Friday, December 19, 2014

Apple of Our Eye—Class Cert. Denied

The district court’s order denying class certification in Rahman v. Mott’s LLP, 2014 U.S. Dist. LEXIS 167744 (N.D. Cal. Dec. 3, 2014), is a nail-biter in the same sense as the movies Argo and Captain Phillips.  We know the outcomes will be good because history tells us that the hostages leave Iran safely and the captain of the seized container ship Alabama will be rescued unharmed by the modern-day superheroes known as Seal Team 6.  But man, it sure was tense getting there.  If your heart was not beating quickly when the hostages were faking their way through the Tehran airport or when the Navy commandos were leveling their rifles at the ever-more-desperate Somali pirates, you are not human. 
We at the Drug and Device Law Blog are human, and although we knew that the outcome of Rahman would be good (because the district court said it would be at the beginning of the order), we had to get through some tense moments to get there. 
The lawsuit is one of the sillier cases that we have seen:  The plaintiff filed a class action alleging that an apple juice seller violated California’s Unfair Competition Law (UCL) by printing “No Sugar Added” on the label.  Id. at *2.  Why is that silly?  Because there was no sugar added.  The statement was completely true, yet it purportedly formed the basis for a class action claiming consumer fraud.  Before you bite your nails to the nub in frustration, bear in mind that the phrase “no sugar added” is regulated under the FDCA.  Under the regulations, a food seller can include “no sugar added” on a product’s label only if the product meets certain conditions, including that “the food that it resembles and for which it substitutes normally contains added sugars.”  Id. at **5-6 (citing 21 C.F.R. § 101.60(c)(2)(iv)).  Apparently, you can put “no sugar added” on the label of a frozen desert, but not a frozen pizza, because ice cream “normally contains added sugar” and pizza does not.  You also have to state on the label that the product is not “low calorie” or “calorie reduced.”  Id. at *5 (citing 21 C.F.R. § 101.60(c)(2)(v)).
We can debate the merits of these rules another time.  The point for today is that the plaintiff moved to certify a class of all California residents who purchased the product bearing “No Sugar Added” starting on one date up until preliminary approval of the class.  Id. at *8.  The defendant mounted the usual arguments in response:
No Ascertainability.  The class was not ascertainable because the defendant obviously did not know which consumers purchased its apple juice and because consumers were unlikely to have any other proof of purchase, such as receipts.  The Third Circuit has held that such problems of proof make a class unascertainable because relying on the word of absent class members deprives the defendant of due process rights and because it would be impracticable to assure the accuracy of the consumers’ claims.  Id. at *9 (citing Carrera v. Bayer Corp., 727 F.3d 300 (3d Cir. 2013)).  That is very sound reasoning, but the plaintiff in Rahman did not file within the Third Circuit.  He filed in the Northern District of California, where the district court held that “[i]n this Circuit [the Ninth], it is enough that the class definition describes a set of common characteristics sufficient to allow a prospective plaintiff to identify himself or herself as having a right to recover.”  Id. at *10.  That does not seem right to us.  Sure, a prospective class member can “identify himself or herself,” but what about the defendant, or the court, or the trier of fact?  Exclusive reliance on self-identification was precisely the problem that the Third Circuit addressed in Carrera.
No Typicality or Adequacy.  The plaintiff’s claims were neither typical of class nor was he an adequate representative mainly because the plaintiff, who was diabetic, did not actually rely on the challenged label and because he disclaimed any claim for damages.  The district court, however, disagreed and found both adequacy and typicality because it was disputed whether the plaintiff relied on the label and whether he had affirmatively waive his claim to damages.  Id. at *14.  In the end, the district court found that the plaintiff was pursuing no claims unique to him.  Id. at *16.  This seems wrong to us, too.  If reliance was disputed for the proposed class representative, it was likewise disputed for every class member.  Because you can resolve those disputes only through proceedings on each class member’s claims, a class action won’t work.  As for the plaintiff’s disavowal of damages, that is a form of claim shaving (abandoning claims on behalf of an entire class in order to make class certification more likely).  That normally represents a conflict with the class and makes the class representative inadequate, and it should have led to that result here, too.
If you are keeping score, the plaintiff at this point has used a procedural device—a class action under Rule 23—to bar the defendant from contesting (1) whether absent class members purchased the product in the first place and (2) whether any of them actually read or relied on the challenged statement, even though both of those elements were disputed.  That threatens to force the defendant to pay money to people whose claims have not been proven, which sounds to us like a deprivation of property without due process of law.  You can feel our tension rising. 
No Predominance of Common Issues.  Not to worry, the predominance requirement of Rule 23(b)(3) came to the rescue, as it so often does.  Notably, the district court found predominating common issues on liability, reasoning that individual proof of reliance is not required because “a presumption, or at least an inference, of reliance arises wherever there is a showing that a misrepresentation was material.”  Id. at *19.  We’ve heard that argument before, and we don’t think it works because presumptions can be rebutted and inferences are not proof.  Again, the defendant’s ability to put on a defense is being hamstrung. 
On damages, the plaintiff’s mojo finally ran out.  The plaintiff did not put forth any workable classwide damages model, but instead “assume[d] that once he proves liability, he will be able to reach a damages settlement.”  Id. at 25 n.4.  Plaintiffs are not usually so forthcoming about their true motive in seeking class certification—to multiply the potential exposure and extort an inflated settlement.  But post-Comcast, failing to account for damages spells defeat.  See Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013).  The plaintiff’s resort to a liability-only class under Rule 23(c)(4) went nowhere because the district court found that neither a separate damages class nor individual proof of damages for each class member was a “particularly desirable” option.  Rahman, 2014 U.S. Dist. LEXIS 167744, at **24-25.  We will keep our eye on liability-only subclasses under Rule 23(c)(4) because some courts have used them as the plaintiff here suggested—to avoid Comcast.  We have not reviewed all those cases, but we do know that subclasses under Rule 23(c)(4) have to meet all the requirement of Rule 23, just like any other class.  The district court in Rahman seems to have recognized that and rejected the idea. 
All’s well that ends well, and you can hear our sighs of relief.  We just wish the district court have driven more nails in the coffin of this class action. 

Thursday, December 18, 2014

Pennsylvania Sound Bites

            In searching for cases for this blog, we sometimes feel like its Groundhog Day.  Another preemption win in a PMA medical device case.  Another food labeling decision from California.  Another failure to plead fraud with particularity dismissal.  Another “Okay, campers, rise and shine, and don't forget your booties 'cause it's cooooold out there today.”  Well, that last one really only applies to Phil Connors, but you get the idea.   

            Faced with routine rulings, it can be difficult to be creative, to find the new hook or twist.  So, sometimes the answer is simply to not – be creative that is.  Sometimes, a decision is just what it looks like it is on its face.  Another good ruling in an already good body of law.  But that doesn’t mean it should be disregarded either.  We just need to pluck out the good sound bites and add them to top of the pile. 

            For instance, if faced with a claim for negligent failure to test in Pennsylvania, you can now add Houtz v. Encore Medical Corp., 2014 U.S. Dist. LEXIS 170481 (M.D. Pa. Dec. 10, 2014) to your motion to dismiss on the ground that “Pennsylvania courts have explicitly stated that negligent failure to test is not a viable cause of action.”  Id. at *7. 

            You can also toss in a cite to Houtz to defeat a negligent marketing claim, which is not recognized in Pennsylvania except for a claim of over-promotion.  Id. at *8-9.  But as the court points out, over-promotion is a very limited exception in which it is alleged that defendant’s promotion negated otherwise adequate warnings.  Id.  If plaintiff alleges, as she did in this case, that Defendants provided no warnings to her, then she has precluded “any prospect that this narrow exception to the prohibition on negligent marketing claims would apply.”  Id. at *9.

            Or, if your plaintiff is trying to use dicta in Lance v. Wyeth, 85 A.3d 434 (Pa. 2014) to get around the learned intermediary doctrine, you can use this: 
However, ultimately the Supreme Court [in Lance] chose not to consider the wisdom of modifications or exceptions to the [learned intermediary] doctrine, because the case before it did not present the issue for consideration.
It is not the province of this Court to extend the law of Pennsylvania and dispose of a doctrine that is still the law of the state.  
Houtz, at *14.  The learned intermediary is still alive and well in Pennsylvania.  If you have a device case, Houtz goes on to explain that plaintiff’s urged interpretation of Lance is an even greater stretch.  Id.  Because plaintiff’s complaint contained no allegations about the adequacy of the warning provided to her surgeon (only to her), her failure to warn claim was dismissed with leave to amend. 

            Houtz can also come in handy if your plaintiff’s design defect claim is a little thin.  At a minimum the court needs to be able to understand from the complaint “what theory of design defect” is being alleged.  And, if that theory is “based upon the availability of an alternative, safer design, [plaintiff] must plead in her complaint what that alternative, safer design might be.”  Id. at *17.  Again, the court gave plaintiff leave to amend to fix this pleading flaw.

            Finally, Houtz gives us a little reminder about the limited nature of the “malfunction theory.”  The malfunction theory of liability allows a plaintiff to prove a manufacturing defect with circumstantial evidence.  Id. at *19.  However, in order to proceed on this theory, plaintiff must prove that the product at issue “has been destroyed or is otherwise unavailable.”  Id. at *19, 20.  If the product is available, plaintiff is not entitled to an inference of a defect.  She’s going to have to prove it the old-fashion way – direct evidence and testing.

            Thanks to Terry Henry at Blank Rome for passing along this decision full of nice, neat quotable tidbits on Pennsylvania law. 

Wednesday, December 17, 2014

Closing Time for the New Jersey Alcotest Product Liability Case

What is that sad, semi-clever thing bartenders have been known to say at closing time?  "You don’t have to go home, but you can’t stay here."  Our days of being around at closing time are in the rear view mirror, growing tinier by the second.  We are unlikely ever again to reenact that greatest of all Sinatra songs, "One for My Baby" ("It’s quarter to three/there’s no one in the place except you and me").  Odds are that at 2 am on any Saturday night, we will be deep asleep, enduring another of those dreams where we showed up late for our Contracts exam, naked and afraid.

This will be the third, and almost certainly last, post we do on the Johnson v. Draeger Safety Diagnostics, Inc. litigation, where a purported class challenged the accuracy of the Alcotest machine used in New Jersey to measure blood alcohol content for driving-while-intoxicated (DWI) arrests and prosecutions. In our first post, Three Dumb Legal Theories Walk Into a Bar, we reported how a New Jersey federal court rejected a claim brought by a pair of plaintiffs whose claim was basically that a defective Alcotest machine forced them to plead guilty to DWI. We thought the theory was wobbly, but let’s remind you of the background. The plaintiffs had been arrested for suspected drunk driving.  Both submitted to breath tests administered using the Alcotest device, which reported, for each, a blood alcohol concentration (BAC) above .08%. Alcotest readings are admissible in DWI prosecutions as evidence of a per se violation of the DWI statute. The plaintiffs each pleaded guilty to DWI. They did not challenge the Alcotest readings at that time, and the reason for that (we surmise), requires even more background. During the roll-out of the Alcotest, twenty individuals charged with DWI challenged the admissibility of their Alcotest results, and their cases were consolidated for consideration of the evidentiary challenge. The case was called Chun.  During the Chun case, a Vice-President of the company that manufactured the Alcotest testified that he was "100 percent convinced" that the device was capable of producing accurate readings; that he "strongly believed" that the device was scientifically reliable; and that no maintenance was needed other than verifying proper operation at the time when the unit is calibrated. In 2008, the Supreme Court of New Jersey concluded in the Chun case that the Alcotest was scientifically reliable and that its results would be admissible and could be used to prove a per se violation of the DWI statute.

The plaintiffs in the Johnson case brought claims alleging negligence and strict liability because the Alcotest did not actually work correctly and could not be properly calibrated, and alleging common law fraud because the company vice-president had lied in the Chun case. The court poured out the case because the claims were subsumed by the New Jersey Product Liability Act (PLA), no physical injury was plausibly alleged, and any claim that the defendant defrauded the FDA would be preempted by Buckman.  Closing time, right?  Well, not exactly. Just like some bars are notorious for setting the clock 15 minutes ahead of time so as to steer the rummies toward a graceful exit, the court gave the plaintiffs leave to amend the complaint. 

That led to our second post, Breaking News – A TwoFer.  Now there was a third amended complaint, and it cleaned things up a bit by limiting the claims to design defect and a fraud that ostensibly had nothing to do with the FDA. But it also looked pretty clear that the action was a collateral attack on prior litigation, and the court declined subject matter jurisdiction under the Rooker-Feldman doctrine. That doctrine comes into play when: (1) the federal plaintiff lost in state court; (2) the plaintiff complains of some injury from the state court judgment; (3) the state court judgment antedated the filing of the federal case; and (4) the plaintiff is inviting the federal court to reject the state court judgment.   

The plaintiffs appealed that decision to the Third Circuit, and that’s where we are today: Johnson v. Draeger Safety Diagnostics, Inc., 2014 U.S. App. LEXIS 23113 (3d Cir. December 9, 2014). We think this will be the, and our, last word on this case because we cannot imagine the Supreme Court granting certiorari. If it does, we will eat a mezcal worm. The reasoning is utterly straightforward, even if the plaintiffs sort of prevailed on one of their arguments, only to lose on simpler grounds. The plaintiffs argued that the Rooker-Feldman doctrine did not preclude their claims because they were not parties to the Chun case and were not seeking to overturn it or their DWI convictions.

The Third Circuit had no problem holding that the Rooker-Feldman doctrine absolutely precluded the design defect claim. All four elements were satisfied. The source of the injury targeted by the design defect claim was the state courts’ evidentiary rulings in their own DWI cases, not the Chun case. Those "injuries can be traced directly to the state court’s decision in each plaintiff’s case that his Alcotest reading was admissible, and to the subsequent DWI conviction."  Id. at *9. 

But the court held that the fraud claim was different. The plaintiffs alleged that the company made false statements that the New Jersey Supreme Court relied upon in deciding Chun, and that the judge presiding over the plaintiffs’ DWI case relied on Chun in admitting the Alcotest BAC results.  According to the court, that "is akin to contending that plaintiffs were ‘forced to litigate in a rigged system.’"  Id. at *11. Hmmmm. We wouldn’t have to imagine too hard to come up with a case where our clients might want to make a similar claim. In any event, the source of the injury complained of via the plaintiffs’ fraud claim, then, is not their prior state court judgments. It is a different case: Chun.  Accordingly, while Rooker-Feldman barred the exercise of subject matter jurisdiction over the plaintiffs’ product liability claim, it did not bar their fraud claim.

That seems to be an unsettling result. Could the plaintiffs really relitigate the company testimony on the efficacy of the Alcotest? Not to worry, because the Third Circuit ruled that the plaintiffs’ fraud claim fails for another reason: they did not plead a plausible claim. The cited statements by the company vice-president represented his opinion regarding the scientific reliability of the Alcotest and whether the device needed ongoing maintenance. Such opinions cannot be fraudulent. But even if those statements could be construed as fact rather than opinion, the plaintiffs did not adequately plead that the statements were false, or that the company vice-president knew or believed that they were false at the time he said them. Being wrong is not the same thing as being fraudulent.

Thank goodness for that.      

Here’s a tipsy tip of the cyber hat to Terry Henry of Blank Rome, who brought this result to our attention. 




Tuesday, December 16, 2014

Federal District Court in Pennsylvania Denies Class Treatment of Medicare Claims against Pharmaceutical Company That Settled Mass Tort Claims

In 2012, the Third Circuit considered whether companies who provide insurance under Medicare Part C, known as Medicare Advance Organizations (“MAOs”), can seek reimbursement of medical expenses from pharmaceutical companies who settled with their insureds on litigation claims related to use of the pharmaceutical company’s drug.  That’s a mouthful, but essentially the question was whether MAOs can create a whole other litigation related to a mass tort in which they seek reimbursement for covering the mass-tort plaintiffs’ injuries.  The answer from the Third Circuit was that they can.  See In re Avandia Marketing, Sales Practices and Products Liability Litig., 685 F.3d 353 (3d Cir. 2012).  Not great.  But then last month the district court in that same case considered whether those MAOs do this in a class action.  If so, that could foster a lot of this litigation.  This time, however, the answer was no.  See In re Avandia Marketing, Sales Practices and Products Liability Litig., 2014 U.S. Dist. LEXIS 164510 (Nov. 24, 2014 E.D. Pa.).  And given the factual background of this case, that answer is no surprise.  

The underlying litigation was the Avandia mass tort.  GlaxoSmithKline, the manufacturer, settled with thousands of plaintiffs and thereby became obligated under Medicare law to reimburse certain MAOs that had initially paid the medical costs of plaintiffs.  That resulted, when applicable, in a lien on the settlement funds by MAOs.  GSK set aside a percentage of the settlement funds to account for those liens.  Id. at *14.  GSK also agreed with many MAOs to enter into Private Lien Resolution Programs (“PLRPs”), which satisfied the MAO liens.  Id. at *14.  GSK did this with 56 MAOs, which covered the vast majority of Avandia plaintiffs.  Id. at *5.  It sought to enter into PLRPs with other MAOs, but had not done so with 94 others at the time the court was considering plaintiffs’ class certification motion.  These other 94 MAOs covered only a small share of the Avandia plaintiffs.  Id.  There was some evidence that many, not all, of those MAOs were not interested in PLRPs or collecting on liens.  

Against this background, Humana, the lead plaintiff, seemed to be asking the court to certify a class and to order GSK to set aside 100% of settlement funds to cover MAO liens or, in the alternative, set aside some lesser class-wide percentage.  Id. at *16.  There were just too many problems with this proposed class action, however, for the court to ever do this.  

To get a class certified, Humana needed to satisfy (i) FRCP 23(a)’s numerosity, commonality, typicality and adequacy requirements and (ii) FRCP 23(b)(3)’s requirement that common questions of law and fact predominate over individual questions and that a class action is superior to other methods of adjudicating the litigation.  Humana could satisfy almost none of these elements.  

Numerosity.  Only 94 MAOs had not entered into PLRPs, with some number of them possibly not interested in recovering on their liens.  Regardless, the court believed that, with potentially more than 40 members, numerosity was satisfied.  Id. at *8-9.  This was the only class-action requirement that the court found satisfied.

Commonality.  The court deferred discussion of commonality until its later, more stringent “predominance” analysis.  

Typicality and Adequacy.  Humana satisfied neither.  Humana, unlike most MAOs, “had the leverage to negotiate a more favorable PLRP than MAOs that insure far few Medicare recipients.” *10-11.  In other words, Humana’s claims and negotiating position were atypical.  For similar reasons, Humana would not be an adequate class representative.  Humana had already negotiated a PLRP, a favorable one, and that made it a “poor representative for the class, and especially for the 94 MAOs that have not agreed to participate in a PLRP at all.”  Id. at *12.  

Predominance and Commonality.  This is where the court delivered its strongest blow to Humana’s class hopes.  Individual, not class-wide, issues would drive the litigation.  Requiring GSK to set aside some class-wide percentage of settlement funds to cover MAO liens would not work.  As the court put it, “the sufficiency of the set-aside (which is the key to determining GSK’s liability) cannot be determined on a class-wide basis.”  Id. at *17.  Some MAOs were not interested in entering into a PLRP, while some were.  The terms to which MAOs agreed varied.  GSK had entered into five different types of PLRPs.  Sometimes the Avandia plaintiffs themselves would choose not to settle their liens through a PLRP.  Also, the percentage of settlement funds needed to cover a MAO lien varied.  All of this highlighted that individual issues predominated:  

[T]the Court would need to conduct an individualized factual inquiry with regard to each settlement in order to determine whether GSK has met its lien obligations with regard to that settling claimant. Thus, neither argument asserted by Humana provides a route for the Court to decide GSK’s liability to the proposed class based upon common evidence. Humana’s contention that GSK has engaged in a uniform course of conduct, which can be used to establish its liability for violations of the MSP Act class-wide, is not supported by the record. Because questions of fact impacting individual class members in individual settlements will predominate over any common issues of fact or law, the case does not satisfy the class-certification criteria of commonality and predominance.

Id. at *17-18.  

Building on this, the court found that the evidence suggested that many MAOs would prefer to make individual decisions on whether and how to resolve their MAO liens:

[A]pproximately 56 putative class members have entered into five separate PLRP, each with somewhat different terms. Approximately 94 putative class members have not entered into a PLRP, despite notice regarding the availability of [a court-ordered] PLRP, which contained terms similar to those accepted by approximately 44 of class counsel’s MAO clients.  These facts suggest that the putative class members may prefer to make individualized decisions with regard to whether and how to pursue their rights under the MSP Act, rather than having their liens resolved on a class-wide basis through a representative plaintiff. 

Id. at *19.  For this and other reasons, the court held that Humana had not shown that a class action was superior to other methods of adjudicating the litigation.  Id.  And so the court denied class certification.  

 This result seems right.  There was a history of negotiation and settlement of the MAO liens, varied terms to those settlements, and plaintiffs and MAOs who did not want to participate at all or who wanted to participate under unique terms.  Class action litigation seems like a way to deter these settlements, not encourage them, and to make the process more expensive.  In the end, if certain MAOs are unhappy with their settlement options but still want to pursue satisfaction of their liens, the courts will still be available to them. 

Monday, December 15, 2014

Breaking News – CAFA Removal Requires Only A Pleading

This morning the United States Supreme Court decided Dart Cherokee Basin Operating Co. v. Owens, No. 13-719, slip op. (U.S. Dec. 15, 2014), holding that removal under the Class Action Fairness Act (“CAFA”) requires no evidentiary submission regarding the amount in controversy beyond that alleged in the notice of removal.  The statute “tracks” Fed. R. Civ. P. 8’s “short and plain” pleading requirement.  Slip op. at 5-6.  Nothing more in the way of evidence is required as a prerequisite to removal.  “[W]hen a defendant seeks federal-court adjudication, the defendant’s amount-in-controversy allegation should be accepted when not contested by the plaintiff or questioned by the court..”  Id. at 5.  Only a “plausible allegation” is necessary.  Id. at 7.  If the amount in controversy is contested, then a hearing is held with the defendant having the burden of proof by a preponderance of the evidence.  Id. at 6.  That happens, of course, after removal – not as a prerequisite to it.  Id. at 7.

We might not have done a breaking news post about Dart, except for this:  In a statement that will be very useful in future CAFA removals, the Court broadly rejected any presumption in favor of remand in CAFA cases – and did not endorse such a presumption in any removal situation:

We need not here decide whether such a presumption is proper in mine-run diversity cases.  It suffices to point out that no antiremoval presumption attends cases invoking CAFA, which Congress enacted to facilitate adjudication of certain class actions in federal court.

Dart, slip op. at 7.

The vote was ostensibly 5-4, but the split decision concerned procedural matters – whether it was appropriate to decide the case (slip op. at 7-14) – rather than disagreement over CAFA requirements.  We’ll leave that argument to Supreme Court wonks.

On the issue we care about, none of the justices expressed disagreement with the majority’s analysis.

Friday, December 12, 2014

Inconvenient (Forum) Shopping in New Jersey

            We (in the peculiarly singular sense) last posted on the day after Thanksgiving, a day sometimes referred to as Black Friday because of the number of retailers that offer purportedly discounted prices to lure eager holiday shoppers.  We have discussed before how the moniker seems more appropriate for other historic events.  It was probably apparent from that post that shopping, particularly at brick-and-mortar stores, is not our favorite thing to do.  We do know, however, that others can be drawn to certain, packed locations by the lure of a good deal.  So too—seamless transition, huh?—can plaintiffs flock to jurisdictions where their lawyers expect a good deal from judges and juries.  Assuming subject matter and personal jurisdiction exists, an assumption we think may be less likely to be foregone in the future, the plaintiff generally gets to pick where the defendant will have to show up to see what kind of deal it can get.

            Once jurisdiction exists, there are two vehicles for a defendant to move a case.  The first often has less utility—a motion to transfer to another court within the same state (or to a different federal court when the case is in federal court, which plaintiffs generally try to avoid in the first place).  Consolidation of cases involving the same product through the application of aggregation procedures limits the availability of motions to transfer, but transferring from one court in a state in which the big drug or device manufacturer does not want to be to another court in the same state may not improve the deal much.
            The second vehicle is to claim that the forum, typically meaning anywhere in the state where sued, is an inconvenient one for the defendant and the case.  There is some basic appeal for the plaintiff’s response to a forum non conveniens motion lodged by a defendant sued in its own state—how can it be inconvenient for you to be sued in your own state?  Because many drug and device manufacturers are based in, or have subsidiaries that are based in, New Jersey, and because one of the mass tort judges in New Jersey was generally thought to be somewhat inclined to one side of the v., Atlantic County, New Jersey, became a favorite destination for litigation tourists.

            With the old sheriff/cashier/croupier moving on, the winds of change may be blowing through the town with a new sheriff.  (Yes, we did try to mix our metaphors there.)  Falcon v. Pfizer, Inc., No. ATL-L-4318-12, 2014 WL 6882591 (N.J. Super. Ct. Dec. 1, 2014), closes the store/casino to out-of-state plaintiffs, sending a message that litigation tourists may not be welcome any more.  The forum non facts of Falcon are fairly familiar for such cases, with Iowa plaintiffs suing in New Jersey over a drug prescribed in Iowa that allegedly produced birth defects in a child born and treated in Iowa.  Other than the plaintiff’s counsel’s office, the only connection of the case to New Jersey was two of the defendants are based there.  Of course, not every defendant is really connected to the case and the plaintiff only alleged injuries from taking a generic product made by one of the two subsidiaries it sued.  The parent company, which also developed the branded version of the drug—which the “Mother Plaintiff” did not take—is based in New York.  The parties made the expected arguments about the private interest and public interest factors that govern a forum non decision under New Jersey law.
            While there is a fairly high bar for dismissal—that is, where the “defendant demonstrates that the plaintiff’s chosen forum is demonstrably inappropriate”—the court has discretion on whether it keeps a case.  Defendants aided their cause by agreeing to accept service in Iowa and waive any statute of limitations defense occasioned by re-filing, allowing them to argue that the case really should be in Iowa.  Because generic document and company witnesses had been completed—something that may distinguish this case from others—the focus was on access to case-specific discovery from third-parties, which the court held was easier if the case were pending in Iowa where the plaintiffs’ treating physicians and their records are.  If the case stayed in New Jersey, “Defendants will be required to either hire local Iowa counsel for the purpose of issuing or obtaining subpoenas, or have New Jersey Subpoenas issued and submit those subpoenas to an Iowa Court who will have to hear any discovery disputes without any familiarity with the case,” neither of which would happen if the case were in Iowa.  (In fairness, we certainly do expect the Defendants would hire Iowa counsel for an Iowa case.)

            By contrast, if the case is in Iowa, plaintiffs will be able to get the same discovery from the New Jersey subsidiary defendants and would face the same hurdles of discovery from the New York parent defendant.  The court also rejected the suggestion that the inability of a New Jersey court to compel live trial testimony from Iowa doctors is mooted by the availability of videotaped depositions, noting that a trial in Iowa would provide the parties with the ability to secure live testimony from these doctors at trial.  In all, the private interest factors “clearly weigh in favor of an Iowa forum” for the wannabe tourists.
            The public interest factors were a closer call, as the question of whether the defendant’s state or the plaintiff’s state has a stronger interest in deciding the case often is.  Given that only one of the New Jersey defendants sold the drug the Mother Plaintiff took, it was generic, and the court had previously held that (most or all) claims against generic manufacturers are preempted, the real question was what interest a New Jersey court would have in determining whether the New York parent should be liable.  The implication is that the answer is “not much,” especially because the court is “satisfied that Iowa law should control Plaintiffs’ claims.”  The Iowa Supreme Court has rejected Conte liability already, as have some New York courts, so this may be an exercise in determining which court gets to grant summary judgment.  “Iowa’s interest in protecting in-state residents is clear.”  Presumably, so is Iowa’s interest in determining when its residents do not deserve compensation.  “[T]here is a significant benefit to having localized controversies decided at home [and] nearly all of the facts arise in Iowa.”  The only remaining impediment to dismissal was whether it would create an undue delay to “an ultimate decision on the merits,” but “an even greater delay will result from the procedural difficulties in compelling discovery from non-party Iowa witnesses.”

            This is not exactly like hanging a “closed for out-of-state business” (or “no vacancy”) sign out, but the reasoning here should apply to a bunch of cases brought in New Jersey over the years.  What it does not address is how the court will address multi-plaintiff cases brought with one New Jersey resident—whose choice of her home forum would be give considerable weight—and a number of forum shoppers.  Some courts have seen through this and severed before jettisoning the visitors.  Some have not.  In any event, Falcon gets to fly back home.
            * * *
            In our last post, we invited readers to participate in our word search contest.  The single-digit number of submissions overwhelmed us.  We have determined that there was a tie between Ed Arnold, a noted gourmand in his own right, and Tom Pirtle, who urged that we accept smokeless tobacco as a food.  Congratulations, gentlemen.  Feel free to add this to your respective resumes under “Honors.”

Thursday, December 11, 2014

Tincher – The Spears and Arrows of Outrageous Spinning

We were first on the web with the news that the Pennsylvania Supreme Court had overruled Azzarello v. Black Brothers Co., 391 A.2d 1020 (Pa. 1978), in Tincher v. Omni Flex, Inc., ___ A.3d ___, 2014 WL 6474923 (Pa. Nov. 19, 2014).  We were also first on the web with a detailed analysis of what the Court did, and did not do, in Tincher – within 24-hours of the 137-page decision becoming available.

That’s all well and good.  We hope we saved at least some of our readers the hassle of having to drop everything and read/noodle over the lengthy opinion.  Now, you can do so in an orderly fashion.  But being out there “fustest with the mostest ” also made us something of a lightning rod when the other side of the “v.” decided that they were going to try to spin Tincher as some sort of “win.”

Tincher a win for the plaintiffs?  That’s frankly absurd.  They remind us of Bagdad Bob – claiming that Saddam Hussein “won” the first Gulf War because he didn’t lose it as badly as he did the second Gulf War.  Just avoiding a total wipeout isn’t a “win.”  General Lee did not “win” at Gettysburg because he was able to get away after the battle (although President Lincoln did cashier General Meade for letting that happen).  Sure, Bexis would have liked the Third Restatement better.  As an amicus, it’s his job to go for the home run, and sometimes he gets it, but smacking the ball off the wall still counts as an extra base hit.

There are two main reasons why plaintiffs took it on the chin in Tincher.

First:  For thirty-five plus years, every defendant in a Pennsylvania design defect trial heard the jury instructed:

“The supplier of a product is the guarantor of its safety.  The product must, therefore, be provided with every element necessary to make it safe for its intended use, and without any condition that makes it unsafe for its intended use.”

Azzarello, 391 A.2d at 559 n.12.  This “plaintiff wins” instruction is gone.  It was, as Tincher stated, “quoted subsequently out of context by the majority in Azzarello as the standard of proof in a strict liability action.”  Tincher, 2014 WL 6474923, at *29; accord id. at *42 (language was “quoted out of context” and “significantly altered the import of the Berkebile passage”).  “Predictably, the ‘approval’ of such jury instructions operated to discourage the exercise of judicial discretion . . ., and likely stunted the development of the common law.”  Id.  If anything, the Court’s criticism of the “guarantor” language was even “greater”:

The greater difficulty is that the Azzarello standard is impracticable.  As an illustration of its new standard’s application, the Azzarello Court offered that a supplier is not an insurer of a product, although it is a guarantor; these terms of art, with no further explanation of their practical import.

Tincher, 2014 WL 6474923, at *42 (emphasis added).  So that’s gone, and we couldn’t be happier.

We have a challenge for anybody claiming that losing this jury charge was a “win.”  Plaintiffs’ lawyers know good and well how to press every advantage for their clients.  That’s their job.  That’s why they loved the Azzarello instruction.  How many times has the plaintiff side used it in closing argument?  Frankly, we’ve never seen them not argue “every element”/”guarantor” to the jury.  They’d be fools not to.  If any of the self-proclaimed “winners” on the other side of the “v.” didn’t think this was important, then what follows should be easy – post a transcript of a closing argument in a design defect case (or warning defect case for that matter) to which Azzarello applied in which you did not mention this language to the jury.

We’ll bet there aren’t any.

Second:  After “Azzarello, decisional focus in strict liability cases shifted to reflect an increasing concern with segregating strict liability and negligence concepts.”  Tincher, 2014 WL 6474923, at *31.  Most notably this “segregation” prompted exclusion of industry standards as “negligence” evidence in Lewis v. Coffing Hoist Division, 528 A.2d 590 (Pa. 1987) – an exclusion later extended to compliance with mandatory government standards by the Superior Court (an appellate court in Pennsylvania) – and of a plaintiff’s comparative fault in Kimco Development Corp. v. Michael D’s Carpet Outlets, 637 A.2d 603 (Pa. 1993).  Concerning these (and other) decisions, Tincher observed:

Subsequent decisional law has applied Azzarello broadly, to the point of directing that negligence concepts have no place in Pennsylvania strict liability doctrine; and, as we explain, those decisions essentially led to puzzling trial directives that the bench and bar understandably have had difficulty following in practice, including in the present matter.

2014 WL 6474923, at *39.  Accord Id. at *43 (“[s]ubsequent application of Azzarello elevated the notion that negligence concepts create confusion in strict liability cases to a doctrinal imperative, whose merits were not examined”).

Henceforth, Tincher held, the “typical” design defect case will include negligence concepts:

By comparison, the Tinchers’ claim was essentially premised upon the allegation that the risk of harm related to [the product] was both foreseeable and avoidable, as illustrated by the [characteristics of their alternative design].  These allegations, at least, bear the indicia of negligence.  Indeed, in some respects this is the “typical” case, which explains both the insight that in design cases, the character of the product and the conduct of the manufacturer are largely inseparable, and the Third Restatement’s approach of requiring an alternative design as part of the standard of proof.

Id. at *67 (emphasis added).  The Tincher court’s refusal to adopt the Third Restatement thus was not driven by rejection of its principles in the “typical” case, but rather by concerns that atypical products not be immunized from liability:

[T]he point that we have stressed repeatedly in this Opinion, is that courts do not try the “typical” products case exclusively and a principle of the common law must permit just application to myriad factual circumstances that are beyond our power to conceive.

Id.  In an atypical case the Third Restatement’s “rule [may] outrun the reason.”  Id.  But, by definition, most cases are “typical.”  Thus, the Court advised:  “the decision to overrule Azzarello . . . may have an impact . . . upon subsidiary issues constructed from Azzarello, such as the availability of negligence-derived defenses.”  Tincher, 2014 WL 6474923, at *71.  Tincher did not decide these issues, but its rejection of Azzarello, and its discussion of the “indicia of negligence” in the “typical” case, leave little doubt that most product liability cases, those prior negligence-based exclusions are an example of a “rule outrunning the reason.”  That’s a second big loss for the plaintiffs’ side.

But you don’t just have to take our word for it, because the plaintiffs’ side is already on record, before Tincher was decided, that the overruling of Azzarello would be a disaster for them, whether or not the Third Restatement was also adopted.  After the oral argument in Tincher, the leading plaintiff-side amicus, the Pennsylvania Association for Justice (“PAJ”), filed an extraordinary application, demanding reargument, because it believed counsel for the plaintiff in the case was not defending Azzarello sufficiently.  PAJ’s application was very interesting reading at the time.  It’s just as interesting now, but for different reasons.

Why would PAJ be worried about Azzarello?  In PAJ’s own words, in Tincher:

[T]he underlying claim resulting in a plaintiff’s verdict involved subrogation by plaintiffs’ insurer.

The impact of a court decision reversing Azzarello or abandoning the Restatement (Second) Section 402A is so significant that it should not be determined based upon a subrogation case essentially “owned” by on insurance company and argued by one who is not committed to consumer protection policies.

AAJ Application ¶¶2, 19.  Spin might fool a reporters who lack much of a legal background, but it can’t fool us.  We have the proof in black and white.

Thus, the initial claim, made to a 360 reporter by the plaintiffs’ counsel in Tincher that the decision was supposedly a “resounding victory for the plaintiffs’ bar,” should be taken with a large grain of salt, because – as PAJ had already pointed out – he’s not really a plaintiffs’ lawyer at all, but an insurance subrogation lawyer.  For someone playing both sides of the street, Tincher may well count as a “victory.”

And there’s a lot more.  That PAJ application makes clear that, not just the adoption of the Third Restatement, but the overruling of Azzarello itself, would be a “dramatic shift” and “inconsistent” with the interests of future plaintiffs.  Once again, we’ll let PAJ’s words speak for themselves:

The brief filed by [the Tinchers] was consistent with the discussions held with counsel for Amicus Curiae [PAJ]; it never advocates overruling Azzarello or changing the function of the judge and jury.  The brief merely mentions in passing, in a footnote to the section arguing for prospective application of any change to the law of strict liability, that the court has the option of overruling Azzarello but rejecting the Restatement Third analysis.

It is the understanding of counsel for the Amicus Curiae that, contrary to the assurances provided to the undersigned, at oral argument counsel for the Tinchers agreed that Azzarello should be overruled.

This has been confirmed by direct conversation with counsel for the Tinchers. After the argument that occurred on October 15, 2013, [Tinchers’ counsel] explained that he believed the so-called “Wade factors” considered by the court under current law should instead be considered by the jury and that the Azzarello formulation as to the role of the jury was incorrect.

The position urged at argument by counsel for the Tinchers represents a dramatic shift in the position of any plaintiff suing for damages in a products liability case and is certainly inconsistent with the position taken by Amicus Curiae PAJ.

[Tincher’s counsel] apparently believed that it was necessary to argue for the overturning of Azzarello prospectively while retaining the framework of the Restatement (Second ) of Torts Section 402A in order to protect his clients’ interest in preserving the jury verdict in the instant case.  A broader interest exists, however, on behalf of injured consumers in product liability cases, which deserves vigorous representation before this Court.

PAJ Application ¶¶11-15 (emphasis added).  Notice how PAJ’s objections are almost all about Azzarello?  So do we.

Based on these allegations, PAJ requested what it admitted was unprecedented relief – that Tincher be reargued with PAJ taking over the arguing the plaintiffs’ position.  Id. ¶17.  What was that position?  PAJ’s primary position was clearly that Azzarello be retained, while the Third Restatement was secondary.  To PAJ, the Tinchers’ concession about “overturning” Azzarello “while retaining the framework of the Restatement (Second ) of Torts Section 402A,” id. ¶15, was so inadequate that it motivated PAJ to seek the unprecedented relief (for an amicus) of reargument.  Winners don’t do that.

The PAJ application represents what real plaintiffs’ lawyers in Pennsylvania thought at the time of the prospect that Azzarello would be overruled.  Whatever they’re now saying to the contrary is spin − putting lipstick on something that, from their perspective, is very much porcine in its result.  Overruling Azzarello is “a dramatic shift in the position of any plaintiff suing for damages in a products liability case and is certainly inconsistent with the position taken by Amicus Curiae PAJ.”  PAJ Application ¶14.

In other words, they lost when Azzarello was overruled.  The next time the other side tries to ignore Azzarello’s demise and spin Tincher as a win, an appropriate response would be along the lines of, “Aside from that, Mrs. Lincoln, how did you like the play?”

Finally, one of the best plaintiff-side bloggers around, Max Kennerly at the Litigation and Trial Blog, took some shots at our analysis of Tincher.  One of them criticized our conclusion, which we repeated in shortened fashion above, that Tincher sounds the death knell of exclusions of “negligence” evidence in strict liability.  He calls it “wishful thinking,” without quoting anything from Tincher to support a contrary analysis.  All Max can say is that Tincher didn’t decide anything, which was true (neither did Azzarello decide the contrary position).  As discussed above, though, there’s plenty in Tincher to support the demise of evidentiary exclusions based on a negligence/strict liability dichotomy, and little to support their continuing viability.  If there were, Max would surely have quoted it, since he’s a very competent lawyer.

We also find this in Max’s Tincher post:  “Parenthetically, the Drug and Device Law folks also wrongly claim Tincher contains an ‘express rejection of absolute liability’ on page 85.  I read that page up and down, it says nothing of the sort.”

There are none so blind as those who refuse to see.  Here’s what Tincher said:

A broad reading of this policy statement [in Miller v. Preitz, a case discussed in the previous paragraph] suggests that liability would attach absolutely, once the consumer or user suffers harm; indeed, early proponents supported such an application.  [citation omitted]  But, experience has taught otherwise and, in modern application, strict liability doctrine is a substantially narrower theory.  [citation omitted].

Tincher, 2014 WL 6474923, at *44 (emphasis added).  Plainly, that’s a rejection of absolute liability under “modern” strict liability.  The language Max quotes as supposedly contrary deals with “disputes that are absent from the decisional law” – meaning that there are no actual precedents for absolute strict liability.  Id. at *66.  There’s a cite that Max omits following his quote.  Here’s what Tincher cited:

See Henderson, 83 Cornell L. Rev. at 901 (“Some courts, in dicta, hold out the possibility that the risk-utility imbalance might be so egregious that the product should not be marketed at all.  Actual holdings to this effect, however, are non-existent.”)

Tincher, 2014 WL 6474923, at *66 (footnote omitted) (emphasis added).  Admittedly “non-existent” precedent is pretty faint support.  Moreover, Max’s language was actually in a paragraph discussing manufacturing defects, not design defects, as both the omitted footnote and language earlier in the same paragraph make clear.

So, for the reasons already stated, we’ll agree to disagree with Max as well when he contorts Tincher into a “win” for his side.  He’s grasping at some mighty fine straws that, as we believe we’ve just shown, don’t support his position at all.  However, we do agree with Max about one thing – “Much remains to be done, however, as the contours of this new structure are chiseled out on the facts of future cases.”