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.

The Lawletter Vol 37 No 3

Matthew McDavitt, Senior Attorney, National Legal Research Group

In all areas of law, long-established principles must at times be applied to novel circumstances or technologies, with a result that is often predictable, based upon the general legal elements of the underlying legal claim.  Such is the case with a threat in the world of international shipping—the hijacking and ransom of commercial vessels in the Gulf of Aden.  This threat is not truly novel, but the danger, often romanticized in popular culture due to its remoteness to modern life, has after more than a century reemerged in recent years as a major threat.

Maritime insurance policies are often named-risk policies, and one major class of risk is termed "general average," a broad category encompassing losses to be proportionately borne by all parties interested in the venture, so long as the losses were occasioned by voluntary sacrifice of part of the ship or a portion of the cargo in order to save the vessel or the voyage in an emergency.  An examination of two types of losses experienced during a pirate hijacking—payment of ransoms and consumption of fuel and supplies by pirates—signals what losses are properly compensable under the general average named-risk category of an insurance policy.

There are three requisite elements to prove a general average sacrifice:  (1) the vessel must be in imminent danger; (2) there must be an intentional, voluntary sacrifice of property by the crew or owners to avert that peril; and (3) by that intentional sacrifice, the safety of the vessel, the remaining cargo, or the voyage must be secured.  See Am. Afr. Exp. Co. v. S.S. Exp. Champion, 442 F. Supp. 715 (S.D.N.Y. 1977).  These elements needed to prove a general average sacrifice were later codified in the York-Antwerp Rules, incorporated into many marine insurance policies today:

There is a general average act when, and only when, any extraordinary sacrifice or expenditure is intentionally and reasonably made or incurred for the common safety for the purpose of preserving from peril the property involved in a common maritime adventure.

York-Antwerp Rules 2004 R. A(1) (emphasis added).  Under Rule C(3), "any indirect loss whatsoever, shall not be allowed as general average."

Thus, in light of these well-settled elements of general average, we may examine the two classes of losses that often occur during piracy events.  First, payment of ransoms is clearly covered as a general average sacrifice, as ransoms represent property (money) paid by parties interested in the maritime venture in order to secure the safety of the vessel and crew during a time of peril.

The Lawletter Vol 37 No 3

Sandra Thomas, Senior Attorney, National Legal Research Group

Courts in several states have interpreted their child support guidelines to allow an order that directs the custodial parent to pay support to the noncustodial parent under appropriate circumstances.  Among these is the Supreme Court of Indiana.  In Grant v. Hager, 868 N.E.2d 801 (Ind. 2007), that court, with two of the five justices dissenting, held that "there is a rebuttable presumption that a custodial parent is not required to make child support payments under these circumstances but that a trial court has authority to deviate from that presumption in accordance with the Indiana Child Support Rules and Guidelines."  Id. at 802.

In Grant, the marriage of the parties was dissolved in 2003.  The parents were granted joint legal custody of their two children, with the mother receiving primary physical custody, and, in accordance with the Indiana guidelines, the father was ordered to pay $108 in child support.  Two years later, the father filed a petition to modify his support obligation.  The father submitted a worksheet showing the mother's annual income of approximately $106,000 and the father's annual income of approximately $56,000; the mother earned 65.4% of the total combined income, and the father earned 34.6%.

The Indiana guidelines directed a total weekly child support obligation for both parents of $517.  Calculating the support obligation of each parent in accordance with that parent's percentage of total income, the mother was responsible for $338, and the father for $179.

Under the guidelines, the father was entitled to a Parenting Time Credit in the amount of $216 based on the number of overnights the children spent with him during the year, and he was entitled to a credit of $55 for health insurance premiums paid by him.  The total of the father's credits, $271, exceeded his $179 share of the weekly support by $92.

The trial court recognized that the mother was the primary custodial parent but concluded that the guidelines produced a "negative credit" that required modification of the existing support order.  The trial court ordered the mother, the custodial parent, to pay child support to the father, the noncustodial parent, in the amount of $92 per week.

The mother appealed, arguing that "the Guidelines cannot result in a custodial parent paying support to the non-custodial parent."  Id. at 802-03.  The court of appeals agreed with the mother and reversed the child support award to the father.  The Indiana Supreme Court granted review.

The supreme court agreed with the court of appeals that the guidelines did not authorize the payment of child support from a custodial to a noncustodial parent.

Rule 2 of the guidelines states a rebuttable presumption that the amount of the award that would result from application of the guidelines is the correct amount.  Applying this presumption to the case before it, the court found that there was a rebuttable presumption that neither party owed support to the other.  However, Rule 3 of the guidelines provides that if the court concludes that the amount of the award reached through application of the guidelines "would be unjust," the court "shall enter a written finding articulating the factual circumstances supporting that conclusion."  Id. at 803.

The court concluded:

The Lawletter Vol 37 No 2

John Stone, Senior Attorney, National Legal Research Group

Police arrested Christina outside Chicago's Midway Airport.  She had purchased a ticket from Southwest Airlines but was behaving so oddly while waiting to board the airplane that agents called the police, who escorted her from the airport.  Christina walked to the rail and bus terminal of the Chicago Transit Authority, immediately outside the airport, where she started singing loudly, ranting about the price of oil, and screaming at other people, with her face only inches from theirs.  She would not or could not stop, despite multiple requests, leading to her arrest.

Experts in the ensuing litigation concluded that Christina had been in an acute manic phase. She did not tell the police about her mental‑health background, however, and was uncooperative after her arrest—sometimes refusing to answer questions, sometimes screaming, sometimes providing false or unresponsive answers.  Telephone calls from her mother and her stepfather informed officers in Chicago that Christina had bipolar disorder, but the officers did not believe the stepfather, and the officer who took the calls from the mother failed to tell anyone else or record the information in Christina's file.  While Christina was in custody, some officers thought that she was just being difficult, some thought that she was on drugs, some thought that she was no worse than the run-of-the-mill loud and uncooperative people who do not want to be in custody, and those who thought that she needed mental‑health care were ignored or overruled.

While detained at a police station, Christina alternated between calm and manic conduct, sometimes chatting amiably and sometimes screaming, chanting rap lyrics, smearing menstrual blood on the cell's walls, and taking off her clothes.  Officers processed the paperwork to release her on an individual‑recognizance bond.  Christina signed the bond and walked out of the station house.  She had no idea where she was and did not do the most sensible things—hail a taxi or head for a bus station and get out of the area during the remaining daylight.  It was evening, and the police station was close to a public‑housing project with an exceptionally high crime rate; the police had not returned her cell phone, so she could not easily summon aid; she was lost, unable to appreciate her danger, and dressed in a manner that attracted attention (a cutoff top with a bare midriff, short shorts, and boots); and she was white and well-off while the local population was predominantly black and not affluent, thus, in the court's view, causing her to stand out as a person unfamiliar with the environment and a potential target for crime.

Soon Christina joined a cluster of 15 to 20 people on a street corner outside one of the project's high‑rise buildings.  She accompanied several young men to an apartment that was vacant and had been taken over as a hangout.  Some of the occupants told her that it was unsafe and that she should leave, but Christina was too confused to act on that advice.  About five hours after the police let Christina go, a man found her in the apartment, forced the others out, and raped her at knifepoint.  People outside tried and failed to break down the door in time to save her.  Trying to escape, Christina jumped out the window, which was seven stories aboveground.  Although she survived the fall, her brain was seriously damaged.  She has undergone years of physical therapy, but her brain functioning is permanently that of a child.

The Lawletter Vol 37 No 2

Sandra Thomas, Senior Attorney, National Legal Research Group

One of the frequently overlooked sections of the Uniform Interstate Family Support Act ("UIFSA") provides that an award of spousal support can be modified only in the court in which the original order was entered.

The purpose of UIFSA is to provide a means for interstate enforcement of support orders and to address the problem of conflicting support orders by placing continuing exclusive jurisdiction to modify a child support order in the court that has issued the original order so long as the payor, the payee, or the child is still a resident of the original state, or if all parties have consented to the exercise of continuing jurisdiction.  The detailed provisions of the Act govern the enforcement and modification of child support provisions in cases in which all parties have left the original jurisdiction.  The provisions of the Act can be found at Uniform Interstate Family Support Act 2008 §§ 101-905.

Under 42 U.S.C. § 666, which took effect in 1996, States were required to adopt UIFSA by January 1, 1998 or face loss of federal funding for child support enforcement. Every U.S. State has adopted either the 1996 or a later version of UIFSA, though with some variations.

One of the provisions that is contained in the Act, but has not been universally adopted by the States, is § 211, titled "Continuing, Exclusive Jurisdiction to Modify Spousal-Support Order."  That section provides:

(a)        A tribunal of this state issuing a spousal-support order consistent with the law of this state has continuing, exclusive jurisdiction to modify the spousal-support order throughout the existence of the support obligation.

(b)        A tribunal of this state may not modify a spousal-support order issued by a tribunal of another state or a foreign country having continuing, exclusive jurisdiction over that order under the law of that state or foreign country.

(c)        A tribunal of this state that has continuing, exclusive jurisdiction over a spousal-support order may serve as:

(1)        an initiating tribunal to request a tribunal of another state to enforce the spousal-support order issued in this state; or

(2)        a responding tribunal to enforce or modify its own spousal-support order.

Unif. Interstate Family Support Act 2008 § 211 (emphasis added).

Unlike the child support provisions, which provide a means for transferring jurisdiction if all parties have left the State that issued the original order, § 211 states that continuing exclusive jurisdiction to modify spousal support exists only in the court that issued the original order.

A recent case that demonstrates the impact of this provision is Sootin v. Sootin, 41 So. 3d 993 (Fla. Dist. Ct. App. 2010).  In Sootin, the parties were divorced in Florida in 1998, and the Florida court ordered the husband to pay permanent alimony.  The wife subsequently moved to Tennessee.  The husband later also moved to Tennessee.  He then filed a petition in a Tennessee court to register and modify the Florida judgment.

July 3, 2012

Charlene Hicks, Senior Attorney, National Legal Research Group

Environmentally friendly, "green" products have become embedded in our culture, and the "green" concept now extends to the building construction industry.  Indeed, many localities now mandate that building construction projects conform with specified standards of green construction.  Although virtually no reported court cases on green issues in the building construction context have arisen to date, it seems only a matter of time before a new body of law develops around such issues.

Because the engineering and technology behind green construction is so new, the lack of any documented product history poses thorny problems of risk allocation.  If the green building product does not perform at the desired or expected level, should the ensuing cost be borne by the architect/engineer, the contractor, or the owner?  This dilemma has been explained by one commentator as follows:

With the hyper-growth of [Leadership in Energy and Environmental Design ("LEED")] certifications and laws encouraging green building, the construction industry is flush with new products aimed at cashing in on the sustainable movement.  Manufacturers are putting new products on the market, with limited time for research and virtually no product history of performance.  Go to the Energy Star website, and you will find a link to new products, with this note, "products in more than 50 categories are eligible for the ENERGY STAR.  They use less energy, save money, and help protect the environment."  Architects and engineers who specify such products rely on the manufacturer's data but have no actual experience with the product performance.  So who bears the risk of specifying experimental products?  The client or the design professional?  While permeable paving allows more water to return to the earth, how does it hold up under freeze/thaw cycles?  Who pays to tear up a two-foot thick "green" roof to get access to a leaking roof membrane?  What happens when a "grey water" system does not produce enough water to fixtures, or, worse yet, spreads some virus to those who come in contact with "dirty" water?

G. William Quatman & Paula Vaughan, Legally Green: What Lawyers Need to Know About Sustainable Design (47th Annual Meeting of Invited Attorneys) 163, 170 (2008).

In instances where a green component or building fails to fulfill preconstruction expectations, property owners are likely to pursue negligence or breach-of-contract claims against the architect, engineer, or general contractor.  In anticipation of such claims, all parties involved in the green construction project should carefully negotiate the allocation of future liability during the contract negotiation process.

June 19, 2012

Brett Turner, Senior Attorney, National Legal Research Group

In Sfreddo v. Sfreddo, 59 Va. App. 471, 720 S.E.2d 145 (2012), the husband and his brother worked for Triple S, a corporation owned by their mother.  In 2004, the mother decided to give the business to her two sons.  To accomplish this goal, she let each of them purchase 200 shares for par value, which was $1 per share.  The husband's shares therefore cost $200.  The corporation then entered into an agreement to redeem the mother's shares, leaving the sons as sole owners of the company.  "[H]usband, his mother, and his brother all testified they understood the transferring of the company to the brothers to constitute a gift."  Id. at 478, 720 S.E.2d at 149.

The corporation was not valued at the time when the husband bought his shares, but a one-half interest owned by another relative of the husband's had been redeemed one year earlier for $1.5 million.  At divorce in 2011, the husband's one-half interest in the corporation was worth $1.636 million.  The $200 paid by the husband was therefore only a small fraction of the total net worth of his 50% interest.

Upon divorce, the wife argued that the husband's entire interest in Triple S was acquired by purchase during the marriage and that it was therefore marital property.  The husband argued that his interest was a gift, as the consideration paid was nominal compared to the value of the stock transferred.  The trial court held that the husband's mother had intended to make a gift, but it found insufficient evidence that the corporation had intended to make a gift.  It therefore treated the husband's stock as marital property.

On appeal, the Virginia Court of Appeals reversed.  The trial court had held that the husband's mother had intended to make a gift.  The corporation had three directors, the mother, the husband, and his brother, and all three had signed the corporate minutes approving the purchase of stock by the husband and his brother.  There was no evidence that the intent of the husband and his brother was any different from the intent of the mother.  Also, "[t]he vast disparity between sale price and value clearly manifests the board's intent to gift."  Id. at 483, 720 S.E.2d at 151.

If all three directors had donative intent, then the corporation necessarily had donative intent.  Indeed, under the trial court's approach, it is not clear how one could ever prove that a corporation intended to make a gift.  "[T]he trial court's conclusion that there was not a corporate intent to gift the shares to husband and his brother was plainly wrong and unsupported by the evidence."  Id. at 482, 720 S.E.2d at 151.

The question remained whether a gift was disproven by the uncontested fact that the husband had paid $200 for his shares.  The court of appeals held that the $200 was not consideration at all:

"To constitute consideration, a performance or a return promise must be bargained for." Restatement (Second) of Contracts § 71(1) (1981). In a comment, the Restatement elucidates this by stating: "[A] mere pretense of bargain does not suffice, as where there is a false recital of consideration or where the purported consideration is merely nominal. In such cases there is no consideration. . . ." Id. cmt. b. In a comment to another section, the Restatement again explains: "Disparity in value, with or without other circumstances, sometimes indicates that the purported consideration was not in fact bargained for but was a mere formality or pretense. Such a sham or 'nominal' consideration does not satisfy the requirement of § 71." Id. § 79 cmt. d. Moreover, the Restatement provides an illustration highly relevant for this case: "In consideration of one cent received, A promises to pay $600 in three yearly installments of $200 each. The one cent is merely nominal and is not consideration for A's promise." Id. illus. 5.