July 11, 2013

Jeremy Taylor, Senior Attorney, National Legal Research Group

The Court of Appeals of Wisconsin recently applied the economic loss rule in a products liability action by a homeowner's property insurer against the manufacturer of an allegedly defective water softener that leaked and damaged drywall, flooring, and woodwork in the home.  See State Farm Fire & Cas. Co. v. Hague Quality Water, Int'l, 2013 WI App 10, 826 N.W.2d 412.  The insurer, State Farm, brought only tort claims against the manufacturer.  The manufacturer defended on the basis that Wisconsin's economic loss doctrine precluded recovery under the plaintiff's theories.  The trial court granted the manufacturer's motion for summary judgment.  The court of appeals rejected the manufacturer's argument, holding that the insurer was entitled to proceed under its tort theories.

At the threshold, the court of appeals noted that the economic loss doctrine bars recovery of purely economic losses through tort remedies when the only damage is to the product purchased by the consumer.  Hence, the doctrine does not apply when a defect in the product causes personal injury or damage to "other property."  It was the "other property" exception with which the court was concerned in the case at hand.

The court noted that Wisconsin engages in a two-part analysis to determine whether damaged property constitutes "other property," so as to allow the pursuit of tort remedies.  First, courts consider whether the defective product and the damaged property are part of an "integrated system."  If they are, then the damaged property is considered to be the product itself and is not "other property."  If they are not, the court then examines the expected function of the product and asks whether the purchaser should have foreseen that the product could cause the damage at issue.  If so, then the damaged property is not "other property."  In order to be "other property," the damaged property must survive both tests.

As to the integrated-system test, the court of appeals concluded that the consumer's water softener was not part of an integrated system, because it had a function apart from the drywall, flooring, and woodwork in the home.  In other words, in order to come within the economic loss doctrine, a defective product must be part of a larger system, and if it lacks a function apart from its value in such a system, it is not "other property" for damage to which an action will lie in tort.  The court noted that property has been deemed to be part of an integrated system precluding a tort recovery when, for example, it consisted of cement that was part of pavers that had been damaged, a replacement gear in a printing press, and windows in a home.

February 5, 2013

Jeremy Taylor, Senior Attorney, National Legal Research Group

The U.S. District Court for the Northern District of Texas recently decided numerous choice-of-law issues in a products liability action brought by the family of a deceased helicopter pilot.  See Sulak v. Am. Eurocopter Corp., Act. No. 4:09-CV-651-Y, 2012 WL 4740176 (N.D. Tex. Oct. 3, 2012).  The decedent was a resident of Hawaii and was killed in Hawaii while piloting a helicopter manufactured and distributed by the defendants, who were located in France.  The decedent's family filed their action in Hawaii state court, and the defendants removed it to federal court in Hawaii.  The Hawaii federal court then transferred the action to the federal district court in Texas based on one defendant's insufficient contacts with Hawaii.

In light of the fact that the action ended up in federal court in Texas and that the crash had occurred in Hawaii, the court was faced with numerous choice-of-law issues involving both procedural and substantive questions.  Noting that it had jurisdiction over the lawsuit based upon federal diversity jurisdiction, the court stated that it was required to apply Texas choice-of-law rules to determine whether Texas or Hawaii law governed the plaintiffs' action.  Texas applies the most-significant-relationship test set forth in the Restatement (Second) of Conflict of Laws.  Under that analysis, it is not necessary that a single state's law control all substantive issues.  Each issue is, therefore, considered separately, and the state law that has the most significant relationship to the issue controls.

The court observed that under the Texas most-significant-relationship analysis, the law of the place of the injury governs questions of substantive law unless the policy considerations of the Restatement's choice-of-law principles show that another forum has a more significant relationship with such an issue.  The court contrasted this rule with the principle that the applicable procedural rules are those of the forum.  The court noted the general rule that if a Federal Rule of Civil Procedure or Evidence governs a disputed point, the Federal Rule is to be followed, even in diversity cases.  The court concluded that the Federal Rule of Evidence restricting the admissibility of subsequent remedial measures should govern in strict products liability cases.  The court also held that it would apply the Federal Rule of Civil Procedure governing the impleading of a third-party defendant, rather than Hawaii law governing the liability of third-party defendants, when the issue was not the substantive question of whether a potential third-party defendant was liable, but the procedural question of whether such a defendant could be impleaded.

September 25, 2012

Jeremy Taylor, Senior Attorney, National Legal Research Group

The U.S. Court of Appeals for the Sixth Circuit recently decided that an immunity defense given to a drug manufacturer by a state statute was preempted by the Federal Food, Drug, and Cosmetic Act ("FDCA").  See Marsh v. Genentech, Inc., Nos. 11-2373, 11-2385, 11-2419, 11-2417, 2012 WL 3854780 (6th Cir. Sept. 6, 2012).  Therefore, the manufacturer's entitlement to immunity had to be analyzed under federal law, despite the existence of an applicable state immunity provision.

The plaintiffs were consumers who alleged that they suffered life-threatening side effects from their use of the defendant's psoriasis drug "Raptiva."  Raptiva worked by suppressing T cells to prevent them from migrating to the skin and causing psoriasis.  However, because T cells fight infection, their suppression has been linked to life-threatening side effects.  Following reports of such effects, including a rare brain infection in patients taking Raptiva, the defendant removed the drug from the market in 2009. 

One of the plaintiffs in the consolidated cases had begun using Raptiva in 2004 and later suffered viral meningitis and a collapsed lung.  She sued Genentech under the theory of strict liability, alleging defective design and failure to warn, and also under the theories of negligence, breach of warranty, and fraud.  She argued that both before and after approval of Raptiva by the Food and Drug Administration ("FDA"), the defendant had known of the dangerous side effects, concealed them from the public, and not included them in the drug's labeling.  The plaintiff further alleged that Genentech had failed to update statements of contraindications, warnings, precautions, and adverse reactions based upon what the defendant knew and that Genentech had negligently failed to comply with various FDA regulations. 

The Lawletter Vol 37 No 3

Jeremy Taylor, Senior Attorney, National Legal Research Group

The U.S. District Court for the Western District of Pennsylvania recently decided a case involving issues of preemption under the Medical Device Amendments ("MDA") to the Federal Food, Drug, and Cosmetic Act ("FDCA").  See Gross v. Stryker Corp., Civ. No. 11-1229, 2012 WL 876719 (W.D. Pa. Mar. 14, 2012).  The case is important because it explains clearly both the grounds upon which a manufacturer may defend on the basis of MDA preemption and the basis upon which a plaintiff may circumvent the preemptive effect of the statute in bringing state tort claims.

In Gross, the plaintiff had received an implantation of an artificial hip prosthesis manufactured by the defendant.  The plaintiff alleged that the device was defective and that the defect had caused him to suffer a serious infection at the operation site, with attendant pain and the necessity of a corrective procedure.  The plaintiff sued under state law theories of strict liability, negligence, and breach of express and implied warranties.

The defendant argued that the plaintiff's state law claims were preempted by the MDA.  The MDA contains an express preemptive section, which provides that no State may establish any requirement for a medical device that is different from or in addition to any requirement imposed under the FDCA and that relates to the safety or effectiveness of the device.  See 21 U.S.C. § 360k(a).  The court agreed that the plaintiff's claims were preempted by the MDA.

Initially, the court noted that for a state cause of action to be preempted by the MDA, the medical device at issue must have been subject to specific federal requirements related to its safety and effectiveness and the plaintiff's claim must be premised on state law that imposes different requirements.  The court noted that, generally, state common-law claims contesting the safety and effectiveness of a device that received approval under the premarket approval process ("PMA") conducted by the Food and Drug Administration ("FDA"), such as the hip prosthesis at issue in the case at hand, are subject to express preemption.  This is because questions regarding a device's safety and effectiveness are requirements addressed in the PMA.

The court concluded that the plaintiff's state breach-of-implied-warranty claim imposed a requirement different from or in addition to the federal requirements and, therefore, was preempted by the MDA in light of the fact that Pennsylvania's "below commercial standards" requirement was not the same as the standards imposed by the FDA.  The court similarly concluded that the plaintiff's negligence claim ran afoul of the preemptive reach of the MDA, given that the plaintiff alleged that the defendant had been negligent in placing the device into the stream of commerce when it contained unsafe manufacturing residuals or bacteria.

June 5, 2012

Jeremy Taylor, Senior Attorney, National Legal Research Group

The U.S. Court of Appeals for the First Circuit recently affirmed a $21.06 million judgment, including $16.5 million for pain and suffering, in favor of a plaintiff who suffered severe injuries resulting from her use of "sulindac," the defendant's generic anti-inflammatory drug.  See Bartlett v. Mut. Pharm. Co., No. 10-2277, 2012 WL 1522004 (1st Cir. 2012).  Sulindac is known to cause a hypersensitivity reaction called Stevens-Johnson Syndrome and a related disease called toxic epidermal necrolysis ("SJS/TEN").  In December 2004, the plaintiff's physician prescribed sulindac under the brand name Clinoril for pain in the plaintiff's shoulder, and the plaintiff's pharmacist dispensed generic sulindac.

According to the court, the consequences for the plaintiff were "disastrous."  The plaintiff developed SJS/TEN early in 2005.  The court noted that TEN is diagnosed when 30% or more of the outer layer of skin on a patient's total body surface area has deteriorated, been burned off, or turned into an open wound.  The plaintiff suffered TEN over 60% to 65% of her body.  She was hospitalized for 70 days, including over 50 days in the burn unit.  She suffered permanent injuries, including permanent near-blindness, esophageal burns, vaginal and lung injuries, and disfigurement.  The plaintiff was unable to have sexual relations or to read, drive, or work.  The plaintiff asserted multiple causes of action against the manufacturer in New Hampshire state court.  The defendant removed the case to the federal district court.  After removal, all claims but the plaintiff's defective-design cause of action were dismissed on summary judgment or voluntarily by the plaintiff.

Initially, the court of appeals noted that under the governing New Hampshire law, the plaintiff, who alleged that sulindac was defectively designed, was required to show that the drug was unreasonably dangerous due to its propensity to cause SJS/TEN.  However, she was not required to establish that there existed an alternative, safer design for the drug.  In reaching this conclusion, the court rejected the manufacturer's argument that a safer alternative is an essential element of a design-defect claim, over and above the existence of an unreasonably dangerous product.  Hence, the district court had correctly permitted the plaintiff to establish that the sulindac was in a defective condition because it was unreasonably dangerous due to its propensity to cause SJS/TEN.  Interestingly, on the eve of trial, the defendant abandoned a potential defense that the drug was unavoidably unsafe but was sold with an adequate warning.

February 21, 2012

Jeremy Taylor, Senior Attorney, National Legal Research Group

The U.S. Court of Appeals for the Fifth Circuit recently ruled that some state law claims by a patient who had allegedly received a defective hip replacement survived federal preemption.  See Bass v. Stryker Corp., No. 11-10076, 2012 WL 266985 (5th Cir. Jan. 31, 2012).  The plaintiff sued the company that had designed, manufactured, and marketed a hip prosthesis that malfunctioned after it was surgically implanted into the plaintiff's body.  He brought his action in the U.S. District Court for the Northern District of Texas under various theories, including strict products liability, negligence, breach of warranty, and violation of the Texas Deceptive Trade Practices Act.  The defendant moved to dismiss, arguing that all of the plaintiff's claims were preempted under Medical Device Amendments ("MDA"), 21 U.S.C. § 360k(a), to the Food, Drug & Cosmetics Act ("FDCA").  The defendant asserted that the state law claims were preempted in light of the U.S. Supreme Court's interpretation of the MDA's preemptive reach in Riegel v. Medtronic, Inc., 552 U.S. 312 (2008).  The district court granted the manufacturer's motion to dismiss on the basis of preemption.  The Fifth Circuit reversed in part, concluding that certain of the plaintiff's causes of action survived MDA preemption.

The court of appeals first noted that a state tort claim to recover for injuries allegedly caused by a medical device is preempted if (1) the federal government has established requirements applicable to the device, and (2) the claims are based on state law requirements that are different from or in addition to the federal requirements and that relate to safety and effectiveness.  Devices that are approved through the premarket approval ("PMA") process of the Food and Drug Administration ("FDA") automatically satisfy the federal-requirements prong of MDA preemption.  The court of appeals found that the district court had correctly determined that the hip replacement device at issue was subject to the PMA process and, for that reason, satisfied the federal-requirements element of preemption.

The court then noted, however, that the preemption provision of the MDA does not prevent a State from providing a damages remedy for claims grounded upon violation of the FDA regulations pertaining to a medical device.  According to the court, state duties in such a case are parallel to, rather than in addition to, the federal requirements.  In order to plead a valid parallel claim beyond the reach of MDA preemption, a plaintiff's allegations must be plausible within the meaning of the rules governing a motion to dismiss.  The court concluded that the plaintiff had sufficiently pleaded parallel claims insofar as his claims were based upon manufacturing defects resulting from a violation of the FDA regulations.  The court noted that the plaintiff had alleged that his injury had been caused by the hip replacement's failure to attach to his bone because the component at issue had been adulterated in violation of specific FDA regulations.  The court explained that if a plaintiff pleads that a manufacturer of a Class III Medical Device, which are all subject to the PMA process, failed to comply with either the specific processes and procedures approved by the FDA or the Current Good Manufacturing Practices promulgated by the FDA and that such failure was the cause of the plaintiff's harm, then the plaintiff has pleaded a sufficient parallel claim for purposes of MDA preemption.