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 Levinson v. Johnson & Johnson Consumer Cos., 2010 WL 421091 (D.N.J. Feb. 1, 2010), Judge Dennis Cavanaugh was confronted with yet another attempt to turn a product liability action into a consumer fraud class action by carefully pleading only economic harm and a failure to disclose the risk of harm.  Faced with motion to dismiss, Judge Cavanaugh significantly narrowed the class, but he allowed certain limited claims to go forward.

In Levinson, some Missouri plaintiffs brought a putative nationwide class action against J&J and Wal-mart, alleging that J&J's Baby Shampoo and Wal-mart's Equate Tearless Baby Wash contained trace amounts of chemicals that increase the risk of cancer, cause skin irritation, and can lead to asthma and hypersensitivity.  Plaintiffs allegedly had independent lab tests conducted that identified trace amounts of methylene chloride (which FDA has banned from use in cosmetics), 1,4-dioxane and formaldehyde.  Plaintiffs alleged that the defendants' failure to disclose the presence of these chemicals -- as well as statements such as "Ultra Mild," "Hypoallergenic," and "gentle enough even for newborns" -- constituted a violation of state consumer fraud statutes, a breach of the implied warranty of merchantability and implied warranties of fitness for a particular purpose, and unjust enrichment.

The defendants moved to dismiss for lack of standing and for failure to state a claim as a matter of law.  In analyzing their standing argument, the court relied heavily on Koronthaly v. L'Oreal, 2008 U.S. Dist. LEXIS 59024 (D.N.J. July 25, 2008), a case involving the purchase of lipstick containing lead.  Judge Cavanaugh described the holding in Koronthaly as "[i]n the absence of an FDA regulation concerning lead content in lipstick, or other legal prohibition, the plaintiff could not 'seek a remedy for a harm that she had not actually or allegedly suffered.'"  Levinson, 2010 WL 421091 at *4 (citation omitted).  Accordingly, the court held that plaintiffs lacked standing to assert purely economic harm from the chemicals that were unregulated by the FDA in soap or cosmetics (formaldehyde and 1,4-dioxane), but they could assert a claim for purely economic harm involving the substance that had been banned by the FDA for use in cosmetics (methylene chloride).  As the court explained:

While the Court agrees that the assertion of an economic injury is not an automatic bar to standing, Koronthaly demonstrates that an exception has been recognized in the context of claims concerning defective products, absent a specific legal prohibition precluding particular ingredients or usages.  Insofar as Plaintiffs' claims pertain to allegedly toxic chemicals that have not been banned by the FDA for use in cosmetics . . . this Court concludes that any potential injury is too remote, hypothetical and/or conjectural to establish standing in this matter.  However, insofar as Plaintiffs' claims pertain to methylene chloride, a chemical explicitly banned for use by the FDA in any cosmetic, this Court declines to dismiss Plaintiffs' claims pursuant to Fed.R.Civ.P. 12(b)(1) for lack of standing.

Id. at *4.

The court then proceeded to analyze whether the individual causes of action stated a claim under Rule 12(b)(6).  The parties apparently had represented to the court that regardless of whether New Jersey law or Missouri law were applied, the result would be the same, and thus there was no conflict of laws issue.  Id. at *5.  The court disagreed, holding that New Jersey's Product Liability Act preempted plaintiffs' other claims.  The court relied upon Sinclair v. Merck & Co., 948 A.2d 587 (N.J. 2008), in which the New Jersey Supreme Court held that consumer fraud claims for economic harm allegedly caused by prescriptions for Vioxx were preempted by the Product Liability Act.  Judge Cavanaugh concluded:

Similarly, at the heart of this matter is the potential for harm caused by the defective products, J&J Baby Shampoo and Wal-Mart Equate Tearless Baby Wash, containing allegedly "toxic chemicals linked to increased cancer risk, adverse skin reactions, and other serious health problems." (See Pl. Compl. para. 2). . . .  [C]onsistent with the Sinclair decision, this court concludes that the PLA subsumes all of Plaintiffs' claims, effectively precluding Plaintiffs' claims with respect to the CFA, and otherwise, in the absence of "harm" as defined by the PLA.  The Court does not agree that articulating a claim in terms of pure economic harm where the core issue is the potential injury arising as a consequence of the products' allegedly harmful chemicals converts the underlying defective product claim into an independent and unrelated consumer fraud issue.  Limiting a claim to economic injury and the remedy sought to economic loss cannot be used to obviate the PLA.

Id. at *6. 

Accordingly, because New Jersey's Product Liability Act would preempt all claims, but Missouri's would not, the court concluded there was a conflict of laws requiring it to determine which law would apply.  Because the plaintiffs were from Missouri and bought and used the product there, the court concluded that Missouri law would apply to these plaintiffs' claims.

Missouri's Consumer Fraud Act requires a causal connection between the allegedly unfair practice and the plaintiff's harm.  Where the harm allegedly results from a failure to disclose, "'there must be a showing that the [product] in fact suffered that defect, or evidence from which the defect reasonably could be inferred, in order to demonstrate an ascertainable loss as a result of [defendant]'s failure to disclose the defect.'"  Id. at *7 (citation omitted).  The court concluded that as to methylene chloride, which the FDA had banned for use in cosmetics, plaintiffs had sufficiently pled a Consumer Fraud Act claim.

Similarly, the court concluded that, with respect to methylene chloride, plaintiffs had sufficiently pled claims for breach of implied warranties under Missouri law.  Id. at *9.

However, the court held that plaintiffs had failed to plead a cause of action for unjust enrichment under Missouri law because they had not sufficiently pled that there was irreparable injury or the lack of an adequate remedy at law.  Id.  The loss was economic, and could be remedied by the payment of money, which could be recovered by an action at law.  Thus, there could be no unjust enrichment.

For those keeping a tally, the court whittled the Missouri plaintiffs' claims down to the violation of Missouri's Consumer Fraud Act and breach of implied warranties solely for the inclusion of methylene chloride -- not the other substances.  In concluding that New Jersey law would preclude all claims because of its Product Liability Act, the court also went a long way toward establishing why a nationwide class could not be certified.  It remains to be seen where this action will go from here, but we will attempt to monitor it for you.

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The Oklahoma Supremes recently held that a group of defendants who had no statutory duty to reveal the presence of additives in their products could not be sued in a class action for breach of warranty, breach of contract, and violation of the state's Consumer Protection Act for not posting the amount of ethanol in their gasoline.  See Rogers v. QuickTrip Corp., 2010 WL 175073 (Okla. Jan 19, 2010).

The defendants in Rogers sold gas at retail.  They initially moved to dismiss, challenging the court's jurisdiction to hear the case.  The Oklahoma Corporation Commission is charged with setting public energy policy and regulating the sale of gas, the defendants argued, and thus a court could not, in a class action, take actions that effectively impose upon the entire retail gas industry a duty contrary to what the Commission had decided.  The court rejected this argument, noting that the Corporation Commission has no ability to award damages to individuals in private disputes.  Accordingly, the court was unwilling to dismiss for lack of jurisdiction. 

But the court held that the trial court erred in failing to grant the defendant's motion to dismiss on the merits.  The court began by observing that a statute in effect when the suit was filed expressly stated that "retail facilities that sell motor fuel shall not be required to post information regarding fuel additives . . ."  A subsequent regulation had allowed retailers to post such information about ethanol content if they wanted to.

Subsequent to plaintiffs' filing of the lawsuit, a statute required retailers to post a sign indicating "contains Ethanol" for gasolines containing more than one percent ethanol. 

The Oklahoma Supremes determined that because the statutory scheme expressly allowed retailers to sell gasoline without posting its ethanol content prior to the lawsuit's filing, there could be no legal duty -- not in contract, warranty law, or in connection with the Consumer Protection Act -- that required such disclosure.  The Oklahoma statute effectively preempted Oklahoma common law.

Consumer fraud claims often are premised on a failure to inform consumers of a particular fact about a product.  The decision in Rogers demonstrates that where a statute gives a seller the freedom to refrain from disclosing that particular fact, the statute can trump disclosure duties that plaintiffs may assert arise from the common law or consumer protection statutes.

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Arkansas has never enjoyed a reputation as a haven for corporate defendants.  Far from it.  Indeed, after Razorback football, class actions appear to be the state’s favorite sport.

It’s precisely because of these facts that you could have bowled me over with a feather when I read the Arkansas Supreme Court’s recent decision affirming – yes, I said affirming – a trial court’s dismissal of a putative class action in its entirety.  Has there been a sea change in this landlocked litigation forum?  Who knows?  But this decision has some far-reaching pronouncements that may offer some comfort to consumer product manufacturers that find themselves ensnared in consumer fraud litigation there.  My friends Beck and Herrmann at Drug and Device Law covered this opinion yesterday, before I could get this post up.  But because this decision has implications beyond just drugs and devices, I'm also covering it here.

The facts in DePriest v. AstraZeneca Pharmaceuticals, L.P., 2009 WL 3681868 (Ark. Nov. 5, 2009) are relatively straightforward.  As AstraZeneca’s heartburn medicine, Prilosec, was going off patent, the company released another prescription heartburn medicine, Nexium, in the same class as Prilosec, "proton pump inhibitors."  Plaintiffs claimed that the defendant falsely marketed Nexium as “new” and “better” than Prilosec, when it was basically the same thing as Prilosec and had similar results.  The result of this conduct, plaintiffs alleged, was that the defendant was able to sell more Nexium at higher prices than it otherwise would have been able to do.  Plaintiffs alleged a host of theories, including breach of the Arkansas Deceptive Trade Practices Act, the Arkansas Unfair Practices Act, and the Arkansas Medicare Fraud False Claims Act, as well as common law fraud, breach of contract, promissory estoppel and unjust enrichment. 

The trial court had dismissed the plaintiffs' third amended complaint, observing that while it "would perhaps make an excellent article in a scientific magazine, . . . it fails as a legal pleading."  Undeterred, the plaintiffs twice amended their complaint, which ballooned up to 290 pages.  They also moved to recuse the judge -- twice -- for bias, citing the language of his ruling.  (My Grandaddy always said not to take a hoe to a snake unless you know you can cut it's head off, or you just might get bitten instead.  The idea that lawyers would twice move to recuse a judge on such an obviously flimsy record is nothing short of remarkable.)

The Unfair Practices Act and Medicare False Claims Act do not provide a private right of action, and plaintiffs did not challenge that dismissal on appeal.  The real news is the Arkansas Supreme Court's analysis of the DTPA's "safe harbor" provision, which states that the DTPA does not apply to "[a]dvertising or practices which are subject to and which comply with any rule, order, or statute administered by the Federal Trade Commission," as well as "[a]ctions or transactions permitted under laws administered by . . . [a] regulatory body or officer acting under authority of this state or the United States."  Ark. Code Ann. sec. 4-88-101(1) & (3).

The court looked to the FDA's approved label for Nexium, which had an analysis of clinical studies showing that the healing rates of Nexium 40 mg were higher than the healing rates of Prilosec 20 mg, and the heartburn resolution rates of Nexium 40 mg were higher than Prilosec 20 mg.  The court thus concluded that advertising which summarized this information from the FDA-approved label was squarely within the Arkansas DTPA's safe harbor:

The information included in the labeling of a new drug reflects a determination by FDA that the information is not "false or misleading."  By approving information to be included in the drug labeling, the FDA has determined that the information complies with its rules and regulations.  Therefore, if the FDA labeling supports the statements made in advertising for an FDA-approved drug, the statements are not actionable under the DTPA.

(Citation omitted.)

The Arkansas Supreme Court carried this analysis over to the common law fraud count, holding that "because AstraZeneca's advertisements were in accordance with that labeling, they were thus not false or misleading as a matter of law."  Similarly, the court agreed that "'[t]here cannot be any "unjust" enrichment where AstraZeneca's alleged conduct falls within what is permitted by federal law and Nexium's labeling,'" because "[o]ne who is free from fault cannot be held to be unjustly enriched merely because he or she has chosen to exercise a legal or contractual right."

The court also affirmed the dismissal of the promissory estoppel claim because "Appellants cite no authority that a product advertisement constitutes a quasi-contractual 'promise.'"

The real takeaway from DePriest is that Arkansas has now made it clear that where a regulatory agency has approved a factual statement -- even for purposes other than advertising -- that agency's conclusion that the statement is not false or misleading cannot be second-guessed by Arkansas courts in cases challenging the product's advertising.  Not under the DTPA, which explicitly provides a safe harbor, but also not under common law fraud or equitable theories like unjust enrichment or promissory estoppel.

This is an important holding, particularly at a time when the federal preemption defense is seen by many commentators to be at its nadir.  I never thought I'd say it, but one can only hope that other states with safe harbor provisions in their consumer fraud statutes will follow Arkansas' lead.

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As consumer fraud claims go, the high fructose corn syrup ("HFCS") claims really are scraping the bottom of the barrel.  Some activists and class action lawyers attempt to blame HFCS for the so-called "obesity epidemic," but even the activist group the Center for Science in the Public Interest has counseled that this is an "urban myth" and that "[t]here isn't a shred of evidence that HFCS is any more harmful (or healthier) than sugar."

That is why it was so satisfying to see a federal court recently use the recent U.S. Supreme Court decision in Ashcroft v. Iqbal, 129 S. Ct. 1937 (2009) to dismiss (without prejudice) an HFCS class action brought under California's Unfair Competition Law, False Advertising Act, and Consumer Legal Remedies Act.  See Wright v. General Mills, Inc., Civ. A. No. 08cv1532 L(NLS), Slip op. (S.D. Cal. Sept. 30, 2009).

In Wright, plaintiffs alleged that the defendant had defrauded the public by using the term "100% Natural" on its Nature Valley crunchy granola bars and chewy trail mix bars at a time in the past when they had contained HFCS.  Applying Iqbal, the court held that the following allegation from the complaint was too conclusory and speculative to meet the Rule 8 pleading standard:

As a direct result of its misleading, deceptive, untrue advertising and its unlawful, unfair and fraudulent business practices related to the "100% Natural" products listed above, Defendant caused Plaintiff and other members of the class to purchase, purchase more of, or pay more for, these Nature Valley products.

Slip op. at 8.  The plaintiff failed to plead facts supporting the elements of her statutory claims and, to the extent that she alleged fraud, failed to meet the requirements of Federal Rule of Civil Procedure 9(b) that she aver "'the who, what, when, where, and how' of the misconduct charged."  Slip op. at 9.  The court, however, gave plaintiff leave to replead.

The court also held that plaintiff's claim for injunctive relief failed because the defendant already had stopped using HFCS in its Nature Valley products and there were no facts pled indicating that a recurrence of the use of HFCS was likely.  Slip op. at 8.  Again, plaintiff was given leave to replead.

Interestingly, the defendant's use of the term "natural" was perfectly consistent with federal law.  As the court noted, "[t]he FDA follows a policy of not taking enforcement action charging that a product labeled as 'natural' is misbranded, as long as the product has no 'added color, synthetic substances, and flavors.'"  Slip op at 5 (citation omitted).  HFCS is not synthetic, of course.  Rather, it is made from corn.

Nevertheless, the court denied the defendant's motion to dismiss based on federal preemption.  In doing so, the court relied, in large part, on the savings clause in the Nutrition Labeling and Education Act of 1990:  "Congress stated that '[t]he [NLEA] shall not be construed to preempt any provision of State law, unless such provision is expressly preempted under section 403A of the Federal Food, Drug, and Cosmetic Act.'"  Slip op. at 3 (citation omitted).  The court reasoned that the inclusion of this clause negated any intention to occupy the field of food labeling.  Id. at 4.  The court also rejected the defendant's conflict preemption argument, finding no conflict where the FDA has deferred taking action to specifically define the term "natural."  Id.  The defendant also had asserted the defense of primary jurisdiction, asking the court to stay proceedings pending action by the FDA.  But the court concluded that the issue did not meet the criteria for invoking this prudential doctrine.

Although the court in Wright gave plaintiffs another bite at the apple, it remains to be seen whether they can truthfully plead their statutory and fraud claims with the specificity required by Iqbal.

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On Wednesday, April 8, Strafford Publications will host a 90-minute teleconference entitled "FEDERAL PREEMPTION AFTER WYETH v. LEVINE:  Analyzing the Supreme Court's Sweeping New Decision; Implications for Product Liability Litigation."  The program begins at 1 p.m. EDT, and you can register here.  CLE credit is available.

The event will feature analysis from Scott Angstreich (who was on the brief for Plaintiff Diana Levine in the Supreme Court), Steven Weisburd (noted product liability and class action defense counsel), and me.  We will be considering not only the impact of Levine on the pharmaceutical industry, but its impacts on other regulatory schemes and the effects, if any, its analysis may have on claims of express or implied conflict preemption.

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Yesterday I attended a program where two Manhattan Institute scholars presented the findings from their report:  IN THE WAKE OF WYETH V. LEVINE:  Making the Case for FDA Preemption and Administrative Compensation.  The report was written by James R. Copeland, Director of the MI's Center for Policy Research, and Paul Howard, Director of the MI's Center for Medical Progress.  The report is the first in a series of reports that will be issued by the MI's "Project FDA," a committee of physician-scientists, economists, medical ethicists, and policy experts working to show how 21st Century technologies can better inform FDA regulations and accelerate the drug development and drug approval processes, while still maintaining drug safety.  The report was touted as a timely response to Wyeth v. Levine and the current congressional proposals to undo Riegel and remove preemption from medical devices.

The report provides good background on the history of FDA regulation, and how the FDA is better equipped than the tort system to balance the risks and utilities of new drugs.  It also provides a useful description of Wyeth v. Levine and makes the normative case for preemption, looking at examples of how the tort system has led to the unavailability of drugs that have actual benefits.

The report goes on to recommend that in exchange for broad field preemption of state law claims for FDA-approved medicines and devices, there should be an "administrative review process that more quickly, fairly, and cheaply provides redress to injured consumers" (Report at 11), modeled on the federal Vaccine Injury Compensation Program.  

But here's the catch:  no one in Congress would ever vote for Copeland and Howard's compensation program, because unlike the vaccine program, their program would not compensate for all injuries caused by a drug.  Rather, it would compensate for all injuries caused by a drug that were not warned about on the FDA-approved label.  Put differently, Diana Levine would not receive compensation under their plan, because the risk of gangrene resulting from IV push was warned about in six places on the product label.

Don't get me wrong:  I personally do not believe Diana Levine was entitled to compensation from a drug company where her medical professionals committed malpractice resulting in a well-known and well-warned-about side effect.  And I could get behind an administrative compensation system that did not overcompensate claimants by paying them for foreseeable risks that were already known and should have been evaluated by their physicians.  But the idea that in the current political environment key lawmakers would even consider such a proposal seems farfetched to me. 

Copeland and Howard theorize that by limiting compensation to unanticipated adverse events, drug companies would have incentives to disclose adverse events quickly and include them in warning labels.  They also explained why their proposal differed from the vaccine program, which compensates for any injury caused by a vaccine:

Attributing adverse events to drugs, however, poses unique challenges.  Since vaccines are given primarily to healthy individuals, it is usually possible to link a severe side effect to an administered vaccine and not an underlying health condition.  Drugs, particularly those used to control chronic illnesses such as diabetes and heart disease, by contrast, are taken by individuals whose health is already substantially compromised, making it more difficult to say definitively that the root cause of an adverse event was drug treatment.  Thus, policymakers would have to consider carefully the classes of individuals and injuries to be covered under any compensation program.  If they did not, the program would overcompensate some individuals, and thus discourage pharmaceutical companies from developing treatments for certain diseases.

Report at 13.

Copeland and Howard would fund their program with a tax on drugs and devices based, at least initially, on market share, but later perhaps on the size of payouts to the users of the respective products.  They also advocate a rigorous post-market review process that would be conducted by FDA personnel separate from those who were responsible for the original drug approval and labeling.  They also would leave claimants with state law tort causes of action against their health care providers.

Philip Howard of Covington & Burling and John O'Quinn of Kirkland & Ellis each responded to the report.  They reiterated their agreement with the presenters that Levine was wrongly decided on its facts, and that state tort law is simply not equipped to handle the risk-benefit balancing that goes into bringing medical products to market.

O'Quinn noted his belief that Copeland and Howard's program could not be adopted in the current political climate.  He also wondered whether engaging in the sort of claim-splitting that precluded state law tort claims against the drug company, but allowed them against the medical providers might create undue pressure to sue the medical providers in most instances.

Ultimately, O'Quinn concluded that Copeland and Howard's proposal was one that should lead to a broader discussion of other potential compensation systems, such as a true no-fault system (although that would be extraordinarily expensive), or even a system in which failure-to-warn claims are not preempted, but merely channeled into a federal system for review by expert tribunals.

Copeland and Howard's report is a good resource for lawyers interested in FDA preemption issues.  It will be interesting to see in the months to come whether it can spark renewed Congressional interest in preemption in exchange for a simplified system to compensate claimants.

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When the Supreme Judicial Court of Massachusetts held that there was no preemption for light cigarette claims on Monday, it was big news that the court was following the U.S. Supreme Court's recent decision in Altria Group, Inc. v. Good, 128 S. Ct. 1119 (2008).  But that, of course, was to be expected.

What is more interesting about the Massachusetts Supremes' opinion in Aspinall v. Philip Morris, Inc., 2009 WL 637110 (Mass. Mar. 16, 2009), is the court's analysis of the safe harbor provision of the state's deceptive trade practices act and the deference the court gave to the relevant agency, the Federal Trade Commission.

Massachusetts' statute provides that:  "'Nothing in this chapter shall apply to transactions or actions otherwise permitted . . . by any regulatory board or officer acting under statutory authority of the commonwealth or of the United States.'"  Id. at *2 (quoting G.L. c. 93A, sec. 3).  The tobacco companies argued that they came within this safe harbor because their designations of "lights" and "low tar" were based on the FTC-approved method of measuring tar and nicotine yields.  Moreover, the FTC had entered into a consent decree with a manufacturer in 1971 that gave it permission to use the descriptors "light" and "low tar" if they were accompanied by tar and nicotine yields using the FTC method.

The court, however, disagreed.  First, it explained that the defendants had the "burden of proving the exemption," and that "burden is a heavy one."  Id. at *3.  According to the court, a defendant must do more than show mere related or overlapping regulatory schemes to meet its burden of proving the applicability of the safe harbor; rather, it "'must show that such [regulatory] scheme affirmatively permits the practice which is alleged to be unfair or deceptive.'"  Id.  (citation omitted).  The court cited the U.S. Supreme Court's analysis of the 1971 consent order in Good to conclude that the defendants showed nothing proving that the FTC had affirmatively permitted use of the questioned terms.  The agency's decision not to act to prevent use of the terms was not the same as affirmatively granting permission to use the terms, the court concluded.

It was particularly interesting -- given the U.S. Supreme Court's recent reluctance to give any credence whatsoever to the Food and Drug Administration's statements about its' regulatory policies and effects in Wyeth v. Levine -- that the Massachusetts Supremes gave substantial deference to the FTC's statements about its regulation on this issue:

[A] high-ranking FTC official stated in a deposition that the FTC has no official position on descriptors on cigarette packages.  This testimony is supported by FTC documents that state that there is no official definition for the terms "light" and "low tar" and that FTC guidance concerning the FTC method [of measuring tar and nicotine yields] did not "apply to other conduct or express or implied representations, even if they concern[ed] tar and nicotine yields."

 Id. at *3. 

The Massachusetts court ultimately held that the defendants failed to meet their burden of proving that they were given "affirmative permission" to use the descriptors "lights" and "low tar," and thus the safe harbor provision did not apply.

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The Practising Law Institute will be hosting from 1-2 p.m. EDT on April Fool's Day -- no irony intended -- a one-hour audio briefing on the Supreme Court's recent decision in Wyeth v. Levine and its impact on pharmaceutical and other litigation.  CLE credit will be provided.  You can register for the audio briefing here.

I will be moderating a discussion between two really first-rate panelists:   David Frederick and Bert Rein.  David is the noted Supreme Court advocate and author of The Supreme Court and Appellate Advocacy (West 2003).  More important, he argued the plaintiff's case before the Supreme Court and won.  Bert Rein -- also a noted Supreme Court advocate and preemption expert -- has been described by The Legal Times as Washington's "Leading Food and Drug Lawyer."  He was on the brief for Wyeth in the Supreme Court.

Together, we will be considering a number of issues, including:

• What, exactly, is the holding of Wyeth v. Levine?  And does it apply beyond pharmaceutical cases?
• Can an implied preemption argument succeed in a pharmaceutical case after Levine?  If so, what would it require?
• What does the fact that Levine involved failure to warn claims say about potential preemption of design defect or manufacturing defect claims in drug cases?
• Does Levine – when read with Altria Group, Inc. v. Good, 129 S. Ct. 538 (2008) – provide a comprehensive framework for analyzing implied preemption arguments?
• What impact, if any, did Levine’s “presumption against preemption” have on the result? 
• Did Levine effectively overrule Geier v. American Honda Motor Co., 529 U.S. 861 (2000)?  And how do we synthesize the cases in which the Court has relied upon a “presumption against preemption” and those in which it has not?
• After Levine, what level of deference should be accorded to a regulatory agency’s statements about the preemptive effect of its rules made in:  (1) a ‘preamble’ to a rulemaking, (2) an amicus brief, (3) public comments, (4) communications to those companies that it regulates?
• Is there a policy reason for treating drugs and devices differently when it comes to preemption?

I hope you can make it for what promises to be a lively and informative discussion between two excellent preemption experts.

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Today there is no joy in Mudville, folks.  Mighty Preemption has struck out and is on the injured players list for the foreseeable future.  See Wyeth v. Levine, No. 06-1249 (U.S. March 4, 2009).

This happened in a game where the facts seemed to weigh heavily in Preemption's favor.  The FDA had known about the risk of gangrene resulting from IV push of Phenergan for more than 40 years.  It had, over time, approved separate revisions to the medicine's label so that -- by the time the physician's assistant decided to give Ms. Levine an IV push of Phenergan at one of the riskiest of all vein sites and ignore the shooting and burning pain described in the label -- there were six separate places in the labeling that addressed the risk of harm that Ms. Levine experienced.  The FDA continued to allow doctors to choose IV push as a last-resort form of Phenergan administration even after the labeling had been studied by an advisory panel.  The label even provided in bold, all-caps type:  "INADVERTENT INTRA-ARTERIAL INJECTION CAN RESULT IN GANGRENE OF THE AFFECTED EXTREMITY."  Levine, slip op., dissent at 15-16 (Alito, J., dissenting).

And at the trial, plaintiffs' counsel had clearly set up the state law conflict, declaring that the label should say "Do not use this drug intravenously."  Wyeth, slip op., dissent at 2 (Alito, J., dissenting).  Panels of preemption Poo Bahs predicted that this was a case where implied conflict preemption would be found, but its parameters very, very narrowly defined.

So much for the academics.  As we all now know, the court -- in an opinion written by Justice Stevens -- held that there was no implied conflict preemption.  Mark Herrmann and Jim Beck have a good discussion of the court's basic holding here.

I want to focus in this post on three aspects of the opinion.

The first aspect is the "presumption against preemption."  This "presumption" is a canard that generally has been trotted out only when the Court is going to find against preemption.  Moreover, Levine and this term's decision in Altria Group, Inc. v. Good, 129 S. Ct. 538 (2008) represent a complete turnaround on this presumption and a stunning reversal of position for Justice Stevens.  Justice Thomas's dissent in Good lays out well how the court's reliance on the "presumption against preemption" had waned in the express preemption context.  Good, 129 S. Ct. at 555-58 (Thomas, J., dissenting). 

But the presumption also had been expressly rejected by the Court in the implied conflicts preemption context.  To begin with, in Freightliner Corp. v. Myrick, 514 U.S. 280, 287-88 (1995), the Court expressly rejected the argument that implied preemption cannot exist where there is an express preemption provision.  Then, in Geier v. American Honda Motor Co., 529 U.S. 861, (2000), Justice Breyer wrote a majority opinion that expressly rejected Justice Stevens's call in the dissent for the use of a presumption against preemption in analyzing implied preemption. 

In Geier, the Court was faced with a statute that not only had an express preemption provision, but also a savings clause that preserved state law causes of action that were not preempted.  Nevertheless, the Court held that implied conflict preemption still could apply where a state law directly conflicted with a federal regulation:

Neither do we believe that the pre-emption provision, the saving provision, or both together, create some kind of "special burden" beyond that inherent in ordinary pre-emption principles--which "special burden" would specially disfavor pre-emption here.  The two provisions, read together, reflect a neutral policy, not a specially favorable or unfavorable policy, toward the application of ordinary conflict pre-emption principles.

Id. at 870-71 (citations omitted).

Taking Justice Stevens to task, the Court refused to impose the presumption against preemption that he advocated in the dissent:

Nothing in the statute suggests Congress wanted to complicate the ordinary experience-proved principles of conflict pre-emption with an added "special burden."  Indeed, the dissent's willingness to impose a "special burden" here stems ultimately from its view that "frustration-of-purpos[e]" conflict pre-emption is a free-wheeling, "inadequately considered" doctrine that might well be "eliminate[d]."  In a word, ordinary pre-emption principles, grounded in longstanding precedent, apply.  We would not further complicate the law with complex new doctrine.

Id. at 874 (citations omitted).

Even as recently as 2001 the Court reiterated its commitment to ordinary conflict preemption principles.  See Buckman Co. v. Plaintiffs' Legal Committee, 531 U.S. 341, 353 (2001) ("our ordinary pre-emption principles apply" even in the face of the Medical Device Amendments' express preemption provision).

And yet in Levine, Justice Stevens -- who for years had been dissenting from preemption decisions for their failure to employ a special "presumption against preemption" -- suddenly was able to assemble a majority willing to sign on to a presumption against preemption (Levine, slip op. at 8) and bolster it with reliance on the statute's express preemption provision (id. at 10-11, 18).

As I have commented in previous posts, the "presumption against preemption" can be a troubling substitute for actual analysis of the conflicts preemption arguments, and since its articulation in Good last December, it already is being applied in a variety of contexts outside of drugs and medical devices to deny motions based on federal preemption.  Justice Stevens's use of the presumption in Levine undoubtedly will further impede the effectiveness of conflict preemption arguments far beyond the drug and medical device arena.  Defendants arguing preemption must use the language of Geier to focus the courts on the "ordinary" principles of conflicts preemption if they are to have any hope of receiving a thoughtful analysis of the issue.

The second aspect I'd like to focus on is the striking lack of deference to the relevant agency here.  NYU Professor Catherine Sharkey has pointed out on numerous occasions that for the most part, the result in the Supreme Court's preemption cases follows what the relevant federal agency has advocated.  In fact, Professor Sharkey has articulated her own approach to preemption called the "agency reference model" that would facilitate input from federal agencies on preemption questions. 

Given the Supreme Court's general deference to agency viewpoints in preemption cases, Levine is all the more remarkable for its utter rejection of the FDA's explanation as to how the state law cause of action conflicts with the FDA's labeling determination.  Levine, slip op., dissent at 22 (Alito, J., dissenting).  It is, of course, understandable that the Court may have had some skepticism of the FDA's "preemption preamble" and the manner in which it was enacted.  Id., slip op. at 20-23.  And the Court noted that the agency's position appeared to have changed over time.  Yet, to refuse even to consider the arguments made in the FDA's amicus brief or accord them any deference (id. at 24, n.13) seems unprecedented.

The third aspect I'd like to focus on are the three stratagems that underlie the opinion and may be the basis for distinguishing it in future cases. 

Stratagem #1:  The jury verdict established only that the warning was insufficient and did not require contraindicating IV administration.  Horse feathers.  The labeling addressed the problems with IV administration in six places.  The only way that the labeling could have been stronger was to completely contraindicate IV administration of the medicine -- a method of administration the FDA clearly chose to allow.  The dissent makes it clear that contraindication is exactly what the plaintiff's lawyer argued for at trial.  And yet the only way Justice Stevens could cobble together a majority was to engage in the artifice that the jury verdict was about the strength of the warning.  In future lawsuits where the defendant is able to show a direct conflict between the state law claim and the federal regulation, Levine will be distinguishable on this ground.

Stratagem #2:  The "Change Being Effected" Rule gave defendant the authority to change its label without FDA approval.  The majority clings to the notion that the CBE Rule gave Wyeth actual discretion to do something with its label other than what the FDA had approved.  That conclusion seems obviously false, and the subsequent curative regulations make that plain.  Indeed, the Court stretches so far as to say that Wyeth could have unilaterally changed its label from what the FDA previously approved not just upon new evidence, but upon merely a new interpretation the company might have of old evidence the FDA was aware of.  This argument, of course, effectively makes FDA approval of labeling meaningless. 

Levine is patently distinguishable because of this stratagem; if the statutory scheme at issue in future cases does not give the defendant discretion to make changes, then a true conflict between the state law and the federal rule is more likely to exist. 

Stratagem #3:  The FDA made no determination regarding the IV-push method of administering Phenergan.  This argument came in various forms.  The Court repeated a trial court finding that there was no evidence the FDA gave more than passing attention to IV-push administration.  Id., slip op. at 16.  Elsewhere, the Court distinguished Geier by observing that the FDA had not issued a formal regulation with notice and comment.  The dissent does a fine job of demonstrating the careful consideration FDA gave to IV administration over the years.  And the dissent makes it plain that an agency's decision does not have to be manifested in a regulation adopted after notice and comment to have the force and effect of federal law.  But this much is plain:  in future cases asserting preemption, if there is an actual agency regulation at issue (as opposed to an individual determination), Levine is easily distinguishable.

One final note regarding the concurring opinions in Levine.  It seems clear that Justice Breyer remains open to the possibility that a federal agency may set a standard that is both a "ceiling as well as a floor."  He merely would require that the agency be very explicit about doing so. 

Justice Thomas, however, seems to have thrown in the towel on implied conflict preemption as articulated in Geier, at least as it relates to those instances in which compliance with the federal and state standards may be technically possible, but the state standard stands as an obstacle to the achievement of the federal purposes:

This Court's entire body of "purposes and objectives" pre-emption jurisprudence is inherently flawed.  The cases improperly rely on legislative history, broad atextual notions of congressional purpose, and even congressional inaction in order to pre-empt state law.  I, therefore, cannot join the majority's analysis of this claim, or its reaffirmation of the Court's "purposes and objectives" jurisprudence.

Levine, slip op., Thomas concurrence at 13 (Thomas, J., concurring in the judgment); see also id. at 16-21.

  Justice Thomas also remains a formalist; it matters greatly to him exactly how the federal law with purported preemptive effect was made:

The Supremacy Clause thus requires that pre-emptive effect be given only to those federal standards and policies that are set forth in, or necessarily follow from, the statutory text that was produced through the constitutionally required bicameral and presentment procedures.

 Id. at 5; see also id. at 22-23.

In sum, the result in Levine is profoundly disappointing from a defense perspective.  A pharmaceutical company was held liable for a side-effect that the medical community and the FDA had been aware of for decades and was warned about six times in an FDA-approved label.  Nevertheless, despite Levine, defendants in a variety of regulatory schemes still have a number of compelling arguments in favor of implied conflict preemption; they must simply pay attention to how Levine was decided and do their best to articulate their conflict preemption arguments in ways that make Levine easily distinguishable.

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It's a 6-3 split, with Justice Stevens writing the majority and Justice Alito writing the dissent, which Chief Justice Roberts and Justice Scalia join.  You can find the opinion here.

I'll post some more about the opinion later today.

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Yesterday the Second Circuit Court of Appeals affirmed the right of the City of New York to require chain restaurants to post calorie counts for items on their menus and menu boards.  New York State Restaurant Association v. New York City Board of Health, No. 08-1892-cv (2d Cir. Feb. 17, 2009). 

The City's regulation requires chains with 15 or more locations nationally to display calorie content next to each menu item in the same size and appearance as the name or price of the menu item.  Such chain restaurants purportedly account for ten percent of the restaurants in New York City.  The regulation permits restaurants to provide additional nutritional information and to include disclaimers that calorie content may vary across servings based on serving size or quantity of ingredients.  The courts previously had refused to stay the effectiveness of the regulation during the appeal, so it currently is in effect in New York City.

The New York State Restaurant Association had challenged the City's right to impose such obligations, arguing that the City's regulation was preempted by the federal Nutrition Labeling and Education Act of 1990 ("NLEA"), and that the regulation violated the First Amendment by forcing restauranteurs to emphasize calorie counts over other kinds of nutrition information.  The court rejected both arguments.

The Second Circuit's unanimous opinion -- authored by Judge Rosemary Pooler and joined in by Judges Sonia Sotomayor and Jane Restani (sitting by designation from the US Court of International Trade) -- relied heavily on the so-called "presumption against preemption" recently re-articulated in Altria Group, Inc. v. Good, 129 S. Ct. 538, 543 (2008).  The court observed that the presumption against preemption is heightened where the state is acting in a traditional sphere of regulation, and it posited that where there is more than one plausible interpretation of a preemption provision, "courts 'have a duty to accept the reading that disfavors pre-emption.'"  NYSRA, slip op. at 12 (citing Bates v. Dow Agrosciences LLC, 544 U.S. 431, 449 (2005)); see also id. at 23-24.

To be clear, the court's analysis is solely one involving express preemption, not implied preemption.  The NLEA says the statute "'shall not be construed to preempt any provision of State law, unless such provision is expressly preempted under [21 U.S.C. sec. 343-1(a)] of the [FDCA].'"  Slip op. at 12 (quoting NLEA).

As for its express preemption analysis, the Second Circuit acknowledged that "the federal statutory scheme regarding labeling and branding of food is a labyrinth and interpreting the statute are a series of agency regulations that sometimes appear to conflict and are difficult to harmonize."  Slip op. at 3. 

Basically, the federal statute, NLEA (which amended the Food, Drug, and Cosmetics Act), has two relevant provisions.  The first is Section 343(q) -- entitled "Nutrition Information" -- which requires mandatory nutrition information to be disclosed for most foods.  You and I know this nutrition information as "Nutrition Facts" on the label of most pre-packaged foods.  Section 343(q) expressly states, however, that restaurants are exempt from the requirement to provide such information.  The express preemption provision relating to Section 343(q) preempts any state or local "requirement for nutrition labeling of food that is not identical to the requirement of [S]ection 343(q) . . ., except a requirement for nutrition labeling of food that is exempt" from this provision -- namely, restaurant food.  In essence, restaurants have no obligations under -- and no preemption protection from -- Section 343(q).

The second relevant provision of NLEA is Section 343(r).  Restaurants are not exempt from this section and therefore have preemption protection under it.  Section 343(r) -- entitled "Nutrition Levels and Health-Related Claims"  -- "prohibits the use of terms that 'characterize[]' the level of any nutrient in a food unless they conform to definitions established by the FDA, and requires that claims about the relationship between nutrients and health conditions be supported by scientific consensus."  Slip op. at 6.  The provision adds that statements of the type required by Section 343(q) -- which does not apply to restaurants -- that appear as part of nutrition information required or permitted by Section 343(q) are "'not a claim which is subject to this paragraph.'"  Slip op. at 6 (quoting statute).  The express preemption provision relating to Section 343(r) "expressly preempts state or local governments from imposing any requirement on nutrient content claims made by a food purveyor . . . that is not identical to the requirement of Section 343(r)," with certain irrelevant exceptions relating to cholesterol, fat, fiber and the like.  Slip op. at 7 (quoting statute).

The Second Circuit reasoned that the text of the statutes thus was very simple:  states were free to regulate nutrition information labeling ("Nutrition Facts") for restaurant food because no federal regulations applied to restaurants under Section 343(q), but were preempted from having rules different from the FDA's for nutrition content and health claims on restaurant foods because there were federal regulations for restaurants on those claims under Section 343(r).  

The problem, the court recognized, was that the FDA's regulations made it difficult to distinguish "nutrition information" from "nutrition content claims."   Is requiring the calorie count "nutrition information" that is not preempted?  Or could it be a "nutrition content claim" that might be preempted?  The NYSRA had argued that Section 343(q) applied only to pre-packaged food, and that any time a restaurant was required to provide similar information -- such as calorie content -- that was a nutrition content claim governed under Section 343(r).  The FDA's regulations gave restaurants flexibility in how to present nutrition information about menu items, the NYSRA maintained, allowing for in-store signs, posters, brochures, or charts.

The court engaged in a tortured analysis of FDA regulation, the parties' proposed interpretations, and the FDA's amicus brief.  Ultimately, the court sided with the FDA, concluding that a statement is "nutrition information" if it is of the type generally required or permitted by Section 343(q).  Calorie counts fall squarely within that type of "Nutrition Facts," and thus -- for restaurants -- are a fair subject for local regulation, according to the court.  Slip op. at 25-26.

The NYSRA also had challenged the regulations on First Amendment grounds, arguing that being forced to convey one piece of nutrition information -- calorie counts -- on menus infringed on its members' First Amendment rights because its members disagreed with the City that calorie counts were the most important factor people should consider in choosing food.  The restauranteurs believed that all nutrition information must be looked at in context with the amount of energy being expended by the customer; posting only a calorie count contradicted this message, they argued.  The NYSRA argued that such forced speech was unconstitutional under United States v. United Foods, Inc., 533 U.S. 405 (2001), which had held that a monetary assessment imposed on mushroom growers to fund mushroom advertisements violated the First Amendment because it compelled some growers to subsidize commercial speech with which they disagreed.

Those of you who are marginally familiar with commercial speech cases may remember the intermediate scrutiny of regulations that is required under the four-part test of Central Hudson Gas & Elec. Corp. v. Pub. Serv. Comm'n of New York, 447 U.S. 557 (1980).  That test focuses on whether there are less speech-restrictive alternatives to achieve the state's legitimate governmental interest.

The Second Circuit held that the intermediate scrutiny of the Central Hudson test was not the appropriate standard for reviewing the City's regulation here.  Central Hudson applies where speech is restricted, the court explained, while here the City is merely forcing disclosure of purely factual and uncontroversial information.  Thus, although the regulation impacts commercial speech, the Second Circuit held that it is properly measured by the rational basis review standard of Zauderer v. Office of Disciplinary Counsel, 471 U.S. 626 (1985). 

Applying this rational basis review, the court cited materials indicating that there is an obesity epidemic, that people eat more calories when they eat out -- particularly at fast food chain restaurants -- than they do when they eat at home, that consumers have "distorted perceptions about how many calories food contained," and that providing calorie counts on menus (at the "point-of-decision") will help consumers make better choices.  The court concluded that the City's regulation easily met the rational basis review standard.

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In the last few years, a number of courts have looked favorably upon federal preemption of state law claims based on food and beverage labeling.  See, e.g., Holk v. Snapple Bev. Corp., 574 F. Supp. 2d 447 (D.N.J. 2008) (finding implied preemption of state law claims against Snapple for for using "all natural" to describe beverages containing high fructose corn syrup); Fraker v. KFC Corp., 2007 WL 1296571 (S.D. Cal. Apr. 30, 2007) (finding implied preemption of state law claims against defendant for using trans fats in oils).

But a recent decision bucks that trend.  In Lockwood v. ConAgra Foods, inc., 2009 WL 250459 (N.D. Cal. Feb. 3, 2009), Judge Charles Breyer denied the defendant's motion to dismiss the plaintiff's Unfair Competition Law claim that "high fructose corn syrup" is not produced by a natural process, thus making it misleading to label pasta sauce containing it as "all natural."  The defendant had argued that the California state law claim was preempted -- either expressly by the federal Food, Drug and Cosmetic Act ("FDCA"), or impliedly by the FDA's regulation of the field.

Citing Altria v. Good, 129 S. Ct. 538 (2008), Judge Breyer began his analysis with a presumption against preemption.  Looking to the express preemption provisions of the FDCA and the National Labeling and Education Act of 1990 ("NLEA"), Judge Breyer concluded that the UCL claim was not preempted because it was not establishing a labeling requirement different from the federal requirement and did not involve "misbranding" of an imitation product as the real thing.  2009 WL 250459 at *2. 

He also rejected the notion that field preemption could apply, citing Freightliner v. Myrick, 514 U.S. 280 (1995) for the proposition that "'an express definition of the pre-emptive reach of a statute "implies" -- i.e., supports a reasonable inference -- that Congress did not intend to pre-empt other matters.'"

Moreover, Judge Breyer reasoned that the FDA's policy on the use of the word "natural" supported his conclusion against preemption.  Under that policy, "natural" simply means that nothing artificial or synthetic is included in, or has been added to, the product that would not normally be there.  In 1991, Judge Breyer recounted, the FDA had solicited public comment on a proposed rule defining the term "natural," acknowledging that -- if not properly defined -- the term might have the potential to mislead consumers.  But the rule was never to be: 

"'Because of resource limitations and other agency priorities, FDA is not undertaking a rulemaking to establish a definition for "natural" at this time.  The agency will maintain its current policy [as explained above].'"  58 F.R. 2302-01 (1993).  Although the FDA acknowledges that consumers are being misled by the use of the term "natural," it has declined to adopt any regulations regarding this term.  This inaction is consistent with an intent not to occupy the field.  This is especially so given that at the time the FDA declined to formally define "natural" it was aware of and had reviewed state regulation of the use of the term, yet it made no mention of the need for uniformity or a preemptive federal regulation, . . . instead, it declined to take any action.

Id. at *5.

In addition, Judge Breyer used the FDA's limited resources and different priorities as a justification to also reject the defendant's primary jurisdiction argument that the court should defer ruling in the case in order to give the regulatory agency the opportunity to address the issue.

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California’s Fourth District Court of Appeal issued an opinion last Monday that illustrates once again why splitting the baby is never a satisfying result.  See Paduano v. American Honda Motor Co., 2009 WL 57806 (Cal. App. Jan. 12, 2009).  The case was straightforward enough:  plaintiff bought a hybrid car expecting it to get 51 miles per gallon, which was what the brochure said was the EPA’s fuel economy estimate for manual transmission versions of the car.  But the car didn’t come close.  Instead, it averaged roughly 30 miles per gallon when plaintiff drove the car.  Apparently EPA’s method of testing hybrid cars differs substantially from how some drivers typically drive them, so that the EPA estimates can be significantly better than actual experience.

Plaintiff sued for breach of one federal and two state warranty statutes, as well as for violations of California’s Unfair Competition Law (“UCL”) and its Consumer Legal Remedies Act (“CLRA”).

The trial court granted summary judgment on all claims, finding, inter alia, that they were preempted by the federal Energy Policy and Conservation Act.  The Court of Appeal, however, affirmed dismissal of the warranty claims, but reversed on the UCL and CLRA claims, holding that they were not preempted.

The court was right to affirm dismissal of the warranty claims because Honda clearly made no warranty about the EPA’s fuel economy estimate.  Rather, the label stated – as required by federal law – “ACTUAL MILEAGE will vary with options, driving conditions, driving habits and vehicle’s conditions.”  And 49 U.S.C. § 32908(d) “clearly provides that ‘[a] disclosure about fuel economy or estimate annual fuel costs under this section does not establish a warranty under the law of the United States or a State.’”  Id. at *7.

Ultimately, however, the majority held that the plaintiff’s UCL and CLRA claims were not preempted.  In doing so, it applied a presumption against preemption from the California Supreme Court’s “colored salmon” case:  Farm Raised Salmon Cases, 42 Cal.4th 1077, 1087-88 (2008), cert. denied sub nom., Albertson’s, Inc. v. Kanter, 2009 WL 56199 (U.S. Jan. 12, 2009).  Paduano, 2009 WL 57806 at *12-*13.  It then applied the U.S. Supreme Court’s recent decision in Altria Group v. Good, 2008 WL 5204477 (U.S. Dec. 15, 2008) to hold that the language of the Energy Policy and Conservation Act does not expressly preempt the plaintiff’s claims.  Paduano, 2009 WL 57806 at *15.  Because the UCL and the CLRA are laws of general applicability that are not based specifically on the disclosure of fuel economy or fuel operating costs, the court held that the federal act’s express preemption provision did not apply.

The majority then found that there might be viable UCL and CLRA claims arising out of two statements from the defendant’s sales brochure:  (1)  “Just drive the Hybrid like you would a conventional car and save on fuel bills,” and (2) “IS THERE ANYTHING SPECIAL I HAVE TO DO?  You just have to love saving money and getting terrific gas mileage.”   Id. at *10-*11.

As Justice Terry O’Rourke points out in the dissent, these statements are “mere unspecific, nonfactual assertions constituting non-actionable puffery.”  Id. at *32-*33.  And the first statement, taken in context, is actually just differentiating this Hybrid from an electric car the owner would have to plug in to charge.  Id. at *23.

But more important, Justice O’Rourke makes it plain that the plaintiff’s sole theory of liability is premised exclusively on the EPA’s mileage estimate, and that the sought-after relief – eliminating or reducing the EPA’s mileage estimate –  actually was expressly preempted by the federal statute because it would impose a legal obligation “related to fuel economy standards.”  Id. at *25.  The Supreme Court’s recent Good decision, Justice O’Rourke explains, is wholly irrelevant to the issue at hand.

The majority and dissenting opinions in Paduano highlight the difficulty of consistently applying the Supreme Court’s preemption precedents.  There is much too much detail in the two sides’ positions to analyze in this blog post.  But certain fundamental questions – such as when to apply the presumption against preemption, and when does a statute of general applicability “impose” obligations within the meaning of an express preemption provision – clearly remain hotly disputed.  One hopes the California Supreme Court will accept review of Paduano, which seems certain to be appealed, and provide some additional clarity in this area.

 

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