in 2004:

The record shows that, possibly as soon as 1991 and definitely no later than September 2000, Urso knew that she had a medical condition, namely, a stuffy nose and breathing difficulties, that her condition was relieved only by the use of Neo-Synephrine, and that she felt she was unable to discontinue her use of Neo-Synephrine despite her doctors' advice and prescrptions for other drugs.

Id. at *4.

The court rejected plaintiff's arguments regarding her lack of knowledge, observing that the knowledge necessary to start the running of the statute of limitations does not require an accurate medical diagnosis or a definitive understanding of causation.  Suspicion starts the clock running, and the plaintiff is under a duty to conduct an inquiry to see if she has a cause of action.

Orso is unremarkable jurisprudentially, but it is a good workmanlike example of the discovery rule's application in statute of limitations motions.

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As the skipper of a small motorboat myself, my interest was piqued by a recent decision reported by Product Liability Law 360, Kelecseny v. Chevron U.S.A., Inc., Case No. 08-61294-CIV-ALTONAGA/Brown (S.D. Fla. Jan. 20, 2009).

Kelecseny was a copycat action brought after a similar class action had been dismissed in California federal court.  In Kelecseny, plaintiffs alleged that ethanol blended gasoline expires more quickly around water, causing damage to boat engines, fuel systems, and fiberglass fuel tanks.  According to plaintiffs, the "major gasoline manufacturers" know this fact, yet they have sold and continue to sell ethanol blended gasoline for use by boaters.

Plaintiffs, however, clearly had some severe problems with the case as pled.  To begin with, they have extreme difficulty identifying which defendant's product, if any, actually injured them.  The court observed that even plaintiffs agreed their strict liability, fraudulent concealment, and Florida Deceptive and Unfair Trade Practices Act claims must be dismissed because the Florida Supreme Court has held that market share alternate liability does not apply to claims of fraud or strict liability.  Kelecseny, slip op. at 2-3 (citing Conley v. Boyle Drug Co., 570 So.2d 275, 286 (Fla. 1990)).

That left just one claim:  negligent failure to warn.  The defendants argued that this state law claim was preempted by the federal Energy Policy Act, which requires refiners to use increasing amounts of so-called "renewable fuels" -- like corn-based ethanol -- from 2006 forward.  Kelecseny, slip op. at 7-8.  In 2007, Congress doubled its mandate, urging refiners to produce 36 billion gallons of such fuel by the year 2022.

Florida enacted a similar state statute last year, the Florida Renewable Fuel Standard Act.  Under that statute, as of 2011, all gasoline offered in Florida will be blended gasoline, except that the statute does not apply to fuel for use in aircraft, boats, collector vehicles, and railroad locomotives.

In analyzing the preemption issue, the Kelecseny court looked to the U.S. Supreme Court's recent pronouncements in Altria Group, Inc. v. Good, 129 S. Ct. 538, 543 (2008).  Thus, the intent of Congress is the touchstone of the analysis, and there is a presumption that the State's historic police powers are not superseded by the federal statute unless that was the "'"clear and manifest purpose of Congress."'"  Kelecseny, slip op. at 6 (citation omitted).  The court held that there was no preemption:

This suit presents no obstacle to attainment of Congress' objectives as contained in the [federal Clean Air Act] and its amendments.  If successful, Plaintiff would obtain, among other things, an injunction requiring Defendants to warn customers of the potential dangers of using blended gasoline in boats and requiring Defendants to continue to make unblended gasoline available for purchase by boat owners in Florida.  Defendants have cited to no law evidencing an intention by Congress to preempt Florida common law causes of action for property damage caused by defective design of unblended gasoline when used in boats or the failure to warn of possible damage if ethanol blended gasoline is used.  Furthermore, no irreconcilable conflict between the federal standards and the claims presented has been shown.

 Id., slip op. at 12.

The court distinguished the situation before it from cases like Geier v. American Honda Motor Co., 529 U.S. 861 (2000).  There, Congress had intentionally preserved for manufacturers options for meeting federal auto safety standards by allowing manufacturers to choose whether to include airbags or much less sophisticated restraint systems in the car.  The proposed the state law causes of action in Geier would have taken away the manufacturer's right to choose, which was a fundamental federal goal under the statute.  Here, in contrast, allowing liability for failure to warn about the potential danger from using blended gasoline in marine applications did not impede any statutory goal, according to the court.  In short, there was no conflict, and thus no implied conflict preemption, the court reasoned.

Kelecseny is just one more reminder that the Supreme Court's pronouncements in drug and medical device cases -- like the anticipated decision in Wyeth v. Levine, No. 06-1249 -- have far-reaching effects that impact much more than just prescription products. 

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Yesterday the California Supreme Court refused to accept review of the nonplussing decision in Conte v. Wyeth, Inc., in which the California Court of Appeal held that a pharmaceutical manufacturer could be liable for failure to warn of risks associated with a generic drug that it neither manufactured nor sold.

Jim Beck and Mark Herrmann give a characteristically thorough and compelling explanation for why the Court of Appeal's Conte decision was wrong as a matter of both law and public policy.  They also point out -- thankfully -- that under California law, the Conte decision has little, if any, stare decisis effect on other panels of the Court of Appeal who consider the same issue.

One wonders, however, whether the Justices ever considered the practical effects of the Conte rule on lawyers' advice to their clients.  After Conte, how do deal lawyers involved in pharmaceutical transactions accurately quantify and evaluate liability risks?  Thoughts, readers?

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