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If you have a good memory, the title of today’s post may seem familiar.  That’s because about sixteen months ago, we told you about the appellate court decision in Oregon that reached this conclusion.  Now it is official.  The Oregon Supreme Court has weighed in and agrees that under Oregon’s product liability statute, hospitals are sellers of the prescription drugs they administer and can be held strictly liable as such.  Providence Health System-Oregon v. Brown, 372 Or. 225, — P.3d – (2024).    

The decision is singularly focused on the text and context of ORS 39.920 – a 1979 Oregon statute that establishes strict products liability for “one who sells or leases any product in a defective condition unreasonably dangerous . . . if the seller or lessor is engaged in the business of selling or leasing such a product.”  Id. at 231.  ORS 39.290 further says that it should be construed in accordance with the Restatement (Second) of Torts §402A and its comments.  The court’s decision turned on the definition of “sells” and “engaged in the business of selling.”

As it turns out, there are a variety of both common and legal definitions of “sell” – all of which involve the “transfer of a product to another in exchange for money or other valuable consideration.”  Id. at 233.  The hospital defendant urged definitions from Black’s and Oregon’s UCC that include transfer of ownership or passing of title and argued that by supplying or administering a drug, it was not “selling” that drug.  Id. at 233-234.  The court concluded that defining a sale as the transfer of the “full panoply” of rights of ownership, which include the ability to transfer the product to someone else, is too limited.  Id. at 234-235.  In part this decision was based on the inclusion of “leases” in ORS 39.290 and in part on the fact that “ownership” and “title” are not concepts included in §402A.  Rather, applying an example from the comments to §402A, the court compared the hospital administering an intravenous drug to a beauty shop who can be sued in strict liability for application of a “permanent wave solution.” 

Having decided that administering the drug was a sale, the court turned to whether the hospital was “engaged in the business of selling” prescription drugs.  Here the court concluded that because the hospital’s business regularly involved transferring products to others in exchange for consideration, it was “engaged in the business of selling.”  Again, turning to §402A, the court points out that comment f states “it is not necessary that the seller be engaged solely in the business of selling such products.”  Id. at 238.  Meaning one can be in the business of selling even when the sale is ancillary to providing a service, such as a movie theater selling popcorn.  Rather, the primary limitation on being engaged in the business of selling is being an isolated seller, such as a homemaker who sells the occasional jar of jam to a neighbor.  Which may be an even more outdate example than the “permanent wave.” 

Moving beyond the text of the statute, the court looked to case law for context.  Considering that the vast majority of the national case law interprets §402A as not applying to hospitals, we would have expected this to be where the tide turned.  However, because ORS 39.290 was passed back in 1979, the court held that the great majority of all the nationwide precedent is irrelevant, since it post-dated 1979, and thus could not have a bearing on legislative intent.  Id. at 244.  And, as for the few older cases, the court ignored those because it had no evidence that the legislature was aware of them.  As a result of this selective use and non-use of the majority rule, the Oregon legislature was presumed to have “intended” to place Oregon in a distinct minority position when nothing in the record supported that “intent” either. 

In short, and for now, hospitals are subject to strict liability in prescription medical product litigation.  That is unless and until the legislature acts to protect them from this rather bizarrely pro-plaintiff result.