Today’s post looks at a case where a defendant was in the wrong place. You might say the same thing about us. As you read this, we are on summer holiday. Because our vacation almost always takes place, as it does this year, during the Drug and Device Son’s birthday, he has veto power over the itinerary. Consequently, year after year, we end up in the same corner of the world. It has something to do with hockey, vodka, and the DDL Son’s rather impressive, one might almost say Nabokovian, language skills. Therefore, we are currently hurtling our way through countries known (1) for once having a secret police that bumped people off with poisoned umbrella tips, (2) for housing Dracula, and (3) for giving the world Rubik’s cube. We shall feel grateful to emerge from this journey not dead, not unsanguinely undead, and not utterly confused.
There is little (not to say nothing — we’ll get to that later) confusing about Fugal v. Wright Medical Group Inc., 2019 U.S. Dist. LEXIS 54413 (D. Utah March 28, 2019). The plaintiff sued both Wright Medical Group (WMG) and Wright Medical Technology (WMT) for injuries she blamed on her implant of a Wright Medical Total Hip System. WMG is a holding company that did not design, market, or sell the hip system and did not have the requisite contacts with Utah, so it moved to dismiss the case for lack of personal jurisdiction. WMT did not contest jurisdiction, but did contest whether the plaintiff had managed to state a valid claim against it.
- Personal Jurisdiction over WMG
WMG did the smart thing and submitted an affidavit disclaiming any substantive role in making or selling the product. At that point, the burden was on the plaintiff to refute such disclaimer with … something. What was that something here? The plaintiff cherry-picked from WMG’s SEC filings and press releases. Taken in isolation, there were some statements that suggested the holding company was “specializing in the design, manufacture and marketing of reconstructive joint devices,” and that it “will focus on advances” on the technology. But read in context, it was clear that the holding company was referring to the activities of WMT. The court held that WMT’s contacts with Utah could not be imputed to the holding company. The usual conclusory allegations about joint venture, alter ego, acting within scope of authority, etc. did not cut it. Accordingly, the court did not burn too many calories in dismissing WMG from the case. Still, it is a cautionary tale for parent and holding companies out there to be careful about how they characterize their activities.
- The Claims Against WMT
The plaintiff attached extrinsic documents such as securities filings to its opposition to WMT’s motion to dismiss. The Fugal court said No Thanks. A motion to dismiss tests the pleadings. The attached documents had not been referenced in the complaint or motion to dismiss. They were desperate add-ons and would be disregarded.
- Manufacturing Defect
A claim of manufacturing defect attacks a mistake in the manufacturing process (duh), and requires allegations that the product at issue deviated from the design specifications. The plaintiff offered “threadbare recitals” to that effect, but the only specific issues identified in the complaint were tendencies of the hip implant to detach, generate debris, cause pain, and require revision surgeries. Those are not deviations from design specifications; they are merely allegations of harms. They are flaws, to be sure, but not flaws in the manufacturing process. Goodbye, manufacturing defect claim.
- Failure to Recall/Retrofit
The Fugal court assumed that Utah does impose a post-sale duty to retrofit or recall, but also assumed that Utah courts would follow the Restatement (Third) of Torts section 11 standard for recalls, imposing such duty only when either the government required such recall, or the manufacturer initiated a recall and botched it. The plaintiff alleged neither of those elements here.
- Breach of Express Warranty
The plaintiff’s allegations that WMT assured doctors and patients that the hip replacement system was safe and effective seem pretty rote and flimsy, but even flimsier was the plaintiff’s allegation of reliance. An express warranty claim requires allegations as to how the warranty became a “basis of the bargain.” All the plaintiff offered on this issue was that the warranty must have become the basis of the bargain because the plaintiff did, after all, select and receive the hip system. Huh? That sounds like medieval casuistry to us. It sounded like that to the Fugal court too, and the express warranty claim was dismissed,
- Failure to Plead Misrepresentation with Particularity
Fed. R. Civ. P. 9(b) requires that averments of fraud or mistake must state the circumstances of such fraud or mistake with particularity. The Fugal court applied this standard to the plaintiff’s claims of fraudulent misrepresentation, fraudulent concealment, and negligent misrepresentation. Basically, these claims alleged that the company hoodwinked doctors and their patients into believing the hip implants were safe, and the company knew it was lying because it was receiving hundreds of failure reports. The plaintiff also alleged that the company lied to the FDA in obtaining 510(k) clearance from the FDA.
That last bit rings Buckman preemption alarms in our head, and it did for the defendant, too. The court successfully ducked the Buckman issue because the plaintiff failed to allege how she had relied on the alleged bamboozlement of the FDA. In any event, the fraudulent and negligent misrepresentation claims flunked the particularity test. The court kept the fraudulent concealment claim alive, at least temporarily, because the plaintiff had plead with particularity that the defendant was “aware of material information related to the safety and effectiveness” of the hip system and “failed to disclose.” The court hinted that the plaintiff might have a pretty hard time demonstrating any duty to disclose, but that issue must await another day.
So much for the parts of the Fugal decision that we like. We will not linger on the court’s rejection of the motion to strike the claims for punitive damages and prejudgment interest. The court found no prejudice from allowing the plaintiff to proceed with those claims. That outcome seems at odds with reality. Why, it is almost as if the Fugal court was temporarily inhabiting a fugue state.
Sneer at the cheap wordplay all you want. Whilst you do your sneering, we will be pairing a lovely tokaji with our goulash, fresh from a thermal bath with the descendants of Liszt, Szilard, and the Gabor sisters.