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

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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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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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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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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Cases brought by public water authorities often present special challenges, particularly where the party sued is not a neighboring landowner, but instead is a product manufacturer that stands far removed from any alleged contamination.  Federal preemption sometimes can be an issue.  Proximate causation is often problematic, since the presence of any alleged contaminant can only have occurred through the conduct of independent third parties, like neighboring farmers, who may or may not have followed the manufacturer's instructions and warnings.

The recent opinion in City of Greenville v. Syngenta Crop Protection, Inc., 2010 WL 4791674 (S.D. Ill. Nov. 18, 2010) raises different issues, including the adequacy of pleadings.  The plaintiffs in the case are public water authorities from various states.  They sued to recover the cost of testing and monitoring their water for atrazine, a chemical used in Syngenta's herbicide.  They also want the cost of installing a carbon-based filtration system to remove atrazine from the water, as well as punitive damages.  

Plaintiffs assert four causes of action:  (i) trespass onto plaintiffs' rights to possess raw water; (ii) public nuisance for interfering with the use and enjoyment of the raw water; (iii) strict liability, and (iv) negligence for breaching duties to avoid contaminating plaintiffs' water sources.  

The defendant moved to dismiss, and the court ultimately mostly denied the motion.  The court began its analysis by considering the defendant's argument that the plaintiffs had not properly pled any injury -- and thus lacked standing -- because they did not plead that their "finished water" (or post-treatment water) contained atrazine at maximum contaminant levels ("MCLs") higher than the EPA's set limit of 3 parts per billion on an average annualized basis.  Without contamination at such levels, the defendant argued, the plaintiffs had not demonstrated that they were impaired in their ability to provide potable water to the public.

The court rejected this argument and sided with plaintiffs, who had cited an opinion from the MTBE Products Liability Litigation.  The court reasoned that where the presence of atrazine at any level makes the plaintiffs' job of providing potable water more difficult and costly, the plaintiffs have suffered an injury regardless of whether the MCL threshhold has been reached.  The court remarked:

[I]t seems an extremely bad rule to require a public water supplier to provide overly contaminated water to the public before it can seek redress from one responsible for the contamination.  Thus, the Court agrees with the In re:  MTBE court that a water provider may demonstrate an injury in fact even if its finished water does not exceed an MCL if its use of the water to meet its statutory obligations to the public becomes more costly because of a defendant's conduct.

Id. at *4.  The court warned, however, that on summary judgment, the plaintiffs will have to show a specific, immediate threat of atrazine in excess of the MCL to maintain standing to sue.  Id. at *5.

Next, the court considered the defendant's challenge to the strict liability claim of the Indiana plaintiffs.  It summarily dismissed the strict liability claim because Indiana law does not allow strict liability in design defect cases; design defect is measured by a negligence standard.  Thus, the court granted the defendant's motion on that count against the claims of the Indiana plaintiffs.  Id. at *6.

The court next analyzed whether the economic loss doctrine barred the tort claims of the remaining plaintiffs under Ohio, Iowa, Kansas, Missouri and Indiana law.  The court concluded that it did not.  The court recited a basic description of the economic loss doctrine, and then concluded that the "economic loss rule simply does not apply in this case because the plaintiffs have alleged that the defendants are responsible for damages to their property rights in their raw water sources by causing those sources to be contaminated by atrazine."  Id. at *8 (citing MTBE).

Finally, the court refused to dismiss the plaintiffs' claims for future damages and refused to apply the statute of limitations at the motion to dismiss stage.

So, the City of Greenville plaintiffs live to fight another day.  But there are many, many more legal defenses that they must surmount, and it remains to be seen whether the claims can be tried together as a class action.  This is a litigation worth monitoring, and we'll report on further developments as they arise.

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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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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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Cars -- like diamonds -- are forever.  Or so we'd like to think.  I used to have a vintage Mercedes that I bought for $4,000.  I loved to sit in that car.  Of course, that's all I could do with it.  It never really ran.  But I looked fantastic in it, sitting in my garage.  My friends used to say it looked like a sedan a Latin American dictator would be assassinated in -- which was fitting, since it killed me to junk that car (which, it turns out, was held together with Bondo).

Gilbert Noble, no doubt, knows what I mean.  He bought a 1999 Porsche 911 Carrera Coupe in 2005.  It was already out of warranty (4 years/50,000 miles).  The 1999 911 was the first year that Porsche began equipping their products with a water-cooled engine.  Gilbert used his car for about a year, when he started noticing smoke billowing from the tailpipe.  It turns out that antifreeze had leaked into the car's oil through a defective cylinder, irreparably damaging the engine.

Gilbert wrote Porsche.  Porsche said, "Sorry, you didn't buy the car from us, and it was out of warranty when you bought it."  So Gilbert sued Porsche, asserting two causes of action:  (1) strict liability, and (2) violation of New Jersey's Consumer Fraud Act.  The court dismissed his claim on the pleadings.  Noble v. Porsche Cars North America, Inc., 2010 WL 606305 (D.N.J. Feb. 19, 2010).

The court made easy work of Gilbert's strict liability claim, holding that it was barred by the economic loss doctrine, which "bars tort claims for harm sustained to the product alone, as opposed to harm to persons or other property damage."  Id. at *3.

The claim under New Jersey's Consumer Fraud Act ("CFA") was more difficult.  There are three elements to a CFA claim:  (1) unlawful conduct, (2) an ascertainable loss, and (3) a causal relationship between the two.  The court held that, under New Jersey law, "a plaintiff cannot maintain an action under New Jersey's CFA when the only allegation is that the defendant 'provided a part -- alleged to be substandard -- that outperforms the warranty provided."  Id. at *4.  To hold that the CFA covers parts failures beyond the warranty period "'would be tantamount to rewriting that part of [the] contract which defined the length and scope of the warranty period . . . [which] would also have a tendency to extend those warranty programs for the entire life of the vehicle.'"  Id. (citation omitted).

Gilbert (and I) learned a valuable lesson:  nothing lasts forever, and when you buy a used product outside of the warranty period, you bear the risk that the product will no longer work.  That's how you can buy a Mercedes for $4,000, or a Porsche 911 for whatever Gilbert paid for it. 

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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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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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