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This post is from the non-Dechert side of the blog.

Our latest Zantac litigation decision is not from the Florida MDL, but rather a standalone case in Maryland − Mayor & City Council of Baltimore v. GlaxoSmithKline, LLC, 2022 WL 537004 (Md. Cir. Jan. 28, 2022).  It’s a split decision, and depending on which side of the split a defendant to that suit is on, the decision is either excellent or atrocious.

The Baltimore litigation is also rather strange, and apparently unprecedented in Maryland.  The underlying liability allegations are little different than what has been asserted in the Zantac MDL, which we described here:

Zantac is a drug that has been around, in branded or generic form, since 1983.  After more than 30 years, it was discovered that the active ingredient could break down into an alleged carcinogen – nitrosamines, the same type of substance anyone who consumes bacon, beer, or cheese has already been exposed to for many years (pills being a lot smaller).

The weirdness is from the identity of the plaintiff – the City of Baltimore.  What the heck is a municipality suing for?  It can’t get, or even be at a risk of, cancer.  The City’s supposed damages got all of one sentence in the Baltimore opinion:

The City asserts that “[t]housands of Baltimore residents” purchased prescription and OTC Zantac/ranitidine and it funded payment for substantial portions of the drugs through healthcare insurance programs.

2022 WL 53700, at *3.  That’s it?  If that’s the case, then the City could sue for similar damages over essentially any purported defect in a prescription drug – or virtually any other product that might change hands in the context of a municipal social welfare program.

This kind of extra-legislative attempt to impose tort taxes to pay for public services is not a good idea.  It violates the separation of powers.  The Supreme Court rejected a similar attempt by the United States seeking recovery of hospitalization costs for a soldier allegedly tortiously injured in an auto wreck in United States v. Standard Oil of California, 332 U.S. 301 (1947).  The Court accurately perceived the issue as “not. . .simply a question of creating a new liability in the nature of a tort,” but rather one of “fiscal policy” and what branch of government properly sets such policy. Id. at 314.

Thus, the Standard Oil court rejected the government’s “tort law analogy” as a basis for “establishing . . . fiscal and regulatory policies.”  Id.  The task of funding government services belongs to the legislature, not the courts:

[This] is a proper subject for Congressional action, not for any creative power of ours.  Congress, not this Court or the other federal courts, is the custodian of the national purse . . . [and] the exclusive arbiter of federal fiscal affairs.  And these comprehend, as we have said, securing the treasury or the government against financial losses however inflicted, including requiring reimbursement for injuries creating them, as well as filling the treasury itself.

Id. at 314-15.

The simple truth is that “the government constantly sustains losses [from] tortious or even criminal conduct,” and only the legislature should decide whether to authorize recovery.  Id. at 315.  The “exercise of judicial power to establish the new liability. . .would be intruding within a field properly within Congress’ control and as to a matter concerning which it has seen fit to take no action.”  Id. at 316.  Unless the legislature “acts to establish the liability, this Court and others should withhold creative touch.” Id. at 317.  We discussed these concerns – which have since crystallized into what is called either the “municipal cost recovery rule” or the “free public services doctrine” – more detail back in one of the Blog’s early(2007) posts.

So to us, the fundamental issue in Baltimore – nowhere discussed in that opinion – is whether a governmental entity can recover its expenditures via tort litigation rather than taxation.  We think that the answer in Maryland is “no,” see Crews v. Hollenbach, 751 A.2d 481, 489 (Md. 2000) (“taxpayers should not be subjected to. . .one charge in the form of state tax and the second in paying damages in [a government] civil suit”), but that question was never raised in Baltimore, let alone decided.

What Baltimore did decide is preemption.  Generic manufacturers of Zantac justifiably view this ruling as a huge win, since the claims against them were justifiably dismissed in toto.

[T]he City’s claims against the Generic Manufacturer Defendants are subject to impossibility preemption. . . .  The generic manufacturers must establish that the generic label is the same as the brand name label to fulfill its duty of sameness.  In other words, the generic manufacturers are not allowed to change the FDA-approved label.  The Generic Manufacturer Defendants here were prohibited by federal law from changing the design or labeling of [their products]. . . .

To the extent that the City’s allegations can be read to allege design defect claims against the Generic Manufacturer Defendants, such claims also are impliedly preempted.  This is because the City alleged that ranitidine was inherently dangerous even when taken as directed and when appropriately stored. . . .  Assuming the truth of the City’s allegations, the Generic Manufacturer Defendants . . . would have been required to stop selling [their products].

Baltimore, 2022 WL 537004, at *4 (citations to Mensing omitted).

The City could not escape preemption by slapping novel labels (“negligent product containers,” “negligent storage and transportation,” etc.) on its claims.  For the same reasons we discussed here, all of the City’s purported “subduties” were merely variations on the theme of preempted warning or design-based claims.  Id. at *5.  Nor was a mere trial court free to invent new causes of action.  “[I]t is not this Court’s role to adopt novel causes of action.  No such causes of action exist under Maryland law and the prerogative to adopt new causes of action is left to the discretion of the General Assembly or the Court of Appeals.”  Id. (citation omitted).

For the same reasons, Baltimore also dismissed all of the retailer defendants.

The Store Brand Retailer Defendants are removed from any FDA requirements as they are not involved in the approval or labeling process at all.  The allegations rendered by the City would require the Store Brand Retailer Defendants to have stopped selling ranitidine all together.

Id. at *6 (finding preemption under Bartlett as well as Mensing).

So that’s the good part of the split decision.

But from the perspective of the branded manufacturers, the Baltimore decision was a superficial mess.  As we’ve discussed, over-the-counter drugs are protected by an express preemption clause, 21 U.S.C. §379r, with a “product liability” exception that has universally been limited to claims for personal injury.  Citing nothing beyond the Maryland cases that adopted Restatement §402A, Baltimore becomes the sole exception to this rule, tersely stating, “There is no requirement that a plaintiff allege a physical injury.”  2022 WL 537004, at *7.  This is probably the most critical holding in this half of the decision, but if you blink you might miss it.  However, even §402A – by itself – defeats this proposition:

Special Liability of Seller of Product for Physical Harm to User or consumer

‘(1) One who sells any product in a defective condition unreasonably dangerous to the user or consumer or to his property is subject to liability for physical harm thereby caused to the ultimate user or consumer, or to his property. . . .

Restatement (Second) of Torts §402A (1965), as quoted in Phipps v. General Motors Corp., 363 A.2d 955, 957 (Md. 1976) (emphasis added).  “Physical harm” is right there in the title; it’s not even necessary to read the comments.  This utterly unsupported holding in Baltimore is simply wrong.

Baltimore dodges preemption a second way, by holding that a “consumer protection” claim is purportedly “parallel” to “misbranding” under the FDCA.  2022 WL 537004, at *7.  That aspect of the decision is also full of holes.

First, the City, as a municipality, cannot consume any drug.  It did no more than pay some of the costs of drugs bought by individuals – it’s essentially a third-party payer.  Again citing nothing, Baltimore holds that a municipal corporation has standing as a “consumer.”  Id. at *9.  While we haven’t researched it thoroughly, this holding appears to be contrary to Maryland law.  E.g, Morris v. Osmose Wood Preserving, 667 A.2d 624, 636 (Md. 1995) (“the deceptive practice must occur in the sale or offer for sale to consumers,” not “entirely during the marketing of the [product]”); Penn-Plax, Inc. v. L. Schultz, Inc., 988 F. Supp. 906, 909 (D. Md. 1997) (“only a consumer may be a proper plaintiff” under the act).  We came across no case allowing a municipality, or even some other third-party payer, such as an insurer, to bring suit under the Maryland consumer protection statute.

Second, the City’s consumer protection claim is justified as “parallel” to vague, never-described “misbranding” allegations:

The City argues that these factual allegations demonstrate that OTC Zantac’s label was misbranded pursuant to 21 U.S.C. §331(a). . . .  It claims that the Brand Manufacturer Defendants should have changed [the drug’s] labeling and by failing to do so failed to comply with parallel duties under Maryland and federal law.  Assuming the truth of the allegations in the FAC, the City has adequately plead a parallel state law claim for relief.

Baltimore, 2022 WL 537004, at *7.  While Baltimore purports to be following Zantac MDL decisions, id., in fact it did just the opposite.  The MDL expressly rejected the plaintiffs’ attempt to bring broad “misbranding” claims as a preemption dodge:

[A] finding that Plaintiffs can avoid pre-emption by alleging that defects in ranitidine products made the products misbranded . . . would render the vast body of pre-emption caselaw in the drug context, including binding Supreme Court decisions, meaningless.  If Plaintiffs’ position were accepted, a plaintiff could avoid pre-emption simply by asserting, for example, that a drug’s labeling was “false or misleading in any particular” or that the drug was “dangerous to health when used” as prescribed.  The Court cannot adopt a position that would render pre-emption caselaw meaningless.

In re Zantac (Ranitidine) Products Liability Litigation, 510 F. Supp.3d 1234, 1253 (S.D. Fla. 2020) (citations omitted).

Baltimore also held that another preemption dodge – a “pre-approval design defect” – survives preemption.  We disagree, for all the reasons stated here, which we won’t repeat.  However, once again the utterly unprecedented nature of this claim under Maryland law goes unsaid in Baltimore.  Maryland decisions have only recognized strict liability claims for “design defect” (or any other kind of defect) when the product was defective at sale, not at any other time.  E.g., Ford Motor Co. v. General Accident Insurance Co., 779 A.2d 362, 370 (Md. 2001) (“irrespective of the theory of recovery . . . a prerequisite to recover against a manufacturer for a defective product is that the plaintiff must show the product was defective at the time it left the manufacturer’s control”) (quoting Giant Food, Inc. v. Washington Coca-Cola Bottling Co., 332 A.2d 1, 10 (Md. 1975)).

The next novel claim that Baltimore allowed was “common law public nuisance.”  In two superficial paragraphs, Baltimore allows the City to claim that federally approved and legally sold prescription drugs can be a state-law nuisance.  2022 WL 537004, at *9.  Baltimore cites two Maryland nuisance cases, both of which deal solely with improper land use − where nuisance law belongs − not products.  Tadjer v. Montgomery County, 479 A.2d 1321 (Md. 1984) (abatement action against owner of landfill for methane explosion); Adams v. Commissioners of Town of Trappe, 102 A.2d 830, 833 (Md. 1954) (the defendant built an underground storage tank after being denied a permit).  Once again, the opinion sweeps under the rug the real public policy implications of this gross overstretch of the law of nuisance, as discussed in State ex rel. Hunter v. Johnson & Johnson, 499 P.3d 719, 724-31 (Okla. 2021); In re Paraquat Products Liability Litigation, 2022 WL 451898, at *9-10 (S.D. Ill. Feb. 14, 2022); and Restatement (Third) of Torts:  Liability for Economic Harm §8 comment g (2020).  Somewhere between pages *5 and *9 of the Baltimore opinion, the caution that “it is not this Court’s role to adopt novel causes of action” fell by the wayside.

Finally, Baltimore does away with Maryland’s economic loss doctrine.  Ironically, the opinion cites Morris v. Osmose – only not the part discussed above that requires the consumer protection plaintiff actually to be a consumer – for the proposition that there is “a public safety exception to the economic loss doctrine.”  2022 WL 537004, at *10.  Once again, the pieces of the puzzle don’t fit together.  The City is not suing over “a serious risk of death or personal injury,” since it could not itself use this product, and thus be exposed to such a risk.  Morris allowed a plaintiff to recover costs of repair and replacement of a dangerously defective product that was removed “before a tragedy result[ed].”  667 A.2d at 632.  The City in Baltimore did nothing of the sort.  It did not repair anything, replace anything, or make any expenditure that in any way reduced the claimed risk.  Returning to the beginning of this post, all the City sought is recoupment of “funded payment[s] . . . through healthcare insurance programs.”  2022 WL 53700, at *3.  Taking this “public safety exception” on its face, none of the damages this municipal plaintiff is seeking falls within that exception.

Thus, the two sides of the Baltimore opinion remind us of the classic “The Strange Case of Doctor Jekyll and Mister Hyde.”  The first part is rational, restrained, and full in accord with governing precedent.  The second part is wild and uncontrolled – repeatedly making unprecedented leaps so that this bizarre and improper plaintiff can pursue novel claims with no basis in existing Maryland law.