A Year Since Tincher

Posted on October 19, 2015 02:51 by Arun J. Kottha

About a year ago, the Supreme Court of Pennsylvania issued its opinion in Tincher v. Omega Flex, a landmark case in which the Court refused to adopt the Third Restatement of Tort for product liability law.  Where have we been since then?  Tincher is obviously cited for the proposition that the Supreme Court of Pennsylvania failed to adopt the Third Restatement for product liability cases - which the Federal Courts of Pennsylvania (wrongly) predicted it would do.  See e.g. McKenzie v. Dematic Corp., No. 3:12-250, 2015 WL 3866633 (W.D. Penn. 2015).  Post-Tincher decisions have also discussed the role of the jury.  For example, the court in McDaniel v. Kidde Residential and Fire & Commercial decided not to weigh evidence of product performance because it was the jury who must evaluate design defect theories if reasonable minds could differ as to whether the product was in a defective condition. McDaniel v. Kidde Residential and Fire & Commercial, W.D. Penn Case Nos. 2:12-cv-1439, 2:12-cv-1473, 2015 WL 1326332.  

Courts are still sorting through the policy implications of Tincher. One MDL court applied the Tincher doctrine to liability to the “bare metal” defense. Schwartz v. Abex Corp., MDL No. 875, 2015 WL 3387824 at *19 (E.D. Penn. 2015) (holding that a product manufacturer has a duty under Pennsylvania law to warn about the asbestos-related hazards of component parts it neither manufactured nor supplied only where the manufacturer knew that its product would be used in connection with a particular hazardous asbestos-containing component). Other courts are unwilling to read Tincher’s “tea leaves” too expansively regarding the scope of strict product liability without explicit language from the Supreme Court of Pennsylvania.  In re Zimmer Nexgen Knee Implant Products Liability Litigation, MDL No. 2272, 2015 WL 3669933 at *35 (N.D. Il. 2015).  

What has been your experience in Pennsylvania at the trial level since Tincher?  Has Tincher been used in other jurisdictions to advance (or detract) from the progress of product liability law?     


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Categories: Product Liability

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I have previously reported on the Vermont Supreme Court’s strict adherence to the Economic Loss Rule (ELR), and noted that some observers might find this surprising, since the  Vermont Supreme Court is generally regarded as “liberal” and sympathetic to claimants/victims/plaintiffs.  Yet the Court has repeatedly denied tort-based recovery to claimants, citing the ELR.  The Court’s adoption and adherence to the ELR goes back as far as 1998.  In Paquette v. Deere & Co., 168 Vt. 258, 719 A.2d 410 (1998), the Court rejected the negligence claim of owners of a defective motor home.  The plaintiffs there had not suffered any physical injury, but claimed that they had suffered economic damages – recoverable in tort, according to them – because of the defective and unsafe nature of their mobile home.  The Court held that allowing a negligence claim in such circumstances would vastly expand tort liability and completely subsume warranty law into tort law.  And that adherence continues unabated in a series of decisions up to 2012.  In Long Trail House Condominium Assoc. v. Engelberth Construction, Inc., 2012 VT 80 (Sept. 28, 2012) the Court affirmed the complete dismissal of a condominium owners association’s defective construction claims against the building contractor, because their only claim was a negligence claim, which the Court found to be barred by the rule. 

Now, in Walsh v. Cluba, the Court has arguably taken the ELR even further.  In Walsh, the Court applied the rule to bar the plaintiff’s negligence claim even though the claim involved  physical damage to real property.  Walsh was a commercial landlord.  Cluba was his tenant.  After signing the lease, Cluba formed the corporation Good Stuff, Inc., a retail company, and turned over possession of the leased premises to Good Stuff.  But Walsh never formalized the lease arrangement with Good Stuff – Cluba remained the tenant on the lease.  After Cluba and Good Stuff vacated the premises, Walsh sued Cluba under the lease (i.e., in contract) for unpaid rent, attorneys’ fees, and physical damage to the premises.  Walsh also sued Good Stuff in negligence (as noted, there was no lease/contract with Good Stuff) for the unpaid rent and for damaging the premises.  At the close of Walsh’s case at trial, the court granted Good Stuff’s motion for judgment as a matter of law, on the grounds that the Economic Loss Rule precluded Walsh’s tort claims against Good Stuff because the parties’ dispute was completely covered by Walsh’s and Cluba’s contractual relationship (i.e., the lease), which required Cluba to leave the premises in the same condition in which he took them.  Walsh argued that the ELR should not bar his negligence claims against Good Stuff because there was more than purely economic harm at issue – there was real physical damage to Walsh’s property.  The trial court was unpersuaded by this argument.  Walsh appealed. 

The Vermont Supreme Court was similarly unmoved by Walsh’s argument.  The Economic Loss Rule generally bars tort claims where the parties have a contractual relationship.  Even though Walsh had no lease (contract) with Good Stuff, the Vermont Supreme Court found that his claim for damages to the premises was governed exclusively by his lease with Cluba.  As he had below, Walsh argued that the ELR does not apply because there was physical damage.  The Vermont Supreme Court was unpersuaded and affirmed the trial court’s grant of judgment as a matter of law to Good Stuff.  The Court reasoned that the well-recognized “other property” exception to the ELR does not apply where there is a contract (i.e., the lease) that touches upon the “other property.”  In other words, the provision in the lease that required Cluba to return the premises to Walsh in the same condition as when they were leased, barred a separate negligence claim by Walsh for damage to his property.

A vigorous dissent argued that the existence of a lease (contract) between Walsh (the landlord) and Cluba (the tenant) should not preclude a tort claim by Walsh against a stranger to the contractual relationship (Good Stuff) where Good Stuff caused real physical damage to Walsh’s property.  Indeed, the dissent’s position seems to be that Walsh should have a tort claim not only against Good Stuff, but against Cluba, where Cluba and Good Stuff caused physical damage to Walsh’s property.

As the dissent argued, this decision by the Vermont Supreme Court is arguably much more than merely a reaffirmation of the Economic Loss Rule.  It is arguably a broad expansion of the rule; essentially a holding that the existence of a contract between A and B negates any independent tort duty by B not to damage A’s property. 

This is an interesting decision from the Vermont Supreme Court given that other state supreme courts have recently cut back on the application of the ELR. 

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Categories: Insurance Law | Product Liability

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Most of the commentary on the Supreme Court’s June 9 decision in CTS Corp. v. Waldburger has focused on the holding that CERCLA does not preempt state statutes of repose which, after a set number of years, extinguish environmental and toxic tort claims—even if the plaintiff-friendly state statute of limitations that § 9658 of CERCLA mandates has not run its course. No doubt the Court’s ruling is important to us civil litigation defense counsel.  I submitted an amicus brief on behalf of DRI—The Voice of the Defense Bar advocating the conclusion that the Court reached and the fundamental, textually based analytical approach that the Court took.

But Waldburger also includes an interesting side show, one that is fascinating to those of us who have been tracking the Court’s federal preemption jurisprudence during the past three decades. Justice Kennedy’s majority opinion starts off on the right track.  It focuses on the text and structure of § 9658, which functions as an express preemption provision by interjecting into state statutes of limitations an ultra-liberal “federally required commencement date” that does not begin until a tort plaintiff discovers both injury or environmental harm and its alleged cause.  The opinion analyzes the plain language of § 9658, which explicitly refers to state statutes of limitations and nowhere mentions state statutes of repose. Not surprisingly, the opinion reaches the conclusion that § 9658 applies only to statutes of limitations and not to statutes of repose. In so doing, the opinion explicitly rejects the Fourth Circuit’s attempt to read statutes of repose into § 9658 merely because CERCLA is a remedial statute. The Court explained such a liberal interpretation cannot “substitute for a conclusion that is grounded in the statute’s text and structure.” Slip op. at 10.   

Unfortunately, Justice Kennedy’s opinion does not stop there.  It includes a Part II-D, in which Justices Sotomayor and Kagan joined, but Justices Scalia, Thomas, and Alito and the Chief Justice did not. (Justices Ginsburg and Breyer dissented from the Court’s decision.) Part II-D gratuitously invokes the controversial and often disputed “presumption against preemption” of the States’ police powers.  Then, as a corollary to that so-called presumption, Part II-D cites two earlier Supreme Court preemption decisions which stated that “when the text of a pre-emption clause is susceptible to more than one plausible reading, courts ordinarily ‘accept the reading that disfavors pre-emption.’”  Id. at 17.  Yet, the Court did not find that § 9658 is susceptible to more than one interpretation.  Indeed, Part II-D states that the plaintiffs had not shown “with clarity” that Congress intended §  9658 to apply to statutes of repose, in which case—as I argued in DRI’s amicus brief—applicable statutes of repose would “cease to serve any real function.”  Ibid.

Justice Scalia, joined by the Chief Justice and Justices Thomas and Alito, filed a separate, one-paragraph concurring opinion that joined in all but Part II-D.  In his separate opinion, Justice Scalia insisted, as he has since Cipollone v Liggett Group, Inc., 504 U.S. 505 (1992), that the interpretation of express preemption provisions should be governed by “ordinary principles of statutory construction.”  In other words, he rejects the “notion . . . that express pre-emption provisions must be construed narrowly,” rather according to the “ordinary meaning” of the language that they employ. See Cipollone, 505 U.S. at 548 (Scalia, J., concurring in judgment in part and dissenting in part).  

This division within the Court about presumptions and special rules of construction that should or should not apply to interpretation of “express pre-emption provisions” may persist for years to come. But at least in Waldburger, the debate was academic.  

There is one aspect of Waldburger and other Supreme Court preemption cases, however, over which there can be no real debate: Only members of the Court and their law clerks have continued the inexplicable tradition of hyphenating the term “pre-emption” rather than spelling it like the rest of us.  Just another baffling aspect of the Court’s preemption decisions . . . .  

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DRI Online Communities

Posted on May 22, 2014 02:28 by Admin

On May 21, DRI rolled out the new committee online communities.  The new communities will enhance DRI’s web presence and will allow committee members to connect with each other and share information more easily.  Each community will have a discussion list, which will replace the current list serve, as well as a document library, blog, and calendar.  Committees will also be able to post announcements about their seminars and publications, and promote open positions and volunteer opportunities.  All posts are sent to members as a daily digest from the communities, unless a member changes his or her settings to real-time delivery.   The communities are designed to be the hub for all committee activity. 

There are six substantive law committees serving as the pilot group: Commercial Litigation, Employment and Labor Law, Product Liability, Women in the Law, Workers’ Compensation, and Young Lawyers.  Additional committee communities will go live over the course of the year.

Members can access the communities through the DRI website, www.dri.org  (there is a new link in the top blue navigation bar).  Committee members are automatically members of the respective community and are being notified via email. Members should call (312) 695-6221 if they are having trouble logging in to the site.

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Mr. Ruskin’s blog post calls attention to the important problem of access to research data in litigation and other contexts.  The effort to obtain Dr. Racette’s underlying data is an interesting case study in these legal discovery battles.  Ruskin notes that there is the potential for “injustice” from such discovery, but he fails to acknowledge that the National Research Council has been urging scientists for decades to have a plan for data sharing as part of their protocol, and that the National Institutes of Health now requires such planning.  Some journals require a commitment to data sharing as a condition to publication.  The Annals of Internal Medicine, which is probably the most rigorously edited internal medicine journal, requires authors to state to what extent they will share data when their articles appear in print. Ultimately, litigants are entitled to “everyman’s” and “every woman’s” evidence, regardless whether they are scientists. 

In the case of Dr. Racette, it was clear that the time he needed to spend to respond to defense counsel’s subpoena was largely caused by his failure to comply with guidelines and best practices of the NIH on data sharing.  Racette was represented by university counsel, who refused to negotiate over the subpoena, and raised frivolous objections. Ultimately, these costs were visited upon the defendants who paid what seemed like rather exorbitant amounts for Racette and his colleagues to redact individual identifier information.  The MDL court suggested that Racette was operating independently of plaintiffs’ counsel, but the fact was that plaintiffs’ counsel recruited the study participants and brought them to the screenings, where Racette and colleagues videotaped them to make their assessments of Parkinsonism.  Much more could be said but for a protective order that was put in place by the MDL court.  What I can say is that after the defense obtained a good part of the underlying data, the Racette study was no longer actively used by plaintiffs’ counsel in the welding fume cases.  

It is not only litigation that gives rise to needs for transparency and openness. Regulation and public policy disputes similarly create need for data access.  As Mr. Ruskin acknowledges, the case of Weitz & Luxenberg v. Georgia-Pacific LLC, is very different, but at bottom is the same secrecy and false sense of entitlement to privilege underlying data. The Appellate Division’s invocation of the crime-fraud exception seems to be hyperbolic precisely because no attorney-client privilege attached in the first place.  

The Georgia-Pacific effort was misguided on many levels, but we should at least rejoice that science won, and that G-P will be required to share underlying data with plaintiffs’ counsel. Without reviewing the underlying data and documents, it is hard to say what the studies were designed to do, but saying that they were designed “to cast doubt” is uncharitable to G-P. After all, G-P may well have found itself responding in court to some rather dodgy data, and thought it could sponsor stronger studies that were likely to refute the published papers.  And the published papers may have been undertaken to “cast certainty” over issues that were not what they were portrayed to be in the papers.

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There is significant tension between the goals of scientific research and the demands of litigation. For scientific researchers, the amount of time required to respond to discovery takes away valuable time that might be otherwise devoted to research. Injustice and unfairness may result when a scientist, who has taken no part in litigation, is served with a lengthy subpoena requiring him to devote large chunks of time to produce the required information. 

In an article published in the journal Neurology by Brad A. Racette, MD; Ann Bradley, JD; Carrie A. Wrisberg, JD; and Joel S. Perlmutter, MD, titled “The Impact of Litigation on Neurologic Research,”Neurology 67(12):2124 (Dec. 2006), the authors complain about the burden of time responding to discovery demands:  

"Any hint of scientific data that support such a cause and effect relationship often encourages plaintiffs' attorneys to file suits against corporations alleging harm to their clients forcing corporations and employers to defend themselves. Both plaintiff and defendant teams hire expert witnesses who are frequently active investigators in relevant fields to bolster their positions. These legal proceedings can influence investigators and hamper research. Interactions with researchers can lead to personal financial or career gain that may bias research findings or impugn other investigators. Even researchers who have not been retained by either side of a legal dispute may be forced to respond to subpoenas for research data causing a substantial loss of research time for investigators and financial burdens on universities. Courts may require release of research records containing personal health information that could sully the trust research participants have in investigators. Litigation and its peripheral effects may bias investigators, impede research efforts, and harm research participants, thereby undermining efforts to understand the cause of neurologic disease."

In a rejoinder to this article, defendant’s counsel in the Welding Fume  Products Liability Litigation, Nathan A. Schachtman, wrote in a reply titled, “Response: The Impact of Litigation on Neurologic Research,” Neurology69(5):495 (Apr. 2007), that the Racette article offered a one-sided, incomplete picture of the interaction between scientific research and the law. 

Schachtman observes that the authors failed to disclose that the welder screenings for their study were funded by plaintiffs as part of an effort to solicit personal injury clients. Defendants served subpoenas to obtain the study’s underlying data only after plaintiffs’ counsel heavily relied on the authors’ study. Thus, Schachtman argues, the authors were not disinterested researchers inadvertently caught up in litigation. He states, “the authors collaborated with plaintiffs’ counsel so closely that counsel invoked litigation privileges to cloak the work in secrecy.” 

In what might be characterized as a sur-reply, Dr. Racette responded that his early collaboration with the plaintiffs had been greatly overstated. Perhaps the best advice, albeit cynical,  to scientific researchers may be to steer completely clear of lawyers at all costs and to avoid the temptation to be "helpful" to lawyers involved in litigation. Of course, the legal profession is the worse off if the best scientists are fearful of becoming involved in the judicial system. 

How then is a court to balance the competing needs for transparency in litigation and permitting scientific researchers, often unrepresented by counsel, with the peace and tranquility necessary to perform their research?  As the court observed in In Re Welding Fume Products Liability Litigation, 534 F.Supp.2d 761 (2008), Dr. Racette had performed some assessments for plaintiffs’ counsel during the nascent stages of the MDL, but later severed his ties with plaintiffs and took no more payments from them. Under these circumstances, the MDL court opted in favor of disclosure. The MDL court reasoned that where an author publishes an article with a view toward litigation, a probability of bias exists which undermines the logic supporting the admission of this material through the “learned treatise” exception to the hearsay rule. In some cases, the “learned treatise” is excluded from evidence due to the taint of suspected bias. On other occasions, the treatise is admitted but subject to impeachment on cross-examination. 

The difficulty arises when a party’s expert reaches his expert opinions by relying on a study performed by a scientific researcher who is completely disinterested in the litigation. In this instance, what intrusion into this scientist’s life will be permitted? Merely because an author has reached a conclusion that dissatisfies one side or the other in litigation should not make that scientific researcher a “target” of a burdensome subpoena.

Pursuant to a very different set of facts, the Appellate Division, First Department, recently ruled in Weitz & Luxenberg v. Georgia-Pacific LLC, 2013 N.Y. Slip.Op. 04127 (6/6/13), that Georgia-Pacific must turn over for in camera review by the Court internal communications related to scientific studies it commissioned into the safety of its products. This discovery dispute arose in the context of the Weitz & Luxenberg New York City Asbestos Litigation (“NYCAL”) cases in which Georgia-Pacific is a defendant. 

In 2005, Georgia-Pacific funded eight published research studies to aid in its defense of asbestos-related litigation. To facilitate this endeavor, Georgia-Pacific entered into a special employment relationship with Stewart Holm, its Director of Toxicology and Chemical Management, to perform expert consulting services under the auspices of in-house counsel, whom the Court found was significantly involved in the pre-publication process. 

The studies at issue were designed to cast doubt on the capability of chrysotile asbestos to cause cancer. The Court observed that despite the extensive participation of in-house counsel, none of the articles disclosed in-house counsel’s involvement. Citing the In Re Welding Fume Products Liability Litigation,  the Appellate Division determined that, “large corporations often invest strategically in research agendas whose objective is to develop a body of scientific knowledge favorable to a particular economic interest or useful for defending against particular claims of legal liability.” 

In determining that the studies and related documents should be subject to in camera scrutiny, the Court stated that the trial court was rightfully wary of prejudicing plaintiffs by permitting the sudden introduction of the studies or experts on the eve of trial, or in the many other pending asbestos cases. Therefore, the principles of fairness, as well as the spirit of the Case Management Order, required more complete disclosure. The Court held that it would be inappropriate to permit Georgia-Pacific to use its expert’s conclusions as a sword by seeding the scientific literature with Georgia-Pacific-funded studies, while at the same time using the privilege as a shield, by withholding the underlying raw data that might be prone to scrutiny by the opposing party which may affect the veracity of its expert’s conclusions. In it’s in camera review, the court will evaluate whether the crime-fraud exception to the attorney-client privilege applies to certain of the client communications in dispute. 

In high stakes toxic tort litigation, such as the NYCAL or Welding Fume litigations, it is not unusual for both well-heeled plaintiffs and defendants to fund studies to support their positions in litigation. In such instances, most courts will require extensive disclosure of the data underlying these studies’ findings. 

However, this is very different from the situation where an independent scientist, who is uninvolved in any litigation, finds that his scientific research and underlying data is the subject of litigation scrutiny. Although some discovery may be appropriate in these instances, forcing scientific researchers to devote an inordinate amount of their time complying with litigation requests may have a chilling effect on the research community’s willingness to take on scientific challenges relating to important public health issues. 

*This blog was originally posted on June 19 by Bill Ruskin on the Toxic Tort Litigation Blog. Click here to read the original entry. 

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Over the past several years the energy drink industry has proven to be wildly popular with consumers, boasting massive gains and a strong foothold in the marketplace.  

According to a recent report from Packaged Facts, in 2012, the total U.S. sales for the energy drinks/shots market totaled more than $12.5 billion and are anticipated to swell to $21.5 billion by the year 2017.  Although energy drink manufacturers have had little trouble establishing their product’s popularity, the industry as a whole has also faced increased legal and legislative scrutiny, particularly the safety of its products and its identification under the FDA as a dietary supplement.

In recent years, the caffeine content of energy drinks has caused many to scrutinize the potential affiliated health risks associated with consuming high quantities of caffeine and the necessity for heightened FDA regulations.  Under current FDA regulations, the amount of caffeine found in soda-type beverages does not have to be included on the labeling when it is at concentrations below .02%.  At such levels, the FDA considers the ingredients to be “generally recognized as safe” or “GRAS.” However, energy drinks have been exempt from this FDA rule as, historically, they have been marketed as dietary supplements rather than soda-type drinks.  As such, energy drinks may have caffeine levels markedly higher than soda-type beverages without being required to disclose the caffeine level.

In 2012, on the heels of an investigation into the possible link between Monster energy drinks and five deaths, United States Senators Richard Blumenthal and Dick Durbin requested the FDA investigate the ingredients in energy drinks and the potential health effects of caffeine on children and adolescents. As a result, on October 22, 2012, the FDA stated it was launching an investigation regarding the five reported deaths and the alleged potential link to the consumption of Monster energy drinks.

Demonstrating the Senators’ resolve on the issue, on November 15, 2012, Senator Durbin took the Senate floor addressing the possible link between 5-hour ENERGY and thirteen deaths, and argued for a highly regulated energy drink market, stating “they are more lethal than alcohol.”  This, and other continued scrutiny, has caused energy manufacturers to react.

In recent months, both Rockstar and Monster have decided to reclassify and market their energy drinks under the FDA regulations as beverages, rather than dietary supplements.  For the first time in a decade, Monster’s cans will disclose its caffeine content, which has long been a hot button issue for consumer protection activists and a centerpiece for energy drink litigation and controversy.  Manufacturers, distributors and product sellers of energy drinks should look very closely at this growing trend in the energy drink industry.  Given the attention from the medical, legal and legislative communities, it is likely that both regulatory changes governing the production and marketing of energy drinks and further consumer driven litigation are on the horizon.  Although both Rockstar and Monster will face some new reporting mandates, the reclassification of these products should help to alleviate the recent legal and legislative scrutiny these companies have faced.  This decision demonstrates the necessity of manufacturers to carefully monitor the legal climate in which it markets its products and to react accordingly to insure the continued hold on market share.

This blog was originally posted by Jonathan Ciottone on June 6. Click here to read the original post on Risky Business.  

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Categories: Product Liability

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In a decision issued on March 7, 2013, the Supreme Court of Florida reaffirmed Florida’s commitment to adherence to the economic loss rule in product liability litigation. In Tiara Condominium Association, Inc. v. Marsh & McLennan Companies, Inc. etc., et al., No. SC10-1022, the high court provides a helpful discussion of the origin and development of the economic loss rule. In summary, the economic loss rule is described as “the fundamental boundary between contract law, which is designed to enforce the expectancy interests of the parties, and tort law, which imposes a duty of reasonable care and thereby encourages citizens to avoid causing physical harm to others.” Thus, economic loss has been defined by Florida courts as “damage for inadequate value, costs of repair and replacement of the defective product, or consequent loss of profits – without any claim of personal injury or damage to other property.” In other words, economic losses are “disappointed economic expectations,” which are protected by contract law, rather than tort law.

Despite the rule’s underpinnings in the product liability context, the economic loss rule has also been applied to circumstances when the parties are in contractual privity and one party seeks to recover damages in tort for damages arising in contract.

In a product liability context, the economic loss rule was developed to protect manufacturers from liability for economic damage caused by a defective product beyond those damages provided by warranty law.  In discussing the development of economic loss rule principles, the Florida Supreme Court analyzed the California Supreme Court’s holding in Seely v. White Motor Co., 403 P.2d 145 (Cal. 1965). In Seely, the California Supreme Court held that the doctrine of strict liability in tort did not supplant causes of action for breach of express warranty.

In that case, the court was confronted with a situation in which plaintiff sought recovery for economic loss resulting from his purchase of a truck that failed to perform according to expectations. The court concluded that the strict liability doctrine was not intended to undermine the warranty provisions of sales or contract law, but was designed to govern the wholly separate and distinct problem of physical injuries caused by defective products. In East River Steamship Corp. v. Transamerica Delaval, Inc., 476 U.S. 858 (1986), the U.S. Supreme Court adopted the reasoning of Seely when it considered the issue of economic loss resulting from defective products in the context of admiralty.

According to the Supreme Court, when the damage is to the product itself, “the injury suffered – the failure of the product to function properly – is the essence of a warranty action, through which a contracting party can seek to recoup the benefit of its bargain.” Recognizing that the extending strict product liability law to cover economic damages would result in “contract law… drowning in a sea of tort,” the Supreme Court held that “the manufacturer in a commercial relationship has no duty either under a negligence or a strict products liability theory to prevent a product from injuring itself.” Thus, from the outset, the focus of the economic loss rule was directed to damages resulting from defects in the product itself.

In a Client Alert, dated July 5, 2011, Stites & Harbison lawyers John L. Tate and Cassidy R. Rosenthal wrote about the Kentucky Supreme Court’s adoption of the economic loss rule in Giddings & Lewis, Inc. v. Industrial Risk Insurers (6/18/11). The Court unanimously held that “a manufacturer in a commercial relationship has no duty under a negligence or strict products liability theory to prevent a product from injuring itself.” The Court wrote: “We believe the parties’ allocation of risk by contract should control without disturbance by the courts via product liability theories.”
As discussed by Mr. Tate and Ms. Rosenthal, in Giddings & Lewis, the manufacturer sold a sophisticated machining center to an industrial concern. The parties set forth their mutual obligations in a detailed commercial contract. After seven years of continuous operation and after the contract’s express warranty expired, the machining center malfunctioned in a spectacular fashion – throwing chunks of steel weighing thousands of pounds across the factory floor. The costs to repair the machining center and to get the business up and running again were almost $3 million. After reimbursing the machine’s owner for its losses, a consortium of insurance companies asserted a subrogation claim against the machining center’s manufacturer. With the warranty expired, the insurance companies sued in negligence, strict liability, negligent misrepresentation, and fraudulent misrepresentation. What could be more tortious conduct that this?  

Applying the economic loss doctrine, the Kentucky Supreme Court agreed with Mr. Tate holding that the purchaser could not recover from the manufacturer under any tort theory. The consortium was limited to contractual remedies, all of which expired years earlier.

Despite such groundbreaking decisions, is the economic loss rule under-utilized in products liability and commercial litigation today?  Of course, if personal injury results from an alleged defect, the rule does not apply. However, not infrequently, complaints alleging damages arising from a defective product that purportedly caused economic loss sound in negligence or strict products liability. Are defense lawyers seeking dismissal of these tort claims on the basis of the economic loss rule as often as they should?

This blog was originally posted on the Toxic Tort Litigation Blog on April 3 by Bill Ruskin. Click here to see the original post. 

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Categories: Product Liability | Toxic Tort

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As a general proposition, a defendant at trial suffers unfair prejudice when the court does not permit the jury to learn of certain facts that, if disclosed, would reveal a witness’s bias or self-interest.  If a witness with no apparent motive for lying gives strong testimony favoring one side at trial, that testimony may have a significant impact on the jury.  It is for this reason that all potential bias or self-interest of both fact and expert witnesses must be vigorously explored during pre-trial discovery.

In Polett v. Public Communications, Inc., No. 1865 EDA 2011, slip op. (Pa. Super. March 1, 2013), a verdict for a whopping for $27.6 million in the Court of Common Pleas of Philadelphia County, Civil Division, was reversed on multiple grounds. However, for purposes of this article, we focus on the finding by the Superior Court that it was error for the trial court not to permit the jury to learn that plaintiff’s treating physician, Dr. Richard Booth, an orthopedic surgeon, had been a named defendant earlier in the litigation and had entered into a tolling agreement with the plaintiffs. Under such a tolling agreement, a plaintiff can await the outcome at trial and decide afterward whether to pursue the party with whom she had entered into the tolling agreement.  Dr. Booth's best protection against being sued at a later date was to ensure that the plaintiffs made a substantial recovery at trial.  Is this self-interest?  You bet!

By way of background, in mid-2006, Zimmer, a medical device manufacturer, launched the Gender Solutions Knee, a knee replacement device designed specifically for women. Zimmer hired Public Communications, Inc. (“PCI”), a marketing firm, to produce a sales video, which would include interviews and footage of patients who had undergone successful knee replacement surgery using the device. Plaintiff Margo Polett underwent successful bilateral knee replacement surgery. On account of her good surgical outcome, her treating physician, Dr. Richard Booth, recommended Mrs. Polett to Zimmer as a candidate to participate in Zimmer’s sales video.

Plaintiffs allege that following the videotaping, which involved Mrs. Polett riding on a stationery exercise bike, her condition worsened and she underwent four further surgeries in failed attempts to repair the damage that plaintiffs alleged occurred during the filming of the promotional video.  Dr. Booth admitted in deposition that the “sword of litigation” hung suspended above his head. Substantial evidence was developed during discovery that when Dr. Booth first gave his causation testimony, which supported plaintiffs’ theory of the case, he had a strong incentive to place responsibility on the medical device manufacturer and the filming company and away from himself.
Due to his clear self-interest in presenting causation testimony favorable to plaintiffs, the Superior Court determined that the defendants should have been permitted to demonstrate Dr. Booth’s partiality as a doctor who faced the possibility of litigation; who did not think he was at fault; who did not want to alienate his patient; and who squarely placed responsibility for Mrs. Polett’s injuries on the filming company and the device manufacturer.  

In so holding, the appellate court concluded that the probative value of the tolling agreement outweighed the danger of unfair prejudice. Although the use of a tolling agreement for impeachment purposes was a matter of first impression for Pennsylvania courts, other Pennsylvania courts had found that analogous agreements were admissible to show bias or prejudice.
Another type of agreement between a plaintiff and a defendant is referred to as a “Mary Carter agreement." These agreements are a means of effectuating a settlement with some but not all defendants in a multi-party lawsuit.  Like the tolling agreement in Polett, evidence of a Mary Carter agreement's existence should be presented before the jury, but they are often shrouded in secrecy and never reach the light of day.

Mary Carter agreements usually incorporate the following basic elements although the terms vary from case to case:

1. the defendant in an multi-party lawsuit who enters into the agreement guarantees that the injured plaintiff  will receive a certain amount, even if the plaintiff fails to receive a judgment against that defendant or the amount of the judgment obtained is less than the guaranteed amount;
2. the agreeing defendant’s liability, which is capped, can be reduced or even eliminated by increasing a co-defendant’s liability;
3. the agreement is kept secret from the jury absent court-ordered disclosure; and
4. the agreeing defendant remains in the lawsuit as a party.
For obvious reasons, Mary Carter agreements have been challenged as being unethical. Arguably, the agreement contravenes the canons of professional conduct concerning candor and fairness; conflicts of interest; unjustified litigation; and taking technical advantage of opposing counsel. Because Mary Carter agreements are collusive agreements between parties with supposedly adverse interests, they create an inherent danger of perjury.

Moreover, these agreements mislead the jury into thinking that the agreeing defendant has interests adverse to those of the plaintiff, when, in fact, the defendant may sometimes share in the proceeds of the plaintiff’s recovery. In my view, lawyers who enter into Mary Carter agreements are walking into an ethical minefield. In New York, these agreements are considered contrary to public policy and are not permitted..

But whether the agreement in question is a tolling agreement or Mary Carter agreement, the finder of fact should be fully apprised of any relevant information that might give rise to bias or interested testimony. It is discouraging that the Polett court seemingly failed to understand this basic premise of trial fairness.

This article was originally posted on March 27 on the Toxic Tort Litigation Blog by Bill Ruskin. You can read the original post here

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Categories: Product Liability | Toxic Tort

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Wednesday's United States Supreme Court opinion in Kiobel v. Royal Dutch Petroleum Co. et al., 569 U.S. ___ (2013), has confirmed that the Alien Tort Statute (ATS) has a limited scope and cannot open the doors of United States courts to lawsuits based on ordinary torts committed by companies outside the territorial confines of the United States.  Although the Court did not meaningfully address the issue of corporate liability, its narrow holding all but guarantees that ATS will not become an issue in lawsuits against corporate clients in products cases.

At first blush, Kiobel does not appear to be the type of case that would interest product liability lawyers.  It involved Nigerian nationals who had obtained asylum in the United States suing foreign corporations that has allegedly aided and abetted the government of Nigeria in committing abuses against its citizens including, among others, extrajudicial killings, crimes against humanity, and torture.  It goes without saying that "crimes against humanity" are topics that are generally outside the pale of the average civil defense attorney's resume.
Representing clients in a global marketplace, however, often necessarily means representing clients who have potential exposure to liability abroad.  Although your client may not be accused of crimes against humanity, the prospect of a German client with an American office being sued in America for building a product in Guatemala that injured someone in Japan is still daunting.  Because ATS has a somewhat broad purpose:  to permit federal courts to recognize "certain causes of action based on sufficiently definite norms of international law,"  569 U.S. ___ (2013), it is conceivable that a clever plaintiffs' attorney would argue that principles of negligence or product liability were "sufficiently definite norms" of international law to warrant jurisdiction.

Whether that argument would be successful is doubtful.  But the Second Circuit, whose opinion the Supreme Court reviewed, had a simple, comforting answer for corporate clients:  ATS does not apply to corporations.  The hypothetical Japanese plaintiff simply could not sue a corporate defendant in America to recover for her injuries.  There would be no need to litigate if the lawsuit involved "sufficiently definite norms of international law." 

Wednesday, the Supreme Court skirted the issue of corporate liability, but announced a rule that should provide a similar degree of certainty to corporate clients.  Its decision did not turn on the corporate status of the defendant, but whether ATS applies extraterritorially.  The Court concluded that it does not. 

Writing for the majority, Chief Justice Roberts concluded that ATS was not intended to bring into the United States Courts claims involving torts committed against foreign subjects outside the territorial confines of the United States.  The majority noted that, historically, ATS had been used only rarely since its 18th century enactment, and historically used only to address claims that a person had violated the law of nations:  violating safe conduct, infringing on the rights of ambassadors, and piracy.  Therefore, it held that to warrant jurisdiction under ATS, a plaintiff's claim must "touch and concern the territory of the United States . . . with sufficient force to displace the presumption against extraterritorial application." 

No justice dissented from the majority opinion, and even the most critical concurrence—by Justice Breyer, joined by Justices Ginsburg, Sotomayor, and Kagan—tended to confirm that corporate clients will not, in the ordinary course of litigation, be faced with jurisdiction based on ATS.  The concurrence advocated reading ATS as permitting jurisdiction over extraterritorial torts when "the defendant's conduct substantially and adversely affects an important American national interest," emphasizing the importance of the United States not becoming a safe harbor for "a torturer or other common enemy of mankind."

In short, although the "easy" ATS answer is now gone, the average corporate client has little to fear from ATS.  Negligence and products liability—while serious allegations—are hardly the stuff from which allegations of being a "common enemy of mankind" are made.     

William F. Auther is the managing partner of the Phoenix, Arizona office of Bowman and Brooke, LLP, where he has an active trial practice in product liability and business litigation.  Amanda Heitz is an associate at Bowman and Brooke.

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