A couple of years ago, we chastised a Third Circuit panel in our “Wrong Court” post, pointing out that its decision to declare an Internet marketing platform a “seller” under Pennsylvania law improperly usurped state judicial power under Erie Railroad Co. v. Tompkins, 304 U.S. 64 (1938). That decision, Oberdorf v. Amazon.com, Inc., 930 F.3d 136 (3d Cir. 2019), was subsequently vacated, rehearing granted on precisely these grounds, and ultimately certified to the Pennsylvania Supreme Court for resolution. See Oberdorf v. Amazon.com, Inc., 818 F. Appx. 138 (3d Cir. 2020). That was the proper disposition under Erie because state courts, not federal courts exercising diversity jurisdiction, should decide whether to recognize novel theories of tort liability. As the United States Supreme Court has repeatedly stated:
[A] federal court is not free to apply a different rule however desirable it may believe it to be, and even though it may think that the state Supreme Court may establish a different rule in some future litigation.
Hicks v. Feiock, 485 U.S. 624, 630 n.3 (1988); accord, e.g., Boyle v. United Technologies Corp., 487 U.S. 500, 517 (1988); Day & Zimmerman, Inc. v. Challoner, 423 U.S. 3, 4 (1975). For a complete discussion of related United States Supreme Court precedent, see this post.
Perhaps no circuit has been as firm in enforcing the federalist principle that federal courts applying state law should show such restraint than the Third Circuit. In “Wrong Court” we listed over a dozen examples: Sheridan v. NGK Metals Corp., 609 F.3d 239 (3d Cir. 2010); Travelers Indemnity Co. v. Dammann & Co., 594 F.3d 238 (3d Cir. 2010); Lexington National Insurance Corp. v. Ranger Insurance Co., 326 F.3d 416, 420 (3d Cir. 2003); Werwinski v. Ford Motor Co., 286 F.3d 661 (3d Cir. 2002); City of Philadelphia v. Beretta U.S.A. Corp., 277 F.3d 415 (3d Cir. 2002); Camden County Board of Chosen Freeholders v. Beretta, U.S.A. Corp., 273 F.3d 536, 541-42 (3d Cir. 2001); Northview Motors, Inc. v. Chrysler Motors Corp., 227 F.3d 78, 92 n.7 (3d Cir. 2000); Leo v. Kerr-McGee Chemical Corp., 37 F.3d 96, 101 (3d Cir. 1994) Adams v. Madison Realty & Development, 853 F.2d 163 (3d Cir. 1988); Falcone v. Columbia Pictures Industries, 805 F.2d 115 (3d Cir. 1986); Bruffett v. Warner Communications, 692 F.2d 910 (3d Cir. 1982); McKenna v. Ortho Pharmaceutical Corp., 622 F.2d 657 (3d Cir. 1980). For a more complete discussion of this Third Circuit precedent (as of 2009), see this post.
Unfortunately, Erie has been transgressed, indeed ignored, again – this time in the MDL context, which makes the error particularly dangerous (a novel state law theory exerts settlement pressure in thousands of cases), and particularly hard to correct (judicial errors disadvantaging defendants in MDLs are notoriously hard to appeal). The decision is In re Valsartan, Losartan, & Irbesartan Products Liability Litigation, 2021 WL 222776 (D.N.J. Jan. 22, 2021), and the issue is express warranty.
The Valsartan MDL, as readers may remember from our prior posts, involves claims that certain drugs were contaminated with nitrosamines – the same class of allegedly carcinogenic compounds that anyone who eats bacon or other processed foods is already exposed to in larger doses than could exist in tiny pills. Since it’s an MDL – which more properly stands for “Maximized and Distorted Litigation” – plaintiffs sued everyone conceivable under every conceivable theory of liability, and some that haven’t been conceived yet.
One of the latter types of theories was involved in today’s decision. Plaintiffs were suing over generic drugs, which means they have every incentive to be creative to surmount the formidable barrier of generic preemption. See generally our Generic Preemption Scorecard. So they came up with an “express warranty” theory of liability that no court anywhere (federal or state) had adopted.
The drug in question is “a drug of choice in lowering high blood pressure.” 2021 WL 222776, at *5. Further, the alleged impurities did not interfere with the drug’s anti-hypertensive activity, so every plaintiff received an effective medication. Id. at *3-4. It’s hard to come up with a valid express warranty claim under those circumstances. In brief, the express warranty theory the Valsartan plaintiffs invented was:
Common Law Breach of express warranties by all defendants because inclusion of defendants’ VCDs [Valsartan containing drugs] in the U.S. Orange Book serves as a warranty that the VCDs at issue constituted a generic drug that is bio-equivalent in every way to the patented drug.
Id. at *5 (emphasis original). Note the use of “common law” – there can be no dispute that the relevant issues involve predictions of state law to which the Erie doctrine applies.
After punting on state law notice issues (as Bexis’ book demonstrates – Beck & Vale, Drug & Medical Device Product Liability Deskbook §2.08, at nn. 16.1 to 16.2 (updated 2020) – the states vary widely on this issue), Valsartan describes plaintiffs’ warranty theory in stark detail:
Plaintiffs argue [manufacturer] defendants’ express warranties arise not from statements in the product labeling, but from the very act of naming the product by the generic active ingredient, that is, by calling their generic drug “valsartan” or “valsartan HCT”, etc., in patient information leaflets dispensed with each prescription, or on a third-party beneficiary basis. Plaintiffs further argue that, based on the prescription alone, plaintiffs could not have bought any other generic drug but valsartan (or VCDs), and that [manufacturer] defendants’ naming their [product] “valsartan” necessarily left plaintiffs no choice but to “rely” on [manufacturer] defendants’ name of the product, which stands as the basis for the bargain between [manufacturers] and plaintiffs.
Id. at *10 (emphasis added).
We’ve litigated a few prescription medical product liability litigation cases in our days, and we’ve also read a lot of decisions from such litigation, but we’ve never seen any statute or caselaw recognizing an express warranty claim based on nothing more than the name of the product as compiled in some official publication. Nor have we seen a state-law warranty claim based on something, like the name of bioequivalent drug (a/k/a “reference listed drug”), that the FDCA mandates be in approved drug labeling (and in the so-called “Orange Book”). E.g., 21 C.F.R. §314.94(a)(4-6, 8). Indeed, insofar as reliance/basis-of-the-bargain is concerned, this “warranty” theory strongly reminds us of “fraud on the FDA” – another made-up, FDCA-based cause of action which was also created to evade a reliance/causation element (a product’s mere presence in the market being because of fraud to avoid the learned intermediary rule).
Nor, apparently, did plaintiffs or Valsartan itself cite a scrap of precedent that the name of a drug, in and of itself, could be an express warranty. The entire discussion of Valsartan’s decision that this theory could state an express warranty claim under the laws of all fifty states is as follows:
The [manufacturers’] very naming of the drug as valsartan or valsartan-containing amounted to an express warranty on which plaintiffs had no choice but to “rely” when they were prescribed the drug and bought it as a medication for their high blood pressure. Plaintiffs did not have to “perceive” the package labelling or insert in order to create a benefit of the bargain. All they had to know was they were buying a generic drug that contained valsartan because the very name “valsartan” or “valsartan-containing” constituted itself an express warranty that what plaintiffs were purchasing was the chemical equivalent of the Orange Book pharmaceutical.
Id. at *11 (emphasis added). What was the authority for this you-don’t-even-have-to-be-aware-of-it version of “express warranty?” This:
See, e.g., Gremo v. Bayer Corporation, 469 F. Supp.3d 240, 258 (D.N.J. 2020) quoting “‘A statement can amount to a warranty, even if unintended to be such by the seller, if it could fairly be understood … to constitute an affirmation or representation that the [product] possesse[s] a certain quality or capacity relating to future performance.’ Volin v. General Electric Company, 189 F. Supp. 3d 411, 420 (D.N.J. 2016) (citations omitted).”
Id. That is all. Nowhere does Valsartan mention that some states have product liability acts and decisions holding that common law claims for express warranty have been subsumed, see, e.g., Seavey v. Globus Medical, Inc., 2012 WL 253116, at *2 (D.N.J. Jan. 26, 2012), so the opinion’s premise of a state-law express warranty claim common to all states is invalid.
Neither of the cited cases has anything to do with the unique, hypothesized form of name-only express warranty in Valsartan. As to express warranty, Gremo (a bad case we blogged about here), involved the usual allegation of safety-related claims (“generally safe”; “not any less safe,” “pose a risk”), and was no way based on merely the name of the product, or on anything else that the defendant has no choice under the FDCA but to include in product labeling. 469 F. Supp.3d at 258. Volin does not involve any FDA-regulated product at all, but only an oven. The “certain quality or capacity” at issue in Volin likewise was completely different from the name of the product. 189 F. Supp.3d at 421 (“only specific allegation of an express statement is that the owner’s manual instructs the user to ‘Push the control knob in and turn it to the LITE position’”).
We presume that, since that is all that Valsartan cites, that is the best that the plaintiffs presented in their MDL briefing in support of their name-only express warranty claim. In other words, there appears to be no law anywhere (which is what our experience tells us is the case), recognizing an “express warranty” based on nothing more than the FD-recognized name of a prescription drug. So Valsartan recognized a novel form of express warranty – under the “common law” (actually express product warranties are governed by state UCCs, not the common law) of all 50 states in direct violation of Erie federalism, as enunciated in multiple precedents from the United States Supreme Court and the Third Circuit. What’s worse is that the opinion appears entirely oblivious to the constitutional ramifications of what it did. Nowhere in the opinion is any citation made to any case involving Erie principles, nor is there any recognition that a “prediction” of state law was being made.
Nor is there any case that we’ve seen involving generic preemption that allowed any claim predicated on the purported “falsity” of a statement that the FDCA and FDA regulations require be included in generic drug labeling. In this respect this purported “express warranty” claim is simply another disguised “stop selling” claim preempted under Mutual Pharmaceutical Co. v. Bartlett, 570 U.S. 472 (2013). As to preemption, we have three other observations: (1) the FDA itself reviews drug names so that companies don’t use names that convey results or otherwise mislead (e.g., no antidepressants called “Happify” or “Pleasurac”); (2) the drug’s name, itself is a required part of the label; and (3) FDA approval of an ANDA is an agency determination that the generic is “comparable to an innovator drug product in dosage form, strength, route of administration, quality, performance characteristics, and intended use.” See FDA website. Thus, there are multiple routes to preemption of the Valsartan plaintiffs’ express warranty claim that do not involve the “Orange Book.”
We hope that the manufacturer defendants in Valsartan do not let this unprecedented (in several ways) “express warranty” ruling stand. This ruling both makes a travesty of the Erie doctrine and should be preempted for attacking an FDA-mandated labeling statement. It is difficult, in an MDL, to obtain appellate review of errors, no matter how egregious.
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On another, less controversial, aspect of the same Valsartan opinion, we also note that Magnuson Moss claims based on FDA-regulated labeling were properly dismissed. Valsartan, 2021 WL 222776, at *20-21. This part of the opinion is the only part that contains a significant discussion of case authority. This issue was also the subject of one of our recent blogposts, here. The previous two sentences may be related.