Monday, November 12, 2012

A hospital? What is it?

            Well, “it’s a big building with patients.  But that’s not important right now.”  What is important, to us, is whether courts view hospitals as distributors of the medical devices and drugs used to treat the patients in those big buildings.  We plan to take a broader look at what courts are saying on this issue soon, but today we thought we’d bring you the case that is prompting our closer scrutiny of hospital strict liability – Von Downum v. Synthes, 2012 U.S. Dist. LEXIS 160218 (N.D. Okla. Nov. 8, 2012). 

            While the issue may seem of only tangential interest to the majority of our readers who represent actual manufacturers and distributors rather than hospitals, much like with pharmacy liability, hospital liability can have a direct impact on the removability of products cases.  It is more likely that a plaintiff will share her state of residence with her hospital than with the manufacturer of the drug or device at issue.  So, limiting a hospital’s exposure in products cases has direct bearing on an issue that is of central importance to our clients – fraudulent joinder. 

            That brings us to Van Downum.  Here the court faced two intertwined motions – the plaintiff’s motion to remand and the hospital’s motion to dismiss.  To be clear, plaintiff’s claim against the hospital was not for professional negligence.  Because, in Oklahoma, like many states, such a claim must be supported by an expert affidavit “that the claim is meritorious and based on good cause,” id. at *4, which the plaintiff didn’t have.  This frankly is the reason we don’t see more hospitals named in products suits.  Instead, plaintiff said he was suing the hospital in strict product liability and negligence for distribution of a defective product.  Id. at 7. 

            No Oklahoma court has addressed the specific issue of whether a health care provider can be held strictly liable for allegedly defective medical devices used in surgery – if they had this would have been an open and shut case.  Rather the court looked at two other lines of Oklahoma decisions.  First, Oklahoma appellate courts have rejected implied warranty claims against hospitals finding health care providers are providers of “services” not goods.  Id. at *8-10.  Second, “Oklahoma courts have consistently declined to hold physicians and hospitals to a standard of strict liability in professional negligence cases.”  Id. at *10.  Putting those two findings together, the court concluded:

The Hospital is primarily in the business of rendering health care services; it is not a member of the manufacturer's marketing chain, as contemplated under § 402A of the Restatement (Second). Thus, Van Downum cannot state a cognizable claim for strict liability against the Hospital.
Id. at *14.  Good decision.

            Unfortunately, the case didn’t end there.  The court still had to consider the negligent distribution claim.  And while the court found that plaintiff’s complaint included nothing more than “conclusory allegations of negligence” which would fail to meet the Twiqbal pleadings standard,
defendants have not shown there is no possibility that Van Downum would be able to establish a cause of action against the Hospital in state court.  It is possible that Van Downum may be able to amend his Petition to state facts sufficient to state a negligence claim against the Hospital. 
Id. at *16.  So, the court remanded the case and sent the motion to dismiss back for determination by the state court.  Here we think the court simply got it wrong.  First, the court failed to follow the Tenth Circuit fraudulent joinder standard.  The Tenth Circuit has adopted the “reasonable basis” standard, not the “no possibility” test.  See Nerad v. AstraZeneca Pharmaceutical, Inc., 203 Fed. Appx. 911, 913 (10th Cir. 2006) (“the court must decide whether there is a reasonable basis to believe the plaintiff might succeed in at least one claim against the non-diverse defendant.  A reasonable basis means just that the claim need not be a sure-thing, but it must have a basis in the alleged facts and the applicable law.”).  Had the court applied the proper standard, the same failings that would have required dismissal under Twiqbal should have also required a finding of fraudulent joinder.  See our prior thoughts on this issue here and here  

            Stayed tuned for our further musings on hospital strict liability.

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