What a virile week we’re having. Tomorrow the blog will discuss a viagra product liability lawsuit. Today we reach back to a case from last March involving a battle between sellers of other male, um, performance products. Put all that together with last week’s post on cannabis and we are reminded of the scene from one of our favorite films, Dr. Strangelove, in which the pilot of a B-52 about to go down in the Soviet Union recites the contents of the survival kit. After listing the .45 semiautomatic pistol, money, gum, nylon stockings, antibiotics, tranquilizers, pep pills, sleeping pills, and prophylactics, the pilot (played by the great Slim Pickens, complete with cowboy hat and twangy-drawl), says, “Shoot, a guy could have a pretty good weekend in Vegas with this stuff.” Except he originally said “Dallas.” But the film came out shortly after JFK’s assassination, and nobody was talking about good times in Dallas. The reference was changed via dubbing to Vegas. Watch Slim’s lips the next time you see the movie.

In re Outlaw Laboratory LP Litig., 2019 U.S. Dist. LEXIS 41940 (S.D.Cal. March 14, 2019), is not a product liability case. It is actually about a turf war among peddlers of male enhancement products. Outlaw (based in Texas – Slim Pickens might’ve been a fitting spokesman) markets the subtly named Tristeel product line. But Outlaw is not alone. It has competitors. This lawsuit began when Outlaw’s attorneys sent letters to gas stations, liquor stores etc. urging them to cease selling Rhino pills. Why? According to the letters, the Rhino pills were “illicit” because they contained a prescription pharmaceutical regulated by the FDA. Also according to the letters, the stores’ sales of Rhino pills constituted violations of RICO and the Lanham Act. So stop what you’re doing, pay us some money, and let’s get on with our lives. There were follow-up demand letters, with the money demands decreasing over time.

The stores did not comply and, true to its word, Outlaw sued them. The core of the claims is that the Rhino pills were misrepresented to be natural and not requiring a prescription. The causes of action included the Lanham Act and the inevitable Cal. Business & Prof. Code section 17200. There was no claim under RICO so Outlaw was not completely true to its word. That will end up being a big issue.

The defendants counterclaimed, asserting that Outlaw’s demands and follow-on lawsuit was a shakedown scheme, and that it constituted a – ta da! – RICO violation. How was Outlaw’s lawsuit supposedly part of a RICO conspiracy? The stores alleged that Outlaw was picking on vulnerable victims – the stores were mostly small shops run by immigrants – and there was nothing remotely unlawful about selling the Rhino pills.

Suddenly Outlaw was playing defense. Outlaw sought to dismiss the counterclaims on the ground that the original complaint was protected by the Noerr-Pennington doctrine, which immunizes those who petition the government from liability for their petitioning conduct. It is protection derived from the First Amendment. Such protection would embrace not only the lawsuit, but also “petitioning-adjacent” activity such as the pre-suit demand letters. All fine and good. But Noerr-Pennington has its limits. It will not immunize “sham” litigation. If a lawsuit is not really a legitimate effort to petition the government but is, instead, an effort to interfere with someone’s business – and nobody in this case doubted that Outlaw wanted to interfere with the selling of the competitive male enhancement products – we are headed to sham territory. But we don’t get there unless the petitions (here, the lawsuit and the prefatory posturing) were not supported by a reasonable belief in their merit. That is an objective, not subjective, standard. Accordingly, the issue was whether Outlaw’s lawsuit and its threat of RICO,were objectively baseless.

The counterclaimants argued that Outlaw had no business invoking RICO, as some of the elements of RICO claims, including existence of predicate acts, were wholly absent. But anybody who has had the misfortune of dealing with the insanely elastic applications of RICO could predict the outcome of that argument. The Outlaw court cited the First Circuit’s Neurontin decision, and concluded that a plaintiff could conjure up a predicate act to support a RICO claim. Sigh. Of course.

But there was another weakness with Outlaw’s RICO theory. The communications by the stores that were at issue were not directed to Outlaw; they were directed to third parties (consumers). The SCOTUS Anza case held that there is no RICO proximate causation when the allegedly fraudulent communications were relied upon by a third party, not the plaintiff. Nice to know there are some limits to RICO. Sometimes.

Moreover, the Outlaw court was persuaded by the stores’ argument that Outlaw “could not have known of the existence of any of the facts it alleged in the demand letters, because those facts simply did not exist, and Outlaw knew they did not.” There was no basis to allege a conspiracy between the stores and the manufacturers of Rhino. There was nothing more than a standard wholesaler-retailer arrangement.

Outlaw argued that “there should be a higher standard of objective baselessness for claims of sham pre-litigation conduct.” One problem with that: there is no support for that proposition in the law.

The result is that the court denied Outlaw’s motion to dismiss the RICO counterclaim. How do we feel about that? First, we think RICO is wildly overused, so, just as a matter of reflex, we have qualms about courts permitting dodgy RICO claims to survive. But… Second, the objective baselessness of allegations is something we see in complaints against our clients all the time. The proportion of facts to fairy tales in complaints is vexingly small. Plaintiff lawyers seems to have no hesitation in alleging knowledge, intention, and bad faith when they nothing to support such allegations besides cynicism and a nose for a good yarn. Anytime a court claps down on such straying from the known facts, we have to applaud. Third, it is interesting how the plaintiff in Outlaw might end up paying a price for pre-suit threats. At a minimum, the Outlaw case offers a cautionary tale.

t’s cold in New Jersey now.  At the time this post hits the blog, it will be about 20 degrees, real feel 15 degrees in most of New Jersey.  That’s too cold for this blogger.  That’s an extra-large cup of coffee for the ride to work.  That’s two-layers of clothing to walk the dog.  That’s dry skin, chapped lips, runny nose, stinging eyes kind of cold.  It can also be sit by a fire with a good book or curl up with a blanket and one of those Oscar-nominated movies you haven’t gotten around to watching yet type of weather.  Or, if you are one of those people who actually like winter, let’s just say we’ll agree to disagree and leave it at that.

But it doesn’t have to be cold outside to get left out in the cold.  That’s what happened to plaintiff in Gomez v. Bayer Corp., 2020 N.J. Super. Unpub. LEXIS 92 (N.J. Super. App. Div. Jan. 14, 2020).  And deservedly so.  Plaintiff’s claims either did not exist under New Jersey law or were preempted.  Plaintiff underwent implantation of a pre-market approved (PMA) permanent birth control device manufactured by defendant.  Plaintiff suffered serious side effects after implantation that ultimately led to her having a hysterectomy.  Id. at *9.  Plaintiff’s complaint alleged causes of action against the manufacturer of the device for:  negligence, breach of express and implied warranties, gross negligence, strict liability, failure to warn, fraud and misrepresentation, and violation of the New Jersey Consumer Fraud Act (NJCFA).  Id.  And that was plaintiff’s first mistake.  With the exception of breach of express warranty, New Jersey recognizes only one products liability cause of action.   All products liability claims are subsumed under the New Jersey Products Liability Act (NJPLA).  So, the appellate court upheld the dismissal of plaintiff’s negligence, implied warranty, gross negligence, fraud and misrepresentation, and violation of the NJCFA claims simply because they don’t exist in New Jersey.  The court did carve out of this section of the decision plaintiff’s negligent training claim, but it didn’t get a warmer reception under the preemption analysis.

The Gomez opinion contains a very thorough discussion of the regulatory framework that serves as the basis for PMA preemption.  Id. at *2-7.  We think you probably all know it, but to summarize – because of the MDA’s express preemption provision and that the PMA process establishes product-specific regulations and requirements, a common law product liability claim is preempted where it would impose a requirement that is different from or in addition to those imposed by the FDA.  When applied to plaintiff’s remaining claims, none made the cut.

The court started with plaintiff’s failure to warn claim – the sum total of which was an allegation that the product “failed to contain adequate warnings or instructions.”  Id. at *24.   Because a device’s labeling and instructions are part of its pre-market approval, any finding that they were inadequate or deficient would be different from FDA’s requirements and therefore must be preempted.  In New Jersey, there is another rub.  The NJPLA provides:

If the warning or instruction given in connection with a . . . device . . . has been approved . . . by the [FDA] under the [FDCA,] a rebuttable presumption shall arise that the warning or instruction is adequate.

N.J.S.A. 2A:58C-4.  Courts have held that this rebuttable presumption of adequacy creates stricter pleading requirements for failure to warn claims.  Gomez, at *18.  To state a claim, the “plaintiff must plead specific facts alleging deliberate concealment or nondisclosure of after-acquired knowledge of harmful effects, or manipulation of the post-market regulatory process.”  Id. (citation omitted).  As noted above, plaintiff’s single, unsupported assertion that defendant’s warnings were inadequate fall far below this heightened standard.  Id. at *24.

Plaintiff’s express warranty claim suffered from a similar problem.  When the claim is based on information in the FDA approved labeling, it too is preempted.  Id. at *24-25.  Therefore, under New Jersey law the only breach of express warranty claim that would survive PMA preemption is one based on voluntary statements by defendant that were not approved by the FDA.  Id. at *25-26.  Because plaintiff’s complaint didn’t contain such allegations, this claim was also dismissed.

The court moved on to the negligent training claim.  Here, plaintiff’s allegations were again sparse and very generalized that defendant failed to properly train and screen healthcare providers.  Id. at *28-29.   From this the court could not determine whether plaintiff was alleging a preempted claim.  Plaintiff’s allegations did not include whether defendant departed from any FDA requirement or how.  Moreover, plaintiff failed to allege how the negligent training, whatever it was, caused plaintiff’s injury.  Id. at *29.  This claim failed both on preemption and causation.

Finally, the court read plaintiff’s strict liability claim as a manufacturing defect claim – which also was insufficiently pleaded.  PMA devices have manufacturing regulations with which manufacturers are required to comply.  Plaintiff failed to allege which FDA manufacturing requirements defendant violated, let alone how defendant violated them.  Id. at *31.  Once again. Plaintiff also failed to allege how any purported violation caused her injury.  Id. at *32.

At oral argument, plaintiff admitted to having no additional facts she could plead to support her allegations.  That coupled with New Jersey’s heightened pleading standards for PMA-device claims led the appellate court to affirm dismissal of all claims with prejudice.  There may be only 58 days until spring, but plaintiffs bringing PMA device claims in New Jersey are looking at an extended wintery forecast.

When we were still (relatively) young lawyers, we defended Bendectin cases.  There was nothing wrong with Bendectin – the litigation produced Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993), the Supreme Court’s landmark decision on excluding bogus expert testimony, and numerous other decisions, state and federal, excluding “junk science.”  Nonetheless, Bendectin’s primary use was as a treatment for morning sickness, and morning sickness occurs at the same time as do many fetal birth defects.  The incessant litigation drove Bendectin off the market – the FDA did not remove it.

For example, according to [one] defendant . . ., Bendectin, the only antinauseant drug available for pregnant women, was withdrawn from sale in 1983 because the cost of insurance almost equalled the entire income from sale of the drug.  Before it was withdrawn, the price of Bendectin increased by over 300 percent.

Brown v. Superior Court, 751 P.2d 470, 479 (Cal. 1988).  The destructive power of Bendectin litigation also brought into currency the terms “tortogen” and “litigen,” both meaning products that generated litigation, but didn’t actually cause anything.  See R.L. Brent, “Bendectin:  Review of the Medical Literature of a Comprehensively Studied Human Nonteratogen & the Most Prevalent Tortogen-Litigen,” 9(4) Reprod. Toxicol. 337 (July-Aug. 1995) (available here for $$$).  Because Bendectin was the only medication approved to treat this morning sickness, pregnant women with morning sickness were left with no FDA-approved therapeutic alternative.

We also worked on vaccine cases, mostly DPT, and but for Congress stepping in with the Vaccine Act – successful preempting just about all product liability litigation against essential vaccines – plaintiffs were on the verge of driving those products off the market as well:

But in the 1970’s and 1980’s vaccines became, one might say, victims of their own success. They had been so effective in preventing infectious diseases that the public became much less alarmed at the threat of those diseases, and much more concerned with the risk of injury from the vaccines themselves.

. . . This led to a massive increase in vaccine-related tort litigation.  Whereas between 1978 and 1981 only nine products-liability suits were filed against DTP manufacturers, by the mid-1980’s the suits numbered more than 200 each year.  This destabilized the DTP vaccine market, causing two of the three domestic manufacturers to withdraw; and the remaining manufacturer . . . estimated that its potential tort liability exceeded its annual sales by a factor of 200.  Vaccine shortages arose when [it] had production problems in 1984.

Bruesewitz v. Wyeth LLC, 562 U.S. 223, 226-27 (2011) (footnotes omitted).

But we haven’t looked at this issue recently – and never on the blog − so we thought we’d see what all this litigation, particularly the explosion of attorney-solicited MDL litigation, has affected targeted products.  Put the emphasis on “recently,” because we’re not citing any material prior to 2000 for the rest of this post.  For some older examples (other than those above). See Paula Jacobi, “Pharmaceutical Tort Liability:  A Justifiable Nemesis to Drug Innovation and Access?,” 38 J. Marshall L. Rev. 987, 991-93 (2005) (the “other casualties” section).

We’ve already discussed the impact of product liability litigation on reproductive choice, since seemingly every contraceptive that’s come on the market has been the target of one mass tort or another.  We’re not the only ones either.

[P]laintiff attorneys − perhaps inspired by the litigation surrounding silicone breast implants −  targeted [the] contraceptive Norplant, a hormonal preparation encapsulated in a silicone elastomer.  This was despite the FDA having no concerns over the drug’s safety.  During more than five years in court, the manufacturer won three jury verdicts, 20 pretrial judgments and dismissal of some 14,000 claims.  A trial verdict against the manufacturer was overturned on appeal.  Despite the favourable rulings, defending the product was a significant financial burden.

Jerome Strauss III & Michael Kafrissen, “Waiting for the Second Coming: Contraceptive Research Is Seriously in Need of Revitalization, 432 Nature 43 (2004).

Pharmaceutical companies have moved out of contraceptive research because of fear of product liability lawsuits and particularly the enormous and seemingly standardless sums juries have awarded in punitive damages in such litigation. . . .  Why have pharmaceutical companies moved out of contraceptive research?  Why wouldn’t they? Nothing jeopardizes corporate profits like controversy over a contraceptive, which, in turn, can discourage the development of new contraceptives.

William Brown, “Déjà Vu All over Again:  The Exodus from Contraceptive Research and How To Reverse It, 40 Brandeis L.J. 1, 32-34 (2001) (footnotes omitted).  See Linda Johnson, “Wyeth Says Norplant Will Stay Off The Market.  The Company Made Its Decision Despite Tests That Backed Up the Effectiveness of the Birth-Control Implants.”, 2002 WLNR 2853999 (Phila. Inq’r. July 27, 2002).

And it is indeed “déjà vu all over again.  We could make a good additional example of the Essure contraceptive system, but for the time being our first obligation to our clients precludes us from doing that in this post.

Apparently, vaccines aren’t out of the woods, yet either.  “Developers have faced an uphill battle since LYMErix, a short-lived human vaccine, was pulled from the market in 2002 amid low demand and lawsuits over potential side effects.”  Brittany Flaherty, “Can a New Lyme Disease Vaccine Overcome a History Of Distrust and Failure?” Health STAT (Aug. 22, 2019).

The vaccine, Lymerix, had caused controversy in recent years, as patients said they were sickened by it and asked the government to restrict sales.  Some filed lawsuits against the maker.

“Sole Lyme Vaccine Is Pulled Off Market” (N.Y. Times Feb. 28, 2002).  Thus, “in the face of lawsuits and plummeting demand triggered by the resulting adverse publicity, the manufacturer of [that] vaccine against . . .  decided to withdraw its FDA-approved product from the market.”  Lars Noah, “Triage in the Nation’s Medicine Cabinet:  The Puzzling Scarcity of Vaccines and Other Drugs,” 54 S.C. L. Rev. 371, 392 (2002) (footnote omitted).

Another litigation casualty was Accutane, a last resort treatment for serious acne.  Yes, it was teratogenic, so Accutane had detailed warnings and a contraindication for pregnant women.  Those warnings were repeatedly found adequate as a matter of law.  E.g., Felix v. Hoffmann-LaRoche, Inc., 540 So. 2d 102, 105 (Fla. 1989); Banner v. Hoffmann-La Roche, Inc., 891 A.2d 1229, 1237 (N.J. Super. App. Div. 2006); Thomas v. Hoffman-LaRoche, Inc., 949 F.2d 806, 817 (5th Cir. 1992) (applying Mississippi law); Bealer v. Hoffman-La Roche, Inc., 729 F. Supp. 43, 45 (E.D. La. 1990).  No, the problem was widespread bogus litigation involving intestinal problems.  Federal claims got the Daubert boot early on, see In re Accutane Products Liability, 511 F. Supp. 2d 1288, 1303 (M.D. Fla. 2007) (plaintiffs’ experts’ “testimony does not satisfy the requirements of Daubert or Federal Rule of Evidence 702”), but mass tort litigation persisted for years in New Jersey before that state’s Supreme Court finally affirmed that the scientific basis for such claims was non-existent:

In sum, the trial court explained its reasons for concluding that plaintiffs’ experts deviated from core scientific principles and strayed from their own claimed methodology in order to reach their conclusions.  That the trial court deemed their testimony to be unreliable and excluded it from being presented is unsurprising. Ample evidence in the record supports that conclusion.

In re Accutane Litigation, 191 A.3d 560, 593 (N.J. 2018).  2018 was too late for Accutane as a litigen, however.  It had been removed from the market in 2009 as unprofitable due to the combined effects of generic competition and litigation:

[The manufacturer] said the move was not done for safety or efficacy reasons and was unlikely to have any impact on earnings. . . .  The [manufacturer] noted on Friday it has been faced with high costs from personal injury lawsuits that it continues to defend against vigorously.

“Roche stops selling acne drug Accutane,” Reuters (June 26, 2009).

Liability concerns are also a primary reason why “Right to Try” initiatives, including a federal statute we critiqued here, have been generally unsuccessful in making investigational drugs available to terminally ill patients.

[E]ven if drug manufacturers offer INDs [investigational new drugs] after the drugs have met the FDA’s safety standards to initiate phase II trials, the drug manufacturers may still be liable for the injuries that result from the INDs. . . .  Given the likelihood of tort liability under this framework, it is unlikely a manufacturer would willingly provide patients with unapproved medications without a statutory shield from liability.

Andrew Zacher, “False Hope & Toxic Effects:  Proposed Changes to the FDA Drug Approval Process Would Fail to Benefit the Terminally Ill,” 14 Quinnipiac Health L.J. 251, 278-79 (2011) (footnotes omitted).

Finally, we would be remiss not to include the ongoing threat to product research and innovation generally posed by “innovator liability” − the bizarre theory that, because of preemption, innovator/branded drug manufacturers should be liable for injuries caused by competing generic drugs.  The suppressive effect that such massive liability (generics account for around 90% of current prescriptions) on the ability of companies to dedicate the vast sums necessary establish the safety and effectiveness of new drugs has been widely acknowledged.  See McNair v. Johnson & Johnson, 818 S.E.2d 852, 866 (W. Va. 2018) (“significant litigation costs would be added to the price of new drugs” and “the increase in litigation against brand manufacturers could stifle the development of new drugs, which would have negative health consequences for society”); Huck v. Wyeth, Inc., 850 N.W.2d 353, 377 (Iowa 2014) (“extending liability to brand manufacturers for harm caused by generic competitors would discourage investments necessary to develop new, beneficial drugs by increasing the downside risks”); In re Darvocet, Darvon, & Propoxyphene Products Liability Litigation, 756 F.3d 917, 944 (6th Cir. 2014) (“there are grave health policy consequences associated with recognizing brand manufacturer liability in these situations including higher priced brand name drugs and fewer innovative drugs”); Rossi v. Hoffmann-LaRoche, 2007 WL 7632318 (N.J. Super Law Div. Jan. 3, 2007) (innovator liability “could only act to stigmatize the ability of companies to develop new and innovative drugs”); Anna Laakmann, “The Hatch-Waxman Act’s Side Effects:  Precautions for Biosimilars,” 47 Loyola L.A. L. Rev. 917, 926 (2014) (innovator liability “could further dampen the incentives to create new drugs and thus reduce overall patient welfare”); Lars Noah, “Adding Insult to Injury:  Paying for Harms Caused by a Competitor’s Copycat Product,” 45 Tort Trial & Ins. Prac. L.J. 673, 688-89 n.69 (2010) (innovator liability “threatens to chill therapeutic product innovation”); Victor Schwartz, et al., “Warning:  Shifting Liability to Manufacturers of Brand-Name Medicines When the Harm Was Allegedly Caused by Generic Drugs Has Severe Side Effects,” 81 Fordham L. Rev. 1835, 1871 (2013) (innovator liability makes it “riskier for brand-name manufacturers to dedicate resources to researching and developing potentially life-saving or life-improving medicines”); Samantha Koopman, “Hidden Risks of Taking Generic Drugs over Brand Name:  The Impact of Drug Labeling Regulations on Injured Consumers & the Pharmaceutical Industry,” 34 J. Nat’l Ass’n Admin. L. Judiciary 112, 140 (2014) (“Overall, innovator liability likely results in less new drug development.”).

Thus, commentators widely recognize that “[t]ort litigation has also been shown to inhibit drug development and drive some drugs off the market.”  Erika Lietzan & Sarah Pitlyk, “Thoughts on Preemption in the Wake of the Levine Decision,” 13 J. Health Care L. & Pol’y 225, 255 n.167 (2010).  “[P]harmaceutical companies will simply not make choices in support of research, manufacture and marketing of low-margin, high-liability risk drugs.”  Jacobi, “Justifiable Nemesis,” 38 J. Marshall L. Rev. at 1009.  “[S]hortages of vaccines and other critical pharmaceutical products have increased in the last few years” due to “[p]ressures emanating from regulatory agencies, courts, and insurers,” which have “ma[d]e this line of the pharmaceutical business less than attractive.”  Noah, “Triage,” 54 S.C. L. Rev. at 402.

One final irony:  Plaintiffs cannot bring claims that products marketed with the FDA’s blessing should be removed from the market.  For relatively obvious reasons, when the FDA has said “yes,” plaintiffs can’t (under the Supremacy Clause) claim that state law says “no.”  E.g., Mutual Pharmaceutical Co. v. Bartlett, 570 U.S. 472, 488 (2013) (“We reject this ‘stop-selling’ rationale as incompatible with our pre-emption jurisprudence.”).  Yet, in the examples we’ve cited, plaintiffs have often accomplished the same thing – simply by using the time, expense, and liability threat of mass litigation to make continued sales uneconomic.  As long as plaintiffs are able to uses these inefficiencies of modern litigation as a weapon to deter drug marketing, regardless of what the FDA has found, society will continue to be deprived of prescription medical products that the FDA’s evaluation of safety and effectiveness would have allowed on the market.

Yesterday, Bexis was staring at a weather forecast featuring rain, snow, and freezing temperatures: In other words, a perfect day for sitting inside and finalizing PowerPoint slides further analyzing the worst cases and the best cases of 2019.

As a friendly reminder to our loyal readers, this Friday, January 24 at 12 p.m. EST, four of your bloggers (Bexis, Steven Boranian, Steve McConnell, and Rachel Weil) will be presenting a free 90-minute webinar on “The good, the bad and the ugly: The best and worst drug/medical device decisions of 2019.”

This webinar is presumptively approved for 1.5 general CLE credit in California, Illinois, New Jersey, Pennsylvania, Texas and West Virginia. For lawyers licensed in New York, this course is eligible for 1.5 credit under New York’s Approved Jurisdiction Policy.

The program is free and open to anyone interested in tuning in, but you do have to sign up, which you can do here.

Today the Supreme Court agreed to take another shot at “stream of commerce” personal jurisdiction in two automotive cases.  Here are the case pages at SCOTUSBlog:  Ford Motor Co. v. Bandemer, No. 19-369, and Ford Motor Co. v. Montana Eighth Judicial District Court, No. 19-368.  The decisions being appealed are Bandemer v. Ford Motor Co., 931 N.W.2d 744 (Minn. 2019), and Ford Motor Co. v. Montana Eighth Judicial Dist. Court, 443 P.3d 407 (Mont. 2019).

Neither case involves the kind of litigation tourism that we frequently discuss on this Blog.  Rather, both cases involve variants of a set of facts that is relatively common in cases involving motor vehicles:  The plaintiff was injured while using a vehicle that was not purchased in the state where the accident occurred.  Oftentimes the vehicle has changed hands several times since it was initially sold in some other state, or else the plaintiff was responsible for bringing it into the state.  Nor was the vehicle in question manufactured, designed, or repaired by the defendant in the state where the injury occurred and suit was brought.  There is no basis for general jurisdiction because the defendant vehicle manufacturer was neither incorporated nor had a principal place of business in the state.  The defendant had plenty of branded dealerships in the state, but those dealerships had nothing to do with the car in which the plaintiff was injured.

Bristol-Myers Squibb Co. v. Superior Court, 137 S. Ct. 1773 (2017), was pretty clear that, for there to be specific personal jurisdiction, “the suit must arise out of or relate to the defendant’s contacts with the forum.”  Id. at 1780.  “[W]hat is missing” in BMS was “a connection between the forum and the specific claims at issue.”  Id. at 1781.  Likewise, in Walden v. Fiore, 571 U.S. 277 (2014), the Court held that “the defendant’s suit-related conduct must create a substantial connection with the forum State.”  Id. at 284.

It’s hard to see how, given these holdings, that such plaintiffs have a jurisdictional basis for the suit, and we discussed the probable demise of stream of commerce jurisdiction here, shortly after BMS.  However, we are now talking about plaintiffs who are suing in their home states where their injuries occurred.  That makes them a lot more sympathetic than our clients’ mass tort litigation tourist opponents, all of whom have readily available (but not as pro-plaintiff) alternative fora.  Will personal jurisdiction really require auto accident plaintiffs to sue manufacturers in the manufacturers’ “home” states, unless those plaintiffs bought their cars new in the states where they live?  Courts have split all over the place on this issue, and our post-BMS cheat sheet includes defense-side wins.

We would have preferred that the Court clarify just what the specific personal jurisdiction “arising from”/”relating to” test means in a nationwide class action, but those cases move slower than individual auto accident cases like these two – so here we are.  Whatever the Supreme Court holds in these cases about the need for a causal connection between the defendant’s in-state contacts and the plaintiff’s claimed injuries will also determine the extent to which litigation tourists will be able to sue our clients in places like Philadelphia or St. Louis (to name two).  We’ve stated our preferred test in these situations – based on the BMS holding about “loose and spurious” forms of ersatz general jurisdiction – here.  We’ll see what happens.

We have been accused of using this Blog as our personal travelogue, posting details of our various adventures notwithstanding the tenuous-at-best connections to the case descriptions that follow. Guilty. Today, for example, we wanted to let you know that you should not miss the opportunity for a visit to the hallowed Bluebird Cafe if you find yourself in Nashville. This tiny venue, featured on the “Nashville” television show, has been a launching pad for the careers of many of Nashville’s top singer-songwriters, many of whom continue to pay visits through fame and beyond. It is most famous for its “songwriters’ roundtable” format, which, for almost 35 years, has featured a circle of songwriters in the middle of the room (not on the stage), taking turns playing songs—famous (some very very famous) and not—and telling stories. It is nothing short of delightful, and, for former Nashville residents and inveterate songwriter fan girls like us, it is awe-inspiring. On New Year’s Eve, we were privileged to see four songwriters whose collective credits would fill a wall, playing and singing their hits and their best songs (not always the same thing) in a room filled with 90 lucky people who were as thrilled as we were. Seriously, don’t miss it.

But, though the Blog indulges tourism in many respects (tenuous connection alert), it draws the line at blatant litigation tourism. And, as the Eastern District of Pennsylvania’s smackdown emphasized, you won’t find a more blatant or ill-advised example of litigation tourism than today’s case.  In Monroe v. Ethicon, 2019 U.S. Dist. LEXIS 219722 (E.D. Pa. Dec. 23, 2019), the two plaintiffs filed their suits in the consolidated pelvic mesh litigation in the Philadelphia Court of Common Pleas.  Along with claims against the manufacturer of their pelvic mesh devices, the plaintiffs included claims against a Pennsylvania raw materials supplier – the supplier of the resin that the manufacturer used in the fabrication of its polypropylene mesh.

There is backstory.  In 2014, several mesh plaintiffs in the same consolidated litigation sued the same raw material supplier.  The supplier filed preliminary objections to the complaint (the Pennsylvania state court version of a motion to dismiss) alleging that it was immune from liability under the Biomaterials Accessibility Assurance Act, a federal statute that bars claims against such suppliers in suits alleging injuries caused by the finished medical devices in which the raw materials are used. (You can read our other posts about the Act here.) As the court explained, “Congress intended the Act to protect suppliers of raw materials and component parts … who do not design, produce or test a final medical device,” from lawsuits alleging that devices using the raw materials are defectively designed or inadequately tested or that they are accompanied by inadequate warnings. Monroe, 2019 U.S. Dist. LEXIS 219722 at *13-14.   The judge entered an order finding the supplier to be a “biomaterials supplier” under the terms of the Act, and, as such, immune from the plaintiffs’ claims. The judge dismissed the claims against the supplier with prejudice. Subsequently, the parties entered into a stipulation under the terms of which the plaintiffs agreed not to name the supplier in any Philadelphia County mesh case. No one did, for five years.

Enter the plaintiffs in today’s case. In September 2019, both plaintiffs, neither of whom had any connection to Philadelphia, filed suits under the Philadelphia mesh master docket number and included the resin supplier as a defendant. The supplier moved to dismiss both cases. The plaintiffs adduced no additional evidence, mounted no new arguments, and supplied no additional affidavits. Nevertheless, they argued that the judge – the same judge who had issued the 2014 order – should not apply his own earlier order.   The judge granted the supplier’s motion and ordered the plaintiffs to file new complaints that did not include the supplier.   When they did, the remaining defendant (the mesh manufacturer) removed the cases to the Eastern District of Pennsylvania. The plaintiffs moved to remand, arguing that the supplier was not fraudulently joined and that, as a “forum defendant,” it prevented the federal court from exercising diversity jurisdiction. On the plaintiffs’ motion to remand, the court explained, “The question is not whether the claims against the forum defendant lack merit but rather whether these claims are wholly insubstantial and frivolous such that they should have never been [sic] brought.” Id. at *26 (internal punctuation and citations omitted).   As the court emphasized, the plaintiffs simply made “the same arguments [the judge] had already considered” and rejected. Id. at *27.   Moreover, the plaintiffs “chose to sue in the one case and one forum where there is a definitive ruling preventing [the supplier] from being a party. Id. at *27. With no appellate ruling on the issue, no other Pennsylvania county would have been bound by the Philadelphia judge’s earlier order. The court concluded, “We just cannot countenance this flouting of a dismissal order with prejudice in the same case.” Id. at *31. The court denied remand and transferred both cases to federal district courts that made sense under the facts of the cases. Nor did the court find a basis for certifying an interlocutory appeal. Instead, the court stated, the plaintiffs could sue the supplier in another Pennsylvania county or in federal district court if they really believed they had claims against the supplier.

But we all know they don’t believe anything of the sort. The fraudulent joinder of the supplier was in aid of one purpose: defeat of federal jurisdiction for plaintiffs seeking the well-known “hospitality” of Philadelphia’s trial court. We would bet a whole lot of money that, thwarted in this effort, the plaintiffs will not file separate suits against the resin supplier.

We love this decision. We enjoy few things more than watching mass tort plaintiff lawyers beaten at their own game, especially when they slide their chess pieces right into the grip of the queen. This was a slam-dunk, and we are delighted that the court acknowledged that.

We were going back through some old cases the other day and came across a gem from our hometown court right here in in San Francisco.  It caught our eye because it deals with an angle of federal preemption on which we have written before and which we think is underappreciated, so we’re going to write about it again.  The issue is implied preemption, more specifically implied preemption where the plaintiff cannot produce “newly acquired information” supporting the drug warning that the plaintiff claims a drug manufacturer should have added to its labeling.  This is a pathway to implied preemption separate and apart from introducing “clear evidence” that the FDA would not have allowed the warning purportedly required by state law.

We will get more into these two pathways in a minute, but it all matters because of the FDA’s Changes Being Effected regulations and ultimately Wyeth v. Levine, where the Supreme Court held that a drug manufacturer could comply with both federal drug regulation and state-law duties to warn by unilaterally strengthening its labeling under the CBE regs.  No impossibility, no preemption.

We have always thought that the Supreme Court was far too generous in its reading of the CBE regulations and the extent to which they actually allow drug manufacturers to change their labels.  But even taking Wyeth v. Levine at face value, it was not the end of implied preemption.  Prescription drug manufacturers most commonly try to invoke implied preemption with “clear evidence” that the FDA considered and rejected the warning purportedly required by state law.  The example that most readily comes to mind is Dolin v. GlaxoSmithKline LLC, 901 F.3d 803 (7th Cir. 2018), where the Seventh Circuit held that federal law preempted the plaintiff’s state law warnings claims because the FDA had repeatedly instructed the company not to add the warning that the plaintiff wanted.

There is, however, more than one way to skin a cat.  Another avenue to implied preemption is to argue that the drug manufacturer could not have changed the drug warnings as the plaintiffs command because there is no “newly acquired information” to support the warning.  That too is grounded in the CBE regulations, which do not allow additional warnings based on information already submitted to the FDA when the drug labeling was approved.

This was the way to summary judgment late last year in a Pradaxa case in California state court.  See Pradaxa Cases, No. CJC-16-004863, 2019 WL 6043513 (Cal. Super. Ct. Nov. 8, 2019).  We have written on Pradaxa cases before—most recently Roberto v. Boehringer Ingelheim here, and another post here covers “newly acquired information” cases, too.  The California summary judgment order is the most succinct, particularly in setting forth a very helpful two-prong framework.

Like all Pradaxa plaintiffs, the California plaintiff alleged that the product—which is an anticoagulant—placed her at an increased risk of bleeding, and that the defendant manufacturer should have warned more strongly about that risk.  The court, however, found those claims to be impliedly preempted.  Here is the quote that you will want to focus on:

Warning preemption analysis is a two-prong analysis, assessed by the Court.  (See Merck Sharp & Dohme Corp. v. Albrecht (2019) 139 S. Ct. 1668, 1676. . . .)  “First, the plaintiff must show that there existed ‘newly acquired information’ such that the defendants could unilaterally change the label pursuant to the CBE regulation without FDA approval. . . .”  . . . Second, “if the plaintiff can point to the existence of ‘newly acquired information’ to support a labeling change under the CBE regulation, the burden then shifts to the manufacturer to show by ‘clear evidence’ that the FDA would not have approved the labeling change made on the basis of this newly acquired information.”

Pradaxa, 2019 WL 6043513, at *2 (some citations omitted).  We saw this two-prong formulation for the first time in Roberto, but we repeat it here because it so cleanly captures two avenues to implied preemption in one gloss.  The plaintiff has to produce “newly acquired information” to support the demanded change.  And it can’t be just any old evidence—it has to be meaningful, concrete, and not previously submitted to the FDA:

“[N]ewly acquired information” is defined as: “data, analyses, or other information not previously submitted to the [FDA], which may include (but is not limited to) data derived from new clinical studies, reports of adverse events, or new analyses of previously submitted data (e.g., meta-analyses) if the studies, events, or analyses reveal risks of a different type or greater severity or frequency than previously included in submissions to FDA.” (21 C.F.R. § 314.3(b) [emphasis supplied].)

. . . [I]t also cannot be rooted in conjecture or hypothesis. Rather, it must conclusively establish, by scientifically valid measurable and statistically significant data, that the different or increased risks are actual and real.

Id. at *3.  If the plaintiff cannot make this showing, i.e., demonstrate that the CBE regs can apply in the first instance, only then does the burden shift to the defendant to produce “clear evidence” that the FDA would not have permitted the proposed stronger warning.

From there, it was a short walk to summary judgment.  Plaintiffs produced evidence that they claimed would support a stronger warning, but with regard to all of it, the court found (repeatedly) that the manufacturer “submitted this information to the FDA before Pradaxa’s warning was initially approved.”  Id. at *4-*5.  The information therefore was not “newly acquired” and it could not support a label change under the CBE regulations.  Because the manufacturer therefore could not have complied with the alleged state law duties without violating federal law, the state law claims were preempted.

Not every case will involve the same factual and regulatory history as Pradaxa, but we still think these are very useful cases in understanding and applying implied preemption.

We keep reading in Law360 and other publications about defense law firms that are ramping up cannabis practice groups. Our own firm is one of them. These developments sparked an interest. After all, won’t many of the principles we’ve worked with over the years for prescription and OTC medications apply to pot and its dressed-up cousins? Or is that just wacky? We’d like to be invited to join a CBD group, even as an adjunct member, but we won’t hold our breath. Anyway, plaintiffs are apparently doing something similar, as we start to see lawsuits alleging problems with cannabidiol (CBD) products. (We have written before about whether the learned intermediary rule should apply to cannabis lawsuits.) Such cannabis lawsuits often focus on whether the CBD product is as strong as advertised.

One example is Snyder v. Green Roads of Florida LLC, 2020 WL 42239 (S.D. Fla. Jan. 3, 2020), a class action against a manufacturer/distributor/seller of various CBD products including but not limited to CBD Oil, CBD Gummies, CBD capsules, CBD Terpenes, CBD Topicals, CBD Syrups, CBD Tea, and CBD Coffee. (There was just one defendant. Thus, surprisingly in this case, there was no joint defense.) There were multiple named plaintiffs. Though they purchased different items, each plaintiff claimed that the product labels misrepresented the amount of CBD that each product contained and that, as a result, each plaintiff was over-charged.

The defendant moved to dismiss the case to the extent that the plaintiffs lacked standing to sue over products they did not purchase, and to dismiss or stay the case because the FDA had primary jurisdiction to decide how CBD products should be labeled. The court mostly went the defendant’s way. The standing issue came first. Article III standing requires a plaintiff to have (1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision. The requirement of standing is meant to weed out phony controversies. Standing principles are fully applicable in the class action context. It is not a terribly high standard, but it isn’t so low as to permit plaintiffs to assert claims based on the marketing of products that they did not purchase.

So that’s a problem for the Snyder class action, as the complaint listed products that no named plaintiff bought. But what about future purchases? Who knows what the future holds, right, man? That stoner logic cannot help the plaintiffs because the allegations in the complaint made it clear that the plaintiffs “will not purchase more of Defendant’s products so long as the labelling does not meet their standards.” Accordingly, the Snyder court dismissed the complaint “to the extent Plaintiffs have failed to allege facts sufficient to demonstrate their standing to pursue class action claims based on products they did not purchase on the product labels in making his decision to purchase that the product labels misrepresented the amount of CBD that each product contained and that, as a result, each was over-charged for the products each purchased.” Far out – as in out of court.

Next is the issue of primary jurisdiction. CBD products are regulated at the federal and state level. The substance and scope of such regulation is in flux, but its existence is undeniable. Effective January 1, 2020, the state of Florida began regulating CBD products, including their labelling with respect to the number of milligrams of hemp extract contained in a product. As for the federal level, regulatory oversight of CBD ingestible products, including labelling, is currently the subject of rulemaking at the FDA. The FDA fairly recently conducted a public hearing and instituted an agency task force on CBD regulations. The Snyder court recognized that “[a]lthough the FDA rulemaking process in ongoing, the FDA is under considerable pressure from Congress and industry to expedite the publication of regulations and policy guidance regarding CBD products.”

Given that regulatory backdrop, did the plaintiffs’ beef with CBD strength labelling come within the embrace of primary jurisdiction? Four factors are baked into the primary jurisdiction doctrine: (1) the need to resolve an issue that (2) has been placed by Congress within the jurisdiction of an administrative body having regulatory authority (3) pursuant to a statute that subjects an industry activity to a comprehensive regulatory scheme that (4) requires expertise or uniformity in administration. These four factors are not exclusive and courts “seem heavily influenced by a fifth factor in cases implicating FDA jurisdiction: whether the FDA has shown any interest in the issues presented by the litigants.”

All of those five factors militated in favor of primary jurisdiction in the Snyder case. First, the FDA is exercising regulatory authority over ingestible and other CBD products, even if there is “uncertainty with respect to whether the FDA will conclude that some or all CBD products are food additives, supplements or nutrients that can be safety marketed to the public and, if nutrients, whether the labelling standards and requirements for CBD products will be different or the same as for other nutrients.” Second, the FDA’s exercise of regulatory authority over CBD products is proper and within the FDA’s jurisdiction. Third, the Agriculture Improvement Act of 2018 explicitly recognized the FDA’s authority to regulate products containing cannabis-derived compounds. Fourth, the exercise of regulatory authority by the FDA over the labelling of ingestible CBD products requires “both expertise and uniformity in administration.” Among other issues with which the FDA is concerned are “whether CBD products pose safety risks, how the mode of delivery affects safety, whether there are dosage considerations related to safety, whether there is a need for manufacturing standards, and whether there are standardized definitions for the ingredients in, for example, hemp oil.” Fifth, the FDA “obviously has expressed an active interest in regulating the manufacture and marketing of CBD products.”

These five factors added up to primary jurisdiction in this case. The public interest in the litigation justifies a stay and “would not prejudice Plaintiffs to any significant degree.” At the same time, “[c]ourts would benefit greatly from the FDA’s regulatory framework.” Consequently, the Snyder court stayed the tort case “until the FDA completes its rulemaking regarding the marketing, including labelling, of hemp-derived ingestible products.” The court’s reasoning is blunt and right on.

While the focus of this blog is on product liability cases, we have had occasion to touch upon Lanham Act cases involving litigation between commercial competitors.  One reason is because Lanham Act cases provided significant early precedent for the principle that FDA exclusive enforcement powers prohibit plaintiffs from bringing what amount to private FDCA violation claims in the guise of private civil litigation.  You’ll find no shortage of posts here expounding that 21 U.S.C. §337(a) represents express congressional policy that nobody but the FDA can seek to enforce the FDCA in a court of law.  The concept took a hit with the Supreme Court’s decision in POM Wonderful v. Coca-Cola Co., 134 S.Ct. 2228 (2014), discussed here, but that decision involved food, not drugs or devices, which is an important distinction because the FDA does not pre-approve food labels.  And indeed, drug and device cases post POM Wonderful have done a good job of holding to that distinction finding that POM Wonderful didn’t open the door to Lanham Act claims that are based on proving FDCA violations.  A couple of 2019 cases discussed here and here.

Which brings us to today’s case – Belcher Pharmaceuticals, LLC v. Hospira, Inc., slip op. (M.D. FL Jan. 7, 2020).  The facts here are interesting.  The drug at issue was epinephrine.  Defendant had been manufacturing the drug since before the 1938 enactment of the FDCA.  Therefore it was grandfathered – did not need FDA approval.  However, the drug was in short supply.  So, the FDA asked the defendant to increase production, which defendant did.  A few years later, plaintiff had a competing product approved.  By 2017, the shortage was over and the FDA ask defendant to stop manufacturing its grandfathered product.  Defendant complied.  Not surprisingly, once defendant discontinued its product, plaintiff saw an increase in the sales of its product.  Slip op. at 1.  Plaintiff brought suit under the Lanham Act alleging that defendant falsely advertised its product as FDA-approved when it was not and sought recovery of any profits defendant made “for doing what the FDA requested.”  Slip op. at 2.  Talk about no good deed goes unpunished.

First, it was undisputed that defendant “never explicitly marketed its products as FDA-approved.”  Slip op. at 6.  Rather, plaintiff argued that defendant misled consumers into believing the product was FDA-approved merely based on the fact that defendant was selling its product.  Plaintiff pointed to the fact that defendant’s labeling and packaging included indications for use and shelf-life representations.  Id.  So, the pre-1938 product had labeling that looked like labeling that would routinely accompany FDA approved products.  OK?  And?  There has to be more right.  Yep.

[T]he very act of placing a drug on the market, with standard package inserts often used for FDA-approved drugs fails to state a claim under the Lanham Act because it would usurp the FDA’s authority to enforce the Food, Drug, and Cosmetics Act.

Id. at 7-8 (citations omitted).  The court doesn’t elaborate, but it doesn’t need to.  Where a case involves the intersection of the Lanham Act and the FDCA and would require the court to interpret and/or apply the FDCA, such claims are not permitted.  It’s not a products case, but any decision that trumpets FDA authority deserves a shout out on this blog.

Someone asked us the other day whether spoliation sanctions could lie against a non-party for alleged loss/destruction of electronically stored information sought through a third-party subpoena.  On the one hand, assuming there is personal jurisdiction, the substantive discovery rules do not vary between parties and non-litigants subjected to valid subpoenas.  On the other hand, other than monetary sanctions, Rule 37(e), regarding discovery sanctions for spoliation appears directed solely against parties.

So we thought we’d take a look.

Initially, we should be clear that we are discussing whether a third-party subpoena creates a duty to preserve – not whether such a duty exists in the absence of any legal process.  In the latter situation there is pretty clearly no duty.  Shamrock-Shamrock, Inc. v. Remark – a recent case involving Florida state discovery rules – demanded a subpoena as a prerequisite to any third-party preservation duties:

[L]itigants may employ various legal mechanisms to impose upon a third party a duty to preserve necessary evidence.  For example, a third party may be required to produce particular evidence it possesses in response to a subpoena. . . .

In this case, there was no statute, contract, or discovery request that would impose a clearly defined duty on [a third party] to preserve any potentially relevant evidence.  Thus, a duty would arise only through [the party’s] purported knowledge of [the] pending litigation. . . .   As such, [plaintiff] would like us to announce that [the third party] owed a duty to it based on the foreseeability of litigation.  Considering the traditional approach to defining legal duty, we decline to do so. Indeed, such a broad pronouncement would be tantamount to declaring a general legal duty on any nonparty witness to anticipate the needs of others’ lawsuits.  There are innumerable circumstances in which a nonparty to litigation may have evidence relevant to a case and may know of its relevance.  But that knowledge, by itself, should not give rise to a duty to safeguard the evidence in anticipation of litigation.

271 So. 3d 1200, 1205–06 (Fla. App. 2019) (rejecting independent action for spoliation for lack of duty) (citation omitted).  Accord In re Delta/AirTran Baggage Fee Antitrust Litigation, 770 F. Supp.2d 1299, 1307-08 (N.D. Ga. 2011) (rejecting “sweeping and novel theory of spoliation” that a subpoena served in different litigation could create a preservation duty to plaintiffs in other litigation).  But see Woods v. Scissons, 2019 WL 3816727, at *4 (D. Ariz. Aug. 14, 2019)  (third party’s spoliation “imputed” to party absent any subpoena at all where spoliator was “not a disinterested non-party”).

Nor are we addressing third-party subpoenas directed against the federal government (such as the FDA).  These are governed by departmental regulations issued pursuant to United States ex rel. Touhy v. Ragen, 340 U.S. 462 (1951).  We addressed that issue, here.

The first place we tried, the Sedona Principles, downloadable here, turned out to be a dud.  The “meat” in the principles is in what are called “comments.”  Comment 5(a) has a section on “Preservation by non-party in response to Rule 45 subpoena,” which states:

Case law concerning the preservation obligations of a subpoenaed non-party in litigation is not well defined.  Some courts have noted that the issuance of a subpoena creates a duty to preserve.  However, since Rule 45 imposes duties on the requesting party and the court to shield a non-party from undue burden and expense, there may be some question whether an overbroad subpoena creates a duty to preserve.

Sedona Principles, Public Comment Version, at 44 (3d ed. 2017) (footnotes omitted).  The Principles simply suggest that a “good practice for the requesting party” is to “to engage the non-party in good faith discussions about the scope of the subpoena, sources of potentially responsive ESI, and the costs of preserving and producing relevant ESI.”  Id.

The footnotes cited one case, In re Napster, Inc. Copyright Litigation, 462 F. Supp.2d 1060 (N.D. Cal. 2006), but in that case the third-party subpoena target had, by the time sanctions were sought, been joined as a party.  Id. at 1065.  Further, the third–party target “acknowledged a duty to preserve documents . . . based on plaintiffs’ subpoena.”  Id. at 1068.  Thus the issue we’re interested in was effectively conceded in Napster.

The question seems to arise most frequently in connection with securities litigation subject to the stay provisions of the Private Securities Litigation Reform Act, which imposes preservation obligations only on “parties” during the duration of the stay.  15 U.S.C. §78u-4(b) (3)(C)(i).  Several courts have decided to improve upon the statute by permitting “preservation subpoenas” directed at third parties in order “to impose an affirmative duty on those parties to preserve the evidence.”  New York State Teachers’ Retirement Systems v. General Motors Co., 2015 WL 1565462, at *5 (E.D. Mich. April 8, 2015).  “[P]reservation subpoenas . . . impose[] a legal obligation on third parties to take reasonable steps to preserve relevant documents.”  In re Heckmann Corp. Securities Litigation, 2011 WL 10636718, at *5 (D. Del. Feb. 28, 2011).  In In re Tyco International, Ltd., Securities Litigation, 2000 WL 33654141 (D.N.H. July 27, 2000), such subpoenas would “give specified third parties notice of the action and impose upon them only a duty to preserve certain relevant evidence,” id. at *5, but had to be particularized, and could not “call for the preservation of an open-ended, boundless universe of materials.”  Id. at *4 (citation and quotation marks omitted).  Tyco relied on a similar order entered in In re Grand Casinos, Inc. Securities Litigation, 988 F. Supp. 1270 (D. Minn. 1997), holding that third-party subpoenas “would further Congress’ intent by subjecting relevant evidence to a ‘stay put’ directive . . . in [the hands] of third-parties,” which in turn strongly implied that a subpoena imposed a preservation duty on the third party receiving it..  Id. at 1272.  See Avenue Capital Management II, LP v. Schaden, 2015 WL 758521, at *3 (D. Colo. Feb. 20, 2015) (“preservation subpoenas . . . put those parties on notice of their duty to preserve certain documents”); In re Refco, Inc., 2006 WL 2337212, at *4 (S.D.N.Y. Aug. 8, 2006) (“courts have generally permitted plaintiffs in PSLRA actions to issue subpoenas [to] specified third parties [that] . . . impose upon them . . . a duty to preserve certain relevant evidence in their possession”).  None of these cases have involved any claim that a third-party’s preservation obligation extended to actions taken before any subpoena was received – indeed, the rationale is the opposite, these subpoenas are justified precisely to create the sought after duty.  See Neibert v. Monarch Dental Corp., 1999 WL 33290643, at *1 (N.D. Tex. Oct. 20, 1999) (“The only obligation imposed on the identified non-parties by the proposed subpoenas . . . is that they not destroy any records presently in their possession or which come into their possession at a later date”).

Similar results have occurred in a number of non PSLRA cases.  In City of Lindsay v. Sociedad Quimica y Minera de Chile S.A., 2012 WL 2798966, at *5 (E.D. Cal. July 9, 2012), the court assumed that it could hold in contempt “any third party that fails to comply with the issued subpoenas,” which assumes that such subpoenas necessarily impose a duty to preserve on a third-party recipient.  Id. at *5.  See In re Broiler Chicken Grower Litigation, 2017 WL 3841912, at *4 (E.D. Okla. Sept. 1, 2017) (“subpoenas to third parties [will] ensure that they too retain evidence”); Garcia v. Target Corp., 276 F. Supp. 3d 921, 925 (D. Minn. 2016) (“third-party subpoenas” mean that “third parties will be on notice of any obligation to preserve evidence”); Bright Solutions for Dyslexia, Inc. v. Doe 1, 12015 WL 5159125, at *3 (N.D. Cal. Sept. 2, 2015) (“the entities that have the information . . . are not parties and thus have no duty to preserve absent a court order”); Johnson v. U.S. Bank National Ass’n, 2009 WL 4682668, at *2 (S.D. Ohio Dec. 3, 2009) (third party subpoena obliges recipient “to describe responsive documents and protect them for subsequent production”); In re Rosenthal, 2008 WL 983702, at *8 (S.D. Tex. March 28, 2008) (third-party who “disregards a subpoena . . . may be found in contempt”).  Again, these cases all seem (in some, the discussion is quite brief) to focus on post-subpoena evidence.  See Swetic Chiropractic & Rehabilitation Center, Inc. v. Foot Levelers, Inc., 2016 WL 1657922, at *3 (S.D. Ohio April 27, 2016) (a “non-party . . . does not have a duty to preserve information absent a court order”); Koncelik v. Savient Pharmaceuticals, Inc., 2009 WL 2448029, at *2 (S.D.N.Y. Aug. 10, 2009) (it “is certain is that without preservation subpoenas, the third party corporations in possession of potentially relevant information are free to destroy that information”).

Some cases do suggest that no independent preservation duty arises even from receipt of a third-party subpoena.  Gambino v. Payne, 2015 WL 1823754 (W.D.N.Y. April 22, 2015), stated flatly that “the only duty under a subpoena to preserve materials is when the served party claims a privilege or protection from the subpoena and has to preserve the materials until the privilege or protection issue is settled.  Id. at *5.  In Comeens v. Harden Manufacturing Corp., 2014 WL 12650101 (N.D. Ala. April 3, 2014), the plaintiffs “fail[ed] to explain how issuing third-party subpoenas” would be any more effective at preserving documents “than the anti-spoliation letters [they had] already issued.  Id. at *2.  Goodman v. Praxair Services, Inc., 632 F. Supp. 2d 494 (D. Md. 2009), conducted an elaborate “control” analysis concerning allegedly spoliated documents held by a third party, id. at 515-16, that would have been entirely unnecessary if the third-party itself had a preservation obligation.  Id. at 516 (“conclud[ing] that [defendant] did not have the sufficient legal authority or practical ability to ensure the preservation of documents prepared by” the third party).  In Novak v. Kasaks, 1996 WL 467534, at *2 (S.D.N.Y. Aug. 16, 1996), the court separately ordered “that all non-parties upon whom subpoenas have been served in this action are to preserve all documents and other materials responsive to such subpoenas.”

Courts also tend to be more sensitive to burdens imposed on nonparties by overly broad third-party subpoenas.  Rule 45 itself requires requesting parties to “take reasonable steps to avoid imposing undue burden or expense on a person subject to the subpoena.”  Fed. R. Civ. P. 45(d)(1).  “[I]t has been consistently held that ‘non-party status’ is a significant factor to be considered in determining whether the burden imposed by a subpoena is undue.”  United States v. Amerigroup Illinois, Inc., 2005 WL 3111972, at *4 (N.D. Ill. Oct. 21, 2005) (citations omitted).  Thus, “[n]on-parties have a different set of [discovery] expectations” and “concern for the unwanted burden thrust upon non-parties is a factor entitled to special weight in evaluating the balance of competing needs.”  Cusumano v. Microsoft Corp., 162 F.3d 708, 717 (1st Cir. 1998) (citations omitted).  “[T]he undue burden calculus is more protective of non-parties than it is for parties.”  Charles v. Quality Carriers, Inc., 2010 WL 396356, at *1 (S.D. Ind. Jan. 28, 2010).

[T]he considerations of proportionality, efficiency, and judicial economy that govern the [subpoena] requests are case-specific. . . .  Plaintiffs have not identified any non-PSLRA case where a court lifted a stay while a motion to dismiss was pending to permit the serving of document preservation subpoenas on hundreds let alone thousands of third-parties covering a 10-year time period and thousands of products.

In re Broiler Chicken Antitrust Litigation, 2017 WL 1682572, at *5 (N.D. Ill. Apr. 21, 2017).  “[N]on-parties have greater protections from discovery and that burdens on non-parties will impact the proportionality analysis.”  Hume v. Consolidated Grain & Barge, Inc., 2016 WL 7385699, at *3 (E.D. La. Dec. 21, 2016) (quoting E. Laporte & J. Redgrave, “A Practical Guide to Achieving Proportionality Under New Federal Rule of Civil Procedure 26,” 9 Fed. Cts. L. Rev. 19, 57 (2015)).  “[T]he Court should be particularly sensitive to weighing the probative value of the information sought against the burden of production on the non party.”  Fears v. Wilhelmina Model Agency, Inc., 2004 WL 719185, at *1 (S.D.N.Y. Apr. 1, 2004).

[I]t is not [the subpoenaed persons’] lawsuit and they should not have to pay for the costs associated with someone else’s dispute.  Not only is it fundamentally unfair for non-parties to bear the significant litigation costs of others, but also if this Court were to allow litigating parties . . . to impose such a burden on non-parties, then the likelihood of cooperation by non-parties in the future would be placed in jeopardy.

Guy Chemical Co. v. Romaco AG, 243 F.R.D. 310, 313 (N.D. Ind. 2007).

We’ve discussed the law essentially straight up in this post.  In any given case we could find ourselves on either side of the issue.