Since Conte in 2008, we have not made a secret of our view that innovator liability is a bad idea, contrary to traditional tort law principles and to sound public policy.  We, especially Bexis, may even be accused of being somewhat obsessed with chronicling the decisions, big and small, on this issue over close to a decade.  We have kept a scorecard of the decisions and commemorated the one-hundredth decision.  We tracked when the Alabama legislature got sick of the turbulent expansion by the courts and kept product liability limited to the product designed, manufactured, or sold/leased by the defendant.  We have peppered our top and bottom ten lists with these decisions and we expect they will find places on our august enumerations for the eleventh year in a row this December.

The decision in In re Zofran (Ondansetron) Prods. Liab. Litig., MDL No. 1:15-md-2657-FDS, 2018 WL 2317525 (D. Mass. May 21, 2018), has familiar ring to it.  Among the claims presented in this MDL are those against the branded manufacturer from the offspring of women who received generic versions of a prescription antiemetic.  These plaintiffs sought to impose innovator liability on the theory that the branded manufacturer had made misrepresentations to unspecified doctors that somehow encouraged the off-label prescription to pregnant women for morning sickness without disclosing a purported risk of birth defects.  (As an aside, while not in the decision, this is considered an essential medication by WHO and the current labeling suggests that FDA rejects that any birth defect risk has been established.)  Last year, the court ruled on a motion to dismiss this version of innovator liability under Georgia, Indiana, Kentucky, Massachusetts, New York, and Oklahoma law.  We discussed it here  and it took on honorable mention on last year’s top ten list.  Other plaintiffs persisted with these claims and the branded manufacturer defendant filed a motion for judgment on the pleadings.  After some voluntary dismissals, the court considered the issue under the law of Oklahoma (again), Connecticut, and New Jersey.

Why is this worth a post instead of just an update to our scorecard? Well, there have been two really big, bad decisions on innovator liability since the court’s prior decision and we like to make sure the majority position continues to hold after such dreck.  The first innovator abomination was T.H. v. Novartis Pharm. Co., which we railed about here and took over the spot of worst case of 2017 in a rare supplemental shuffling of the list.  We have said quite a bit about why this decision, and the Court of Appeals decision before it, were especially bad, extending innovator liability into perpetual liability under the guise of foreseeability.  A few months later, the Massachusetts Supreme Judicial Court a mile away from the Zofran MDL issued its own stinker in Rafferty v. Merck & Co., Inc., reversing a lower court rejection of innovator liability.   Even with the “limitation” that innovator liability would only for “reckless” conduct in failing to update the branded drug’s label, there is a good chance that this will find a place on the list of 2018’s worst come December.  There was also a good decision a few weeks ago from the West Virginia Supreme Court soundly rejecting innovator liability in McNair v. Johnson & Johnson, which may end up with a place on 2018’s best list.  More important than our lists—breathe, Bexis, breathe—is that the Zofran court reviewed and considered these decisions before addressing the merits.

The Oklahoma plaintiff’s claim was easy, given the court’s evaluation of Oklahoma law less than a year ago. “While it is true that the minority view has gained ground in the last year with the California and Massachusetts opinions, that is not sufficient under the circumstances to tip the balance.”  2018 WL 2317525, *4.

The court had not previously considered Connecticut law and the Connecticut state courts had not previously considered the issue. The Sixth Circuit had, though.  Connecticut was one of the 22 states at issue in In re Darvocet, which we lauded here before giving it the top spot in our 2014 list.  The Darvocet analysis was that the Connecticut Product Liability Act provided the sole remedy for misrepresentation claims asserted and it required the product at issue to be the defendant’s to impose liability.  While not binding, “In re Darvocet is a 2014 decision by a federal appellate court that addresses the issue in comprehensive terms, and there appears to be no Connecticut authority suggesting a contrary result.” Id. at *5.

Predictably, In re Darvocet (in the district court) had addressed New Jersey law and New Jersey lower courts have addressed the issue a few times, even if the New Jersey Supreme Court has not.  They all came out against innovator liability, with pre-Conte cases followed post-Conte.  (See here and the New Jersey part of this.)  The New Jersey PLA also limits liability to the manufacturer or seller of the product that allegedly hurt the plaintiff and misrepresentation claims like the plaintiffs assert against the branded manufacturer are subsumed by the NJPLA. Id. Thus, there is no innovator liability under New Jersey law.

Despite our retrospective here, we do not see this decision making this year’s top ten list. However, the First Circuit could certainly take high honors by affirming this or the prior Zofran MDL decision.  Just saying.

A case from Alabama this week got us to thinking about two topics on which we write a lot — innovator liability and personal jurisdiction. We thought the most interesting part of Bexis’ recent post on innovator liability was its suggestion that innovators sued over the use of generic drugs should consider objecting to jurisdiction.  After all, it is one thing to say that an innovator manufacturer can be potentially liable for a generic manufacturer’s warnings under state tort law.  It is a fundamentally different question whether the innovator manufacturer can be subject to personal jurisdiction in that state under the U.S. Constitution.  The plaintiff’s use of the generic drug cannot alone support specific personal jurisdiction over the innovator for the simple reason that the innovator did not make or sell the drug.

How does any of this relate to the aforementioned case from Alabama? Well, what if an enterprising plaintiff argued that a prescription drug manufacturer is subject to personal jurisdiction in the forum state because the manufacturer submitted a New Drug Application for its product to the FDA.  Seems like a strained proposition, but that is what the plaintiff argued in Blackburn v. Shire U.S., Inc., No. 2:16-cv-963, 2018 U.S. Dist. LEXIS 78724 (N.D. Ala May 10, 2018).  Innovator liability was not at issue in Blackburn, but innovator manufacturers are all NDA holders.  Thus, if the Blackburn plaintiffs are correct and merely submitting an NDA can result in personal jurisdiction in distant forums, then innovators will not get very far with the jurisdictional challenges that Bexis has suggested.

Fortunately, the district court in Blackburn faithfully applied the law and properly rejected NDA-based personal jurisdiction.  The plaintiff took a prescription drug and sued five different companies with “Shire” in their names over allegedly inadequate warnings after developing a kidney injury. Id. at **1-2.  The district court dismissed three of the defendants for lack of personal jurisdiction, but the plaintiff later moved to reinstate one of them, the holder of the drug’s NDA. Id. at **3-4.  According to the plaintiff, the court could exercise specific jurisdiction because the defendant, “as the NDA holder” for the drug, “placed [the drug] into the stream of commerce to reach Alabama consumers, such as himself.” Id. at *16.

The issue was specific jurisdiction, and the district court started by quoting BMS:

In order for a state court to exercise specific jurisdiction, the suit must arise out of or relate to the defendant’s contacts with the forum.  In other words, there must be an affiliation between the forum and the underlying controversy, principally, an activity or an occurrence that takes place in the forum State and is therefore subject to the State’s regulation.  For this reason, specific jurisdiction is confined to adjudication of issues deriving from, or connected with, the very controversy that establishes jurisdiction.

Id. at *15 (quoting Bristol-Myers Squibb v. Superior Court, 137 S. Ct. 1773, 1780 (2017) (emphasis in original).  As a general rule, it is not sufficient that a defendant might have predicted that its goods would reach the state.  Rather, the defendant must have “targeted” the forum and “purposefully availed itself of the privilege of conducting activities within the forum.” Id. at **15-16 (citations omitted).

The plaintiff did not dispute that the defendant had not actually manufactured or sold the drug. Instead, the plaintiff contended that the defendant, as the NDA holder, should be deemed a “manufacturer” for jurisdictional purposes.  The district court had little difficulty rejecting these “semantics.” First, the plaintiff argued that the defendant established sufficient minimum contacts when it sought permission from the FDA to manufacture, market, and sell the drug in Alabama and other states.  But merely seeking permission from the FDA or submitting an NDA “does not rise to the level of targeting Alabama or invoking the benefits and protections of its laws (especially when none of these activities occurred within Alabama or were directed at Alabama).” Id. at *17

Second, the plaintiff argued that the defendant purposefully availed itself to Alabama by crafting a “defective label that it knew would be purchased by Alabama residents.”  But this is just a version of “the defendant might have predicted its product would be sold in the state,” which is not sufficient to establish personal jurisdiction. Id. at *17. Third, the plaintiff argued that the that the actions of the entities that actually sold the drug should be attributed to the defendant under some sort of alter ego theory, but the plaintiffs’ proposed amended complaint did not allege any facts supporting such a theory. Id. at *17-18.

There are other aspects to the order, but jurisdiction over the NDA holder is what caught our eye. Although we are not fond of saying that an argument “proves too much,” we think that statement applies here.  If merely submitting an NDA creates personal jurisdiction in Alabama, then it would arguably create personal jurisdiction in any state within the FDA’s regulatory reach, i.e., within the United States and its territories.  “NDA holder jurisdiction” would therefore be a form of universal jurisdiction that the Supreme Court condemned in Bauman.  It does not fly.  So for now, Bexis’ advice to innovators remains sound.  Innovators and NDA holders can and should consider challenging personal jurisdiction in cases where they did not make and did not sell the drug at issue.

While the entire blogging team (RS, at least) was traveling home by planes, trains and automobiles from the DRI’s annual Drug and Medical Device conference, the West Virginia Supreme Court of Appeals – yes, the same court that rejected the learned intermediary rule little more than a decade ago – issued its blockbuster opinion today refusing to adopt innovator liability in McNair v. Johnson & Johnson, ___ S.E.2d ___, No. 17-0519, slip op. (W. Va. May 11, 2018).  Major congratulations to the winning team from Patterson Belknap, who not only emerged victorious, but sent McNair to us within minutes of its release – and were nice enough to let us know that they cited our Innovator Liability Scorecard in their briefing.  They, and their steadfast clients, just put a major finger in the dike to the benefit of us all.

As we’ve mentioned before, innovator liability in McNair found its way to West Virginia’s highest court via a certified question from a Fourth Circuit panel looking for a way around Foster v. American Home Products Corp., 29 F.3d 165 (4th Cir. 1994).  We infer that motive because the opinion certifying the question gave the false impression that no prior West Virginia law existed on this question.  McNair v. Johnson & Johnson, 694 F. Appx. 115, 120-21 (4th Cir. 2017).  It didn’t work. See McNair, slip op. at 7, 14-17 (citing and relying upon In re Darvocet, Darvon, & Propoxyphene Products Liability Litigation, 756 F.3d 917, 944 (6th Cir. 2014) (applying West Virginia law), and Meade v. Parsley, 2009 WL 3806716 (S.D.W. Va. Nov. 13, 2009)).

McNair (with a couple of justices dissenting – no other opinions yet), reaffirmed the traditional limits – indeed the entire rationale − of product liability as making sure that manufacturers (and not others) are responsible for defects (and negligence) in products from which they profited.  Innovator liability ““would sever the connection between risk and reward” . . . that forms the basis of products liability law.”  Slip op. at 24 (quoting defendants’ brief).

[S]trict liability has only been applied to a manufacturer, seller, or distributor of the product in question.  In other words, a plaintiff cannot recover damages in a strict liability action against the defendant, in the absence of showing that the defendant either manufactured or sold the product that allegedly injured the plaintiff.

Id. at 10 (citation, footnote, and quotation marks omitted).  There’s very good reason for this limitation:

[T]his Court, as well as other courts, adopted products liability to place responsibility for the harm caused by a product on the party who profits from its manufacture and sale.  Because the brand manufacturer did not place the generic product on the market, it cannot spread the cost of compensating generic consumers by including the cost of insurance or judgments as part of the product’s price tag.

Id. at 24 (citations and quotation marks omitted).  Particularly in the case of prescription drugs,

If brand manufacturers become liable for injuries allegedly caused by generic drugs, significant litigation costs would be added to the price of new drugs to the disadvantage of consumers.  Further, the increase in litigation against brand manufacturers could stifle the development of new drugs, which would have negative health consequences for society.

Id. at 25 (citation omitted).  This logic applied to all theories by which a product manufacturer could be held liable.  Negligent misrepresentation likewise failed, for the reasons stated in Darvocet, supra, and Huck v. Wyeth, Inc., 850 N.W.2d 353 (Iowa 2014).  McNair, slip op. at 15-18.  As to general negligence, “all federal circuit courts that have considered the question have held, under the laws of different states, that a brand manufacturer does not owe a duty to a consumer who uses a generic drug.”  Id. at 18-19 (string citation omitted; see our scorecard for these cases).  “Any recognition of an outlier theory of liability permitting a generic drug consumer to bring an action against the brand manufacturer for an injury allegedly arising from the use of the generic drug would be plainly at odds with this public policy.”  Id. at 24.

McNair, further rejected plaintiffs’ attempt to distinguish between a defective product and a defective label:

[W]here necessary safety information is missing from a label, that makes the drug defective, not the label. . . .  [I]n Cardinal v. Elsevier Inc., No. MICV201104442, 2014 WL 10937406, at *3 (Mass. Super. Aug. 11, 2014), the court explained that “the label . . . is not the product, but a way in which a plaintiff can claim that the product is defective.” (citations omitted).  We agree with this reasoning, which is consistent with our own products liability law.  Here, the allegedly injury-causing product is the generic drug ingested by the consumer, not the warning label.

Slip op. at 13-14 (other citations and quotation marks omitted) (note: Bexis tracked down the Cardinal decision and sent it to Westlaw).

Ironically, the court’s prior learned intermediary-related outlier also figured into McNair’s most excellent result.  As we mentioned at the time, the West Virginia legislature reinstated the learned intermediary rule by statute. See W. Va. Code §55-7-30.  That statute just happened to be phrased in terms of a drug’s “manufacturer or seller”:

(a) A manufacturer or seller of a prescription drug or medical device may not be held liable in a product liability action for a claim based upon inadequate warning or instruction unless . . . [t]he manufacturer or seller . . . acted unreasonably in failing to provide reasonable instructions or warnings . . . to prescribing or other health care providers. . . .

Id. §55-7-30(a)(1) (quoted at McNair, slip op. at 23).  “[T]his statute incorporates this Court’s long-standing restriction of products liability to the manufacturer and seller of the allegedly injury-causing product.” Id. at 24.  Once again, the past excesses of West Virginia plaintiffs have come back to haunt them.

Nor was the McNair court influenced by plaintiffs’ argument that the common law should be distorted in order to allow plaintiffs to evade federal preemption as recognized in PLIVA, Inc. v. Mensing, 564 U.S. 604 (2011).  Preemption is no reason to jettison traditional product liability principles:

Just as the Supreme Court refused to distort the Supremacy Clause in Mensing to prevent the undesirable result of providing immunity to generic manufacturers in failure to warn cases, we decline to distort our products liability law to hold a brand manufacturer liable for injuries allegedly caused by a generic drug that the brand manufacturer neither manufactured nor sold.  Like the Supreme Court, we find that the proper remedy for consumers harmed by generic drugs rests with Congress or the FDA.

McNair, slip op. at 27.  “[A] brand manufacturer does not choose for its warning label to accompany the drugs marketed by its competitors.  Instead, federal law mandates such a result. Id. at 25.

Thus, the Supreme Court of Appeals’ syllabus (the binding precedent under West Virginia practice) reads:

There is no cause of action in West Virginia for failure to warn and negligent misrepresentation against a brand-name drug manufacturer when the drug ingested was produced by a generic drug manufacturer.

Slip op. at syllabus, point 4.

What a way to come home from DRI Drug and Medical Device.

Once again we find ourselves in the position of creating new defenses to a novel, plaintiff-side cause of action.  This time, we’ve been doing a lot of thinking about innovator liability – the theory that would hold branded manufacturers liable for injuries allegedly caused by the ingestion of (preemption-immune) generic drugs on some kind of attenuated inadequate warning theory – since even before the California Supreme Court’s T.H. v. Novartis, Inc., 407 P.3d 18 (Cal. 2017), decision late last year.  If your company or your clients are concerned about being a target of such theories, here are some ideas we’ve come up with that might help.

Direct Preemption

In T.H., the “major, and ultimately most important, consideration under California law is the foreseeability of physical harm.”  407 P.3d at 29 (citations and quotation marks omitted).  What did T.H. have to say about “foreseeability” in deciding to create a new negligence duty on non-manufacturing branded manufacturers?  The manner in which T.H. construed “foreseeability” was much different than in the normal negligence case:

[A branded drug manufacturer] could reasonably have foreseen that deficiencies in its [product’s] label could mislead physicians about the safety of [the drug’s] generic bioequivalent, which was legally required to bear an identical label.

A brand-name pharmaceutical manufacturer has a duty under federal law to draft, update, and maintain the warning label so that it provides adequate warning of the drug’s potentially dangerous effects. . . .  [T]his category of manufacturers may use the “changes being effected” . . . regulation to “add or strengthen a contraindication, warning, precaution, or adverse reaction” immediately upon filing a supplemental application, without waiting for FDA approval.

The duty for a manufacturer of generic drugs, on the other hand, is to ensure that its warning label is identical to the label of the brand-name drug. . . .

What a brand-name manufacturer thus knows to a legal certainty is that any deficiencies in the label for its drug will be perpetuated in the label for its generic bioequivalent.

Id. (numerous regulatory citations omitted) (emphasis added).

T.H. thus grounded its duty (to be distinguished from breach) analysis, not on the likelihood that the defendant would have violated some common-law obligation, which is the usual way foreseeability is analyzed – but on the likelihood that the defendant would be compliant with its federal obligations under the FDCA.  Indeed, T.H. suggests that, but for this federal overlay, it would not have recognized a new duty at all.  Id. at 31 n.2 (were there “parity between NDA [branded] holders and ANDA [generic] holders with respect to submission of . . . safety-related labeling changes based on newly acquired information,” that could “justify reweighing of the [duty] factors and some reconsideration of the brand-name manufacturer’s duty in this category of cases”).

There is a second element to T.H.’s foreseeability analysis, and that also involves compliance (as opposed to violation) with legal obligations:

A brand-name manufacturer will also be aware that although the warnings communicated in its drug label are designed for physicians . . . it is often the pharmacist who actually decides whether the patient receives the brand-name drug or its generic bioequivalent.  Moreover, many insurance companies require the substitution of a generic drug for the brand-name drug as a matter of course. . . .  Accordingly, it is entirely foreseeable that the warnings included (or not included) on the brand-name drug label would influence the dispensing of the generic drug, either because the generic is substituted by the pharmacist or the insurance company after the physician has prescribed the brand-name drug, or because the warning label on the generic drug is legally required to be identical to the label on the brand-name drug.

Id. at 29-30.

The same unusual reliance on compliance with – rather than violation of – federal and other legal requirements governing the marketing of prescription drugs occurred in Rafferty v. Merck & Co., 92 N.E.3d 1205 (Mass. 2018):

[I]n the vast majority of such cases, the duty to warn would be limited to the manufacturer of the product − even if the plaintiff were to bring a general negligence claim − because the risk of harm arising from an inadequate warning would be foreseeable to a manufacturer only with respect to users of its own product, not the users of another product. . . .  Moreover, apart from any duty arising from the risk of foreseeable injury, only in rare cases could a plaintiff contend that his or her injury was caused by the inadequate warning given for another product.

But this case presents an exception to the usual pattern. Because the Hatch–Waxman amendments to the act require that the warning label of a generic drug be identical to the warning label of its brand-name counterpart . . . duty to warn claims involving generic drugs are potentially viable as general negligence claims, although not as products liability claims.  With generic drugs, it is not merely foreseeable but certain that the warning label provided by the brand-name manufacturer will be identical to the warning label provided by the generic manufacturer, and moreover that it will be relied on, not only by users of its own product, but also by users of the generic product.

92 N.E.3d at 1214-15 (once again omitting a passel of regulatory citations) (emphasis original).  And again the branded defendant’s compliance with the FDCA was the basis for this unique extension of duty to a non-manufacturer:

Federal labeling requirements for generic drugs present precisely the kind of “special circumstance” where a consumer would rely on the warnings created by someone other than the manufacturer of the product causing the injury. . . .  Where a brand-name drug manufacturer provides an inadequate warning for its own product, it knows or should know that it puts at risk not only the users of its own product, but also the users of the generic product.  Consequently, this is the rare (perhaps the only) type of case involving a manufactured product where the requirements of general negligence may be satisfied even where the requirements of products liability are not.

Id. at 1215 (emphasis added).

Plainly, innovator liability amounts to the imposition of a singular and burdensome form of non-manufacturing negligence liability predicated on the branded defendant’s compliance with its obligations under the FDCA – specifically the Hatch-Waxman requirement that it allow generic manufacturers to copy its labeling word-for-word.

Basing liability expressly on a branded manufacturer’s compliance with federal law should give rise to impossibility preemption.  This observation goes back to the oldest FDCA preemption case on the books, McDermott v. Wisconsin, 228 U.S. 115 (1913), where a state’s attempt to prohibit a product because its label complied with the FDCA, rather than with state law, was held preempted.  Even in 1913, it was “well settled that the state may not, under the guise of exercising its police power or otherwise, . . . enact legislation in conflict with the statutes of Congress passed for the regulation of the subject, and if it does, to the extent that the state law interferes with or frustrates the operation of the acts of Congress, its provisions must yield to the superior Federal power given to Congress by the Constitution.” Id. at 131-32 (citations omitted) (emphasis added).

The modern way of expressing the proposition recognized in McDermott is that “state and federal law conflict where it is ‘impossible for a private party to comply with both state and federal requirements.’” PLIVA, Inc. v. Mensing, 564 U.S. 604, 618 (2011) (quoting Freightliner Corp. v. Myrick, 514 U.S. 280, 287 (1995)).  “Even in the absence of an express pre-emption provision, the Court has found state law to be impliedly pre-empted where it is ‘impossible for a private party to comply with both state and federal requirements.’” Mutual Pharmaceutical Co. v. Bartlett, 570 U.S. 472 (2013) (quoting English v. General Electric Co., 496 U.S. 72, 79 (1990)).

That’s, frankly, pretty blatant here, since (as just demonstrated) compliance with federal law is the sine qua non of extending a warning-related duty to the non-manufacturing, branded-drug defendant in both T.H. and Rafferty.  Since innovator liability is explicitly based on the fact of the branded manufacturer’s compliance with what Hatch-Waxman requires, it cannot avoid being preempted, because the entire theory flows from the premise that meeting FDCA requirements about allowing generic use of its labels equals foreseeability, indeed “certainty.”

There are undoubtedly numerous other precedents expressing the same concept, but even the most anti-preemption courts recognize that tort law cannot penalize compliance with federal law.  Take the Seventh Circuit in Bausch v. Stryker Corp., 630 F.3d 546 (7th Cir. 2010), one of the most virulently anti-preemption decisions we can think of.  Bausch was adamant that preemption (express, in that case) precludes “claims that the [product] at issue ‘violated state tort law notwithstanding compliance with the relevant federal requirements.”  Id. at 552 (quoting Riegel v. Medtronic, Inc., 552 U.S. 312, 330 (2008)) (emphasis original in Bausch).  Innovator liability, which equates “foreseeability” with the branded defendant’s “compliance with the relevant federal requirements,” is worse than even the claims Bausch recognized would be preempted, because state-law innovator liability exists because of, not merely “notwithstanding,” a defendant’s FDCA compliance.

Lack of Personal Jurisdiction

Next, we invite you to consider personal jurisdiction in innovator liability cases in light of Bristol-Myers Squibb Co. v. Superior Court, 137 S. Ct. 1773 (2017) (“BMS”).  In a prescription drug product liability case, BMS held that there was no specific jurisdiction over a plaintiff’s claim just because the same defendant allegedly sold the same drug to other, in-state residents, causing similar injuries:

The mere fact that other plaintiffs were prescribed, obtained, and ingested [the drug] in California − and allegedly sustained the same injuries as did the nonresidents − does not allow the State to assert specific jurisdiction over the nonresidents’ claims.  As we have explained, “a defendant’s relationship with a . . . third party, standing alone, is an insufficient basis for jurisdiction.”

BMS, 137 S. Ct. at 1781 (quoting Walden v. Fiore, 134 S.Ct. 1115, 1123 (2014)).  Rather, “case-linked” personal jurisdiction requires case-linked conduct by the defendant within the jurisdiction.  “Nor is it sufficient − or even relevant − that [the defendant] conducted [activities] in California on matters unrelated to [its product].  What is needed − and what is missing here − is a connection between the forum and the specific claims at issue.”  Id.  It was dispositive in BMS that “all the conduct giving rise to the [plaintiffs’] claims occurred elsewhere.”  Id.

Now, consider the conduct alleged to give rise to innovator liability.  It is not the sale of any product, let alone sale of the product that allegedly injured the plaintiff in the jurisdiction where the plaintiff brings suit.  Rather:

Plaintiffs further allege that [the branded defendant] knew or should have known that [the drug] was of questionable efficacy . . ., that [the drug] carried serious risks of side effects for [persons such as plaintiff], and that federal law required [defendant] to report this information to the FDA and to update the warning label − something [it] could have done unilaterally.  Instead, [the branded defendant] falsely represented that [the drug] was safe and effective and would not cause serious side effects in newborns, and it intended for pregnant mothers and their physicians to rely on these representations.

T.H., 407 P.3d at 26.  See Rafferty, 92 N.E.3d at 1212 (similar allegations that the branded defendant “not changed its label” to include a relevant risk that it was warning about overseas).

Under BMS, where does the “case-linked” conduct of branded defendant take place in an innovator liability case?  That conduct does not include sale of a product.  The defendant did not sell the allegedly injurious product, but only a different bioequivalent product with the same risks.  Sale of a different product to different people, even if those other people are in-state residents, can’t support specific, “case linked” personal jurisdiction.  That’s what BMS was all about, only BMS involved the same product, not a bioequivalent generic.  Further, since a branded defendant did not sell the injurious product, there’s not even an arguable basis for “stream of commerce” jurisdiction in innovator liability cases.

Rather, the alleged failure to warn, the alleged knowledge of undisclosed risks, and the alleged failure to bring this information to the attention of the FDA (or to consumers) occurred, if at all, at the principal place of business of the defendant.  Unless the branded defendant in an innovator liability case has the misfortune of being “at home” in the state permitting that theory, there is no basis for “case linked” personal jurisdiction under BMS, because no case-linked conduct occurred that also constituted the necessary “purposeful availment” of the jurisdiction where the plaintiff was allegedly injured by ingesting a generic drug resided.  Further, Daimler AG v. Bauman, 571 U.S. 117 (2014), teaches that there can be no general personal jurisdiction under the same facts, unless the branded defendant was either incorporated or had its principal place of business in the state where suit is brought.

No case-linked jurisdiction due to lack of case-related in-state conduct, combined with the defendant not being “at home” for general jurisdiction purposes, means that there can’t be personal jurisdiction over a branded defendant sued for no reason other than the plaintiff being injured in a state recognizing innovator liability.  Branded defendants should raise personal jurisdiction as a defense – remember, personal jurisdiction is waivable.

This jurisdictional insight is the reason we invited the guest post a few weeks ago by Blank Rome’s Terry Henry.  He was the first person (other than Bexis) whom we saw articulate this argument – and he got around to writing about it before we did.

The second act of the personal jurisdiction defense to innovator liability occurs when the plaintiff is forced to bring suit in the state where the defendant is “at home.”  That sets up choice of law as another hoop for plaintiff to jump through. Historically, almost all states have limited product liability (even under fraud-based theories) to the manufacturer of the product that allegedly produced the plaintiff’s harm.  Fewer, but still quite a few, states have product liability statutes that expressly impose this requirement (sometimes referred to as “product identification”).  Think back to how plaintiffs, during the brief period that West Virginia rejected the learned intermediary rule, attempted (with some success) to claim that West Virginia “public policy” overrode any other choice of law principles and precluded reliance on the differing law of a plaintiff’s home state?   We described that situation here.  Well, that same “public policy” exception to choice of law analysis, see Restatement (Second) of Conflict of Laws §187(2)(b) (1971) (discussing this aspect of the law), can be utilized by branded defendants to argue that allowing innovator liability would offend the law of the defendant’s “home” state, thus rendering the theory entirely unavailable.  If there’s a statutory basis for this home state public policy, then so much the better, but even states without such statutes (Pennsylvania is one of those) probably have long-established precedent saying something like this:

The underlying purpose of [strict liability] is to ensure that the costs of injuries resulting from defective products are borne by the manufacturers that put such products on the market rather than by the injured persons who are powerless to protect themselves. . . .  [T]he burden of injuries caused by defects in such products should fall upon those who make and market the products and the consuming public is entitled to the maximum of protection.

Miller v. Preitz, 221 A.2d 320, 334-35 (Pa. 1966).  That’s a pretty solid iteration of state “public policy” that product liability is intended to be borne by manufacturers of injurious products.

So consider raising personal jurisdiction as an issue against plaintiffs making innovator liability claims. There’s more than one way to skin a cat.

Setting up a Prophylactic Preemption Defense

The potential scope of innovator liability is so massive that it may require branded companies to reconsider how they carry out certain aspects of their business.  We’re sure most such companies review their warnings in strict compliance with FDA requirements and guidance concerning analysis of signals from medical literature and adverse events, with full recognition that, first, overwarning is a bad thing and, second, voluntarily reported adverse events, by themselves aren’t proof of causation.

If innovator liability catches on, then potential defendants might want to consider changing those time-honored practices at two critical moments:  (1) when entry of generic products into the market is imminent, and (2) when a decision is made to sell the new drug application of a drug having generic counterparts.  When #1 happens, the commercial considerations that reinforce strict compliance with FDA warning standards weaken, because a significant loss of market share is inevitable.  When #2 happens, the potential defendant is about to lose any control over drug labeling, since only NDA holders can file NDA supplements.  Number 2 would, of course, be in addition to any indemnification or similar provisions in the contract selling the NDA.

In those situations, companies that fear being targeted by innovator liability might want to pull every possible “signal” or statistical anomaly they can find in their data and submit these purported “risks” to the FDA for its independent evaluation − even if, objectively, the company does not believe that the data otherwise justify a “changes being effected” labeling change of the sort mentioned in T.H. or Rafferty.  Let the FDA be the one to say “no.”  If the FDA doesn’t like this, let the agency take regulatory steps to prohibit innovator liability.

Why?

The FDA saying “no” – that the scientific data at the time the supplement was submitted was insufficient to justify a warning change – sets up a “clear evidence” preemption defense.  In Cerveny v. Aventis, Inc., 855 F.3d 1091 (10th Cir. 2017), which we discussed here, the court held:

We conclude that the rejection of a [submission to the FDA] may constitute clear evidence that the FDA would have rejected a manufacturer-initiated change to a drug label. Our case provides a perfect example. . . .  Under the standard that would have applied to a change proposed by [the manufacturer], the FDA concluded that warnings were unjustified for risks [at issue in this case].  That conclusion controls here, and the FDA’s denial constitutes clear evidence that the FDA would not have approved the [plaintiffs’] desired warning.

Id. at 1105.  Indeed, the big preemption fight in Cerveny wasn’t even about whether an FDA rejection was preemptive “clear evidence,” but rather focused on whether an FDA citizen’s petition filed by a non-NDA holder should be given the same effect as an FDA rejection of a manufacturer’s NDA supplement.  The scientific standards for both are the same, and Cerveny said that’s enough for preemption.  Id.

Some states disagree, and only give preemptive effect to FDA rejection of manufacturer-filed submissions.  Notably, Massachusetts is in this category.  See Reckis v. Johnson & Johnson, 28 N.E.3d 445, 459-60 (Mass. 2015) (holding that FDA decision rejecting additional warning language proposed by defendant would preempt claims, but not FDA rejection of a third-party citizen’s petition).  California trial court decisions provide a solid basis for a Cerveny-like preemption argument.  See In re Incretin-Based Therapies Products Liability Litigation, 142 F. Supp.3d 1108, 1122-23 (S.D. Cal. 2015), rev’d on other grounds, ___ F. Appx. ___, 2017 WL 6030735 (9th Cir. Dec. 6, 2017) (as to Buckman preemption); Risperdal & Invega Product Liability Cases, 2017 WL 4100102, at *10-11 (Cal. Super. March 16, 2017), reconsideration denied, 2017 WL 4479317 (Cal. Super. July 24, 2017); In re Byetta Cases, 2015 WL 7184655, at *13-14 (Cal. Super. Nov. 13, 2015).  Since the strategy we’re recommending that branded manufacturers consider involves manufacturer-submitted supplements, the distinction drawn in Reckis would be irrelevant.

Thus, if a branded company is staring down the barrel of extensive innovator liability for injuries caused by products it did not make, and thus received no profit from manufacturing, it may be time to reconsider, at certain critical periods, whether to err on side of extreme caution concerning possible emergent risks, and let the FDA decide.  If the FDA says no warning is justified at those times, then the company can assert a “clear evidence” preemption defense against future plaintiffs (innovator liability or otherwise) claiming the opposite.

*          *          *          *

To our in-house readers:

Do these arguments interest you?  Well, Bexis has put together a detailed presentation on these – and several other − ideas for combatting/ameliorating innovator liability.  The dog and pony show takes about an hour, and if you’d like Bexis to pay you a visit and discuss innovator liability with your in-house legal team (invite your outside counsel, too, if you’d like) send an email and we’ll try to set something up.

This guest post, by long-time friend of the blog, Terry Henry of Blank Rome, is a little different than most.  It was invited.  We read an article Terry wrote, which, at the end (it was mostly about other stuff), advised “[a] brand manufacturer defending itself [against innovator liability] should consider, at the appropriate time, a motion to dismiss any potential claims related to innovator liability on lack of jurisdiction.”  It just so happens that we (well, Bexis) had been thinking about precisely that – the “suit-related conduct” in innovator liability cases does not take place in the plaintiff’s forum state (MA or CA) because the branded defendant didn’t sell the injurious product, so unless that defendant is unfortunate enough to be “at home” in those states, there shouldn’t be case-specific personal jurisdiction either.  Without a product sale there’s not even a stream of commerce argument.  Wishing to encourage innovative thinking by defense counsel, we reached out to Terry and invited him to write a full blogpost devoted solely to personal jurisdiction in innovator liability cases.  Here it is.  As always our guest posters deserve 100% of the credit, and any blame, for their posts.

*******

Friday evening this writer and his son were to catch a flight from Philadelphia to Denver so that the boy could attend his scheduled tour of University of Colorado, Boulder.  As the time to board our 6:00 pm flight approached, the gate agent announced a delay. The aircraft coming in from Boston had a mechanical problem and our flight was now pushed back to 10:45!  We quickly investigated other options, but the two remaining flights were booked solid.  The situation looked bleak.  Experience told me that our flight was probably going to cancel and that our weekend in Boulder would not happen.  But how can you look your hopeful teenager in the eyes and dash his expectations?  So we decided to be optimistic and set up camp for the long wait.  When my Flight Aware app updated to let us know our incoming aircraft had finally taken off from Boston, we could see a ray of hope.  And so too, should branded drug manufacturers facing innovator liability claims.

Readers of this blog are familiar with the bleak prospects for branded manufacturers facing innovator liability claims in California; that distorted theory that holds a branded manufacturer liable for an allegedly inadequate label on the generic version of the branded manufacturer’s drug.  Innovator liability has hit the headlines again because the Massachusetts Supreme Court recently adopted it in Rafferty v. Merck . Innovator liability also snuck past the district court and is pending before the Seventh Circuit in Dolin v. GSK.  What seemed like an aberration when Conte v. Wyeth first gave life to the theory in 2008 may be gaining ground with courts looking to provide a remedy to plaintiffs that took the generic form of a drug. The blog warned us this could happen.

So where can a brand drug manufacturer find a little ray of hope in what appears to be expanding exposure from innovator liability?  Two words – specific jurisdiction.  In addition to the usual substantive arguments for why innovator liability is not a valid claim, a brand manufacturer should also assert lack of jurisdiction.

If the brand manufacturer defendant is not “at home” in the jurisdiction where the case is pending, the court cannot exercise general jurisdiction over the brand manufacturer.  “At-home” status is determined by where the manufacturer is incorporated or where it has its principal place of business.  Daimler AG v. Bauman, 134 S. Ct. 746 (2014). State of incorporation is usually a pretty straight forward determination, but principal place of business can be a bit murky.  The reality of today’s business organizations mean that companies may have operations in many states and employ senior officers in a variety of locations. Hertz Corp. v. Friend, 599 U.S. 77 (2010), explains how to determine a corporation’s nerve center, which is how Hertz defines principal place of business.  If a branded manufacturer is facing potential innovator liability, it should establish early, by affidavit or declaration, the facts showing that the defendant is not at-home in any innovator liability state. This will limit the Court’s jurisdiction over the brand manufacturer to specific jurisdiction.

Specific jurisdiction depends on an affiliation between the forum and the underlying controversy.  Goodyear Dunlop Tires Operations, S.A. v. Brown, 131 S. Ct. 2846, 2851 (2011).  A defendant’s suit-related conduct must create a substantial connection with the forum State.  Walden v. Fiore, 134 S. Ct. 1115, 1121 (2014).  For a court to exercise specific jurisdiction over a branded manufacturer, there must be a relationship between the branded manufacturer, the forum, and the litigation, and it must be the branded manufacturer, not the plaintiff or generic manufacturer, who creates the suit-related contact with the forum state.  Id. at 1126.   See also Bristol-Myers Squibb Co. v. Superior Court of California, San Francisco County, 137 S. Ct. 1773, 1783 (2017).  That the brand manufacturer may generally sell its branded version of the drug in the forum state is irrelevant for purposes of specific jurisdiction, because there is no connection between general in-state sales and some other manufacturer’s competing generic version of the drug taken by plaintiff.  See generally Bristol-Myers Squibb Co., 137 S. Ct. at 1773.  Similarly, the fact that a plaintiff may have been injured in the forum is irrelevant because there must be a connection between the injury and the branded manufacturer’s in-state conduct.  Walden, 134 S. Ct. at 1121.

In the context of innovator liability, the brand manufacturer’s case-linked conduct will be its internal decision making with respect to its drug label and its communications with FDA about the label.  That conduct likely took place at the manufacturer’s headquarters or in its dealings with FDA, not in the forum state.  Under BMS, a court cannot exercise specific jurisdiction over that out-of-state conduct.  Plaintiffs argue. and courts have speculated, that a brand manufacturer should have known that generic manufacturers were required to adopt its label, and should have foreseen that the information in their branded label would be communicated to plaintiffs by way of the generic drug being sold in-state.  If at all, that knowledge exists at corporate headquarters.  Using foreseeability to analyze minimum contacts impermissibly allows plaintiff’s contacts (or the generic manufacturer’s contacts) to drive the jurisdictional analysis.  Walden 134 S. Ct. at 1125.  Foreseeability attributes another person’s forum connections to the branded manufacturer “and makes those connections ‘decisive’ in the jurisdictional analysis,” obscuring the reality that none of the branded manufacturer’s challenged conduct (related to the label) took place in the forum state.  Id.

This jurisdictional analysis addresses innovator liability claims filed in a state where the branded manufacturer is not at-home, but not claims filed in the branded manufacturer’s home state.  In such a situation, the court would be able to exercise general jurisdiction over the branded manufacturer, but would have to undertake a choice of law analysis – including application of “public policy,” see Restatement (Second) of Conflict of Laws §187(2)(b) − to determine if the plaintiff would get the benefit of innovator liability imported from his or her home state (presumably Massachusetts or California).  That is a discussion for another blog.

The end of our story is all good. Our flight finally pushed back at 11:00 pm and we were pretty exhausted arriving in Boulder at 3:00 am (5:00 am east coast time).  But when the sun crested over Folsom Field just a few hours later, with the majestic cloud capped Rockies towering over campus, we were glad that we remained optimistic.  And so, as we fly back east with the sun setting behind us, it is good to know that the requirements of due process can provide that light of hope for branded manufacturers by precluding courts from exercising jurisdiction over allegations of innovator liability.

Stephen Hawking may have been the smartest guy in the world, even though he believed that “People who boast about their I.Q. are losers.”  Hawking is best known for his work on black holes.  As used in physics, a black hole describes a point-sized mass (called a “singularity”) so dense that its escape velocity exceeds the speed of light.  That effectively cuts it off from the rest of the universe, so that nothing emanates from it – hence the “black hole” terminology.  Hawking’s study (more than “study,” really since he thought most of these things up) applied the black hole concept to the entire universe, thus providing a theoretical underpinning for “Big Bang” cosmology.  Beyond that, Hawking developed laws of black hole mechanics.  He dealt with rotating black holes, and determined that contrary to their initial definition (and Hawking’s own prior work) black holes could under some circumstances emit radiation due to annihilation of particles near the event horizon (it’s complicated – you can access Hawking’s many and varied ideas here).  That radiation is now called “Hawking radiation,” and over cosmological time (trillions of years or longer) can cause black holes to evaporate and eventually explode.

He will be missed.

The massive gravity of black holes sucks in everything surrounding them and crushed it into effectively nothing but mass and spin.  We immediately thought of black holes in the legal context when we learned on Friday that the Massachusetts high court (called the “Supreme Judicial Court”) decided to recognize a form of innovator liability – imposing liability for injuries caused by generic drugs on their branded competitors. See Rafferty v. Merck & Co., ___ N.E.3d ___, 2018 WL 1354064 (Mass. March 16, 2018).

As we had feared, California did this first, adopting an extreme – even more extreme than usual − version of innovator liability in T.H. v. Novartis Pharmaceuticals Corp., 407 P.3d 18 (Cal. 2017).  In Hawking’s parlance, that would make the state a “supermassive” legal black hole.  Massachusetts isn’t as big a state, and its innovator liability theory isn’t as downright bizarre as California’s, so Rafferty probably created an intermediate-mass legal black hole.  But liability for injuries caused by products that the defendant never even made (and thus made no money from) is potentially crushing to innovator drug companies no matter what.

So what exactly did Rafferty hold?

For one thing, much more than in T.H. the Massachusetts court was quite frank that it was only doing this because preemption prevented plaintiffs purportedly injured by generic drugs from suing generic manufacturers.  There was none of this bullhockey that we got from California about innovator liability stemming from well-established negligence principles.  Before ever getting to state-law issues (or even to the facts of the case) Rafferty identified generic preemption as the problem:

This allocation of labeling responsibilities under Federal law has proved difficult to reconcile with the duties required of generic drug manufacturers under State tort law. . . .  Under Federal regulations . . . manufacturers of generic drugs − because they lack the power to change the warning labels on their products unilaterally − cannot independently fulfil these State law duties. . . .  The practical consequence is that a consumer who suffers injury arising from an inaccurate or inadequate drug warning label can sue the manufacturer for damages caused by his or her injury only if the consumer ingested a brand-name version of the drug — but not if the consumer ingested the generic version.

2018 WL 1354064, at *2 (citations omitted).  For this reason, innovator liability could not exist as a product liability claim as “product liability” is normally understood:

[U]nder our prevailing law, . . . [defendant] owes [plaintiff] no duty to warn under the law of products liability.  As noted by the judge, a manufacturer may be found liable for a failure to warn only where the product that caused the injury was made by that manufacturer; its duty of care extends only to users of its own product.

Id. at *3 (discussion of several prior Massachusetts product liability cases omitted).  Unlike California, Rafferty held that there was no basis for innovator liability in product liability (including ordinary negligence), or the Massachusetts consumer fraud statute.  See also Id. at *13 (discussing consumer protection).

But in today’s day and age, at least in Massachusetts or California, a result that produces no liability against anyone is apparently intolerable.  Thus, the court in Rafferty, using its common-law powers, made something up – product liability for “recklessness.”  Rafferty turned to “a general principle of tort law,” hitherto unknown in product liability, that “[e]very actor has a duty to exercise reasonable care to avoid physical harm to . . . all persons who are foreseeably endangered by his conduct, with respect to all risks which make the conduct unreasonably dangerous.”  Id. at *5 (quoting Jupin v. Kask, 849 N.E.2d 829, 835 (Mass. 2006)).  And what did Jupin quote for this broad, vague declaration of anyone potentially liable to everyone for anything?   Not any Massachusetts case, but rather Tarasoff v. Regents, 551 P.2d 334, 344 (Cal. 1976).  Argh‼  Even though we’re in Massachusetts, the principles of crazy California tort law are still around, expanding liability.

However, unlike the California Supreme Court, Rafferty was at least willing to “recognize[] . . . that, even where the requirements of negligence are satisfied, there may nevertheless be a public policy justification for declining to impose a duty of care where “the imposition of a precautionary duty is deemed to be either inadvisable or unworkable.”  2018 WL 1354064, at *5 (citation and quotation marks omitted).  But while “in the vast majority of . . . cases, the duty to warn would be limited to the manufacturer of the product − even if the plaintiff were to bring a general negligence claim − because the risk of harm arising from an inadequate warning would be foreseeable to a manufacturer only with respect to users of its own product,” id. at *6, prescription drugs were different, because to comply with the FDCA, innovator manufacturers are required to let generic manufacturers use their labels verbatim.

With generic drugs, it is not merely foreseeable but certain that the warning label provided by the brand-name manufacturer will be identical to the warning label provided by the generic manufacturer, and moreover that it will be relied on, not only by users of its own product, but also by users of the generic product.

Id. at *6 (emphasis original).  Innovator liability thus exists to make innovator manufacturers pay for having complied with the “require[ments]” of the regulatory scheme imposed by the “Hatch-Waxman amendments,” and for no other reason. Id.

Where a brand-name drug manufacturer provides an inadequate warning for its own product, it knows or should know that it puts at risk not only the users of its own product, but also the users of the generic product.  Consequently, this is the rare (perhaps the only) type of case involving a manufactured product where the requirements of general negligence may be satisfied even where the requirements of products liability are not.

Id. at *6 (emphasis added).

“Perhaps the only” – there it is, a unique, expansive duty imposed on a non-manufacturing innovator pharmaceutical company because its FDA-approved warning is deemed inadequate under state law, with the duty expanded to include generic drug users because the defendant is forced by Hatch Waxman to let generic manufacturers (who are equally subject to the federal requirement) use its labeling verbatim.  Under Rafferty, innovator liability is a consequence of a branded drug company’s compliance with the FDCA, and nothing else.  In and of itself, this massive transfer of liability based on conformity with the requirements of federal law raises serious preemption issues.

Back to Rafferty’s rationale.

Unlike California, the Massachusetts court in Rafferty at least had the good sense to recognize that there were countervailing public policy considerations implicated by making a drug manufacturer liable for injuries caused by competing products:

[I]f consumers of generic drugs were allowed to recover damages for a brand-name manufacturer’s negligent failure to warn, it would be far more difficult for the manufacturer to shoulder these costs, for three reasons.

First, these costs would not be incurred until after the brand-name manufacturer’s patent monopoly expires and generic competitors enter the market, at which point the brand-name manufacturer will have suffered a precipitous decline in sales of its product. . . .

Second, because prices drop with generic drug competition, the sales of generic drugs may exceed the sales generated during the patent monopoly period, and may even continue indefinitely, long after the brand-name manufacturer has moved on to focus on other patented products. . . .

Third, because . . . [f]ederal preemption bars any generic drug consumer from bringing a failure to warn claim against any generic manufacturer, all such claims would be brought only against the brand-name manufacturer . . ., leaving the brand-name manufacturer without any ability to share the costs of litigation, or of a damage award or settlement, with the generic manufacturer.

Rafferty, 2018 WL 1354064, at *7-8 (citations and quotation marks omitted).  Innovator manufacturers are thus “not in the best position to bear its [innovator liability’s] costs.”  Id. at *8.  Such liability “impose[s] on brand-name manufacturers an additional ‘cost of production’ for products that, in reality, they no longer produce.”  Id.

What is a “cost of production” for a “product[] that, in reality [is] no longer produce[d]”?  Quite frankly, it is a cost that must inevitably be inequitably recouped, because the only way a drug manufacturer will pass along that cost is to consumers of other, non-defective products.  With all the brouhaha lately about reducing the price of prescription drugs, innovator liability is a recipe for increasing those costs substantially.

[A]s a matter of public policy . . . allowing a generic drug consumer to bring a general negligence claim for failure to warn against a brand-name manufacturer poses too great a risk of chilling drug innovation, contrary to the public policy goals embodied in the Hatch-Waxman amendments.

Id. at *10.

Nonetheless, liability uber alles prevailed.  Precedent be damned.  Id. at *11 (“we find ourselves in the minority of courts that have decided this issue” – see our scorecard).  “The widespread use of generic drugs means that, if we decline to impose any liability on brand-name manufacturers, countless consumers would be left without a remedy.”  Rafferty, 2018 WL 1354064, at *9.  Rather than letting the state legislature (let alone Congress, which enacted Hatch-Waxman) balance large-scale public policy concerns, Rafferty created innovator liability for “reckless” conduct:

In other types of cases where we have circumscribed liability for public policy reasons, we have nevertheless consistently recognized that there is a certain core duty − a certain irreducible minimum duty of care, owed to all persons − that as a matter of public policy cannot be abrogated: that is, the duty not to intentionally or recklessly cause harm to others.

Id.  Thus, Rafferty professed to “tolerate[] ordinary negligence but draw[] the line at recklessness.  Id.

But did it really?  There are two types of “reckless” conduct, as explained in Restatement (Second) of Torts §500 (1965) (defining “reckless disregard”).  One is where the “actor knows, or has reason to know, . . . of facts which create a high degree of risk of physical harm to another, and deliberately proceeds to act, or to fail to act, in conscious disregard of, or indifference to, that risk.”  The second is where the “actor has such knowledge, or reason to know, of the facts, but does not realize or appreciate the high degree of risk involved, although a reasonable man in his position would do so.”  Id. comment a.  The second of these is really just a glorified type of negligence.  “An objective standard is applied . . ., and [the actor] is held to the realization of the aggravated risk which a reasonable man . . . would have, although he does not himself have it.”  Id.

Rafferty chose the second, dumbed-down version of “reckless disregard,” using the Restatement’s weak alternative definition of recklessness:

[H]e does an act or intentionally fails to do an act which it is his duty to the other to do, knowing or having reason to know of facts which would lead a reasonable man to realize, not only that his conduct creates an unreasonable risk of physical harm to another, but also that such risk is substantially greater than that which is necessary to make his conduct negligent.

Rafferty, 2018 WL 1354064, at *10 (quoting a case that quotes from Restatement §500) (emphasis added).

Under this standard, a brand-name manufacturer that intentionally fails to update the label on its drug to warn of an unreasonable risk of death or grave bodily injury, where the manufacturer knows of this risk or knows of facts that would disclose this risk to any reasonable person, will be held responsible for the resulting harm.

Id. at *11 (emphasis added).  At least the “fails to update” language seems to limit liability to current NDA holders, which is some improvement on the even more malignant California style of innovator liability.

Is Rafferty’s “recklessness” standard really going to contain the evil genii of innovator liability that has been let out of the bottle?  We aren’t holding our breath.  Our brethren on the other side of the “v.” have proven time and time again to be willing and able to allege whatever is necessary to state whatever cause of action they have to, whether or not the facts support it.  Then they file hundreds or thousands of cases until the defendant settles rather than risks catastrophic liability – the legal “black hole” we mentioned at the outset of this post.  Thus, we are skeptical, to say the least, of Rafferty’s assurances that this novel form of liability “will not materially chill innovation or increase drug prices.”  Id. at *12.  While Congress “in enacting the Hatch-Waxman amendments . . . expected that its Federal regulatory scheme would be supplemented with traditional State law remedies,” id., innovator liability, is anything but “traditional,” as indeed Rafferty itself recognized in the course of reaching its admittedly “minority” result.

Back when we first encountered mass torts in the prescription medical product context we realized that, as plaintiffs created new theories of liability, it was up to us to create new defenses to counter them.  That’s how Buckman Co. v. Plaintiffs Legal Committee, 531 U.S. 341 (2001), came to be.  We’ll see what we can come up with this time.  After all, as Stephen Hawking himself said, “[i]ntelligence is the ability to adapt to change.”

We recently read a news story about a man who was imprisoned for 39 years for a crime he did not commit. The crime was grisly and resulted in the violent deaths of a 24-year-old woman and a small child, leaving a community outraged and law enforcement officials determined to hold someone responsible.  So, burdens of proof be damned, the defendant was convicted despite the fact that relevant DNA recovered from the victims was not his.  Eventually, a crusading retired policeman succeeded in winning exoneration and freedom for the prisoner.   Now, we went to law school.  We know all about the differences between criminal law and civil law.  And we know we should be circumspect about fragile visceral analogies when we are well aware of the relevant distinctions.  Nevertheless, when we read a bad “innovator liability” decision – a decision holding an innovator drug manufacturer liable for injuries caused by a generic version of the drug – a drug manufactured by someone else – there is a simplistic part of us that fails to see how this is so different from imprisoning someone for a crime he did not commit

Today’s case, Garner v. Johnson & Johnson, et al., 2017 WL 6945335 (C.D. Ill. Sept. 06, 2017) (just surfacing though several months old), is just such a bad decision.  In Garner, the plaintiff alleged that a generic fluoroquinolone antibiotic caused her to suffer serious injuries.  She sued the generic drug manufacturer that actually made her drug along with the innovator drug company that manufactured the name-brand version of the drug.  The defendants moved to dismiss for failure to state a claim.

The court first considered the plaintiff’s claims against the generic drug manufacturer, and correctly concluded that, under Mensing, the claims, all rooted in alleged inadequacies of the generic drug’s warning label, were preempted.  But the court wanted to hold someone responsible.  So, noting that the Seventh Circuit had not yet addressed innovator liability, it undertook to circumvent Illinois law.

As we discussed in our “Innovator Liability at 100” post, Illinois has long required product identification for all product liability matters, as evinced by the Illinois Supreme Court’s rejection of industry-wide liability under both market share liability and public nuisance rubrics. See Young v. Bryco Arms, 821 N.E.2d 1078, 1087-91 (2004) (public nuisance); Smith v. Eli Lilly & Co., 560 N.E.2d 324, 337-39, 344-45 (Ill. 1990) (market share liability); City of Chicago v. American Cyanamid Co., 823 N.E.2d 126, 134-35 (Ill. App. 2005) (market share liability in public nuisance); Lewis v. Lead Industries Ass’n. Inc., 793 N.E.2d 869, 874-76 (2003) (same) (all four cases finding no causation as a matter of law without product identification). See also Leng v. Celotex Corp., 554 N.E.2d 468, 470-471 (Ill. App. 1990) (rejecting market share liability pre-Smith in asbestos case); York v. Lunkes, 545 N.E.2d 478, 480 (Ill. App. 1989) (rejecting market share liability pre-Smith in battery case); Poole v. Alpha Therapeutic Corp., 696 F. Supp. 351, 353 (N.D. Ill. 1988) (rejecting market share liability pre-Smith in blood products case); Coerper v. Dayton-Walther, 1986 WL 4111, at *1 (N.D. Ill. March 27, 1986) (rejecting market share liability pre-Smith in tire rim case).

Moreover, Illinois does not recognize a duty to warn about the risks of a competing product:

[Defendant] is under no duty to provide information on other products in the marketplace. Such a duty would require drug manufacturers to rely upon the representations made by competitor drug companies.  This arrangement would only lead to greater liability on behalf of drug manufacturers that were required to vouch for the efficacy of a competitor’s product.

Pluto v. Searle Laboratories, 690 N.E.2d 619, 621 (Ill. App. 1997).  Recently, an Illinois appellate court recognized in dictum that an “overwhelming majority of courts have held that generic consumers may not sue the brand-name manufacturer.” Guvenoz v. Target Corp., 30 N.E.3d 404, 409 n.1 (Ill. App. 2015). See id. at 416 (plaintiffs “cannot obtain relief from brand-name drug manufacturers whose products they did not ingest”).

But the Garner court disregarded all of this. The court acknowledged that, to state a claim for negligence, the plaintiff was required to establish that the defendants owed her a duty of care, and that the existence of such a duty turned on the reasonable foreseeability of the injury.  But it  held, “In the well-regulated pharmaceutical industry, . . . a brand-name manufacturer . . . is surely not blindsided to find out that the equivalent of its . . . [label] as imposed on generic versions of [its drug],” and that doctors and patients would rely on that label when prescribing and using the generic drug.   Garner, 2017 WL 6945335 at *7.  Further, the court held, it was “a common practice, and therefore foreseeable, for a doctor to prescribe a name brand drug and the pharmacy to fill it with the generic version.” Id. And so, though “other courts have expressed trepidation about the consequences of holding brand-name manufacturers liable for injury caused by generics,” id. (citations omitted), the court concluded that finding that the brand-name manufacturer had a duty of care to a plaintiff taking someone else’s drug “simply allows [the plaintiff] to attempt to recover from the one entity, under federal law, that has the unilateral ability to strengthen the label.” Id.  Even though that entity did not manufacture the product that allegedly injured her.

The court next addressed the issue of causation, acknowledging that “liability for negligence may not be imposed based merely on a breach of duty, without causation being established. Id. (citation omitted).  The plaintiff alleged that she would not have taken the generic drug if its label contained adequate warnings.  (Although the generic drug was a prescription drug, the court failed to analyze warnings causation from the perspective of the prescribing physician.) And the court held that “an extra link in the causal chain (here, the transfer of the identical label from the branded drug to the generic drug) does not break it.  It is possible for a plaintiff to show that injuries caused by mislabeling on a generic medication can be directly traced back to the brand name manufacturer’s creation of the label.” Id. (citations omitted).  As such, the court found that the plaintiff had “adequately alleged causation,” id., and, in derogation of its Erie duty to apply Illinois law, denied the innovator company’s motion to dismiss the plaintiff’s negligence claims.  Similar analysis allowed the plaintiff’s related claims to proceed.

We get the issue. We understand that the United States Supreme Court has limited the remedies of plaintiffs injured by generic drugs, even assuming they can prove a product defect, an injury, and causation in between.  But “someone’s gotta pay” cannot justify a decision that starts from a desired result and works backward, hurdling any doctrine or jurisprudence that gets in the way.  We defend innovator drug companies for a living, and we will continue to speak out against decisions like Garner. And we’ll keep you posted on what comes next.

Sometimes it happens.  For eleven years, we have published our annual “worst of” the year post on the Thursday before Christmas and our annual “best of” the year post on the Thursday before New Year’s.

Guess what?  In a development that we weren’t entirely surprised to see happen, the California Supreme Court recognized not only innovator liability, but innovator liability in perpetuity, later during the same day that our 2017 “worst of” post was published, which coincidentally was the first day of winter.  Winter is not just coming, it’s now here.  California’s tort climate just became much colder for our pharmaceutical clients.

So we’re publishing this addendum to this week’s “worst of” post.  This year there will be two number one worst of the worsts.  Given everything else that’s happened in 2017, we suppose that is appropriate.

  1. T.H. v. Novartis, 2017 WL 6521684, slip op. (Cal. Dec. 22, 2017).  Innovator liability, which effectively shifts 100% of potential liability for drug injuries to the 10% of the drug market that branded drugs represent, received the nod of all seven justices in this 4-3 decision. Y et, remarkably, the majority took the view that “the burden on brand-name drug manufacturers” to warn “those who are prescribed the generic version of the drug is zero.”  That attitude, an insouciance towards any policy supporting prescription drugs (Brown cited not at all by the majority, and only once, parenthetically, by the somewhat less restrained concurrence) was apparent throughout.  The result is pharmaceutical companies being disfavored, even compared to asbestos manufacturers. The same dismissively pro-plaintiff attitude that recently caused the same court to invite all mass tort plaintiffs to sue in California (2016-1) rears its ugly head again.  T.H. defined negligence “duty” broadly and vaguely – “each person has a duty to use ordinary care and is liable for injuries caused by his failure to exercise reasonable care in the circumstances” – so that it could characterize even this vast expansion of liability to non-manufacturers as some sort of “exception” to the a general rule that allegations of negligence make anyone liable to everyone for anything.  But then T.H. inconsistently discounted a mountain of contrary federal precedent because federal courts aren’t supposed to predict novel expansion of state-law liability.  At least Sindell, bad as it was, was honest about its unprecedented result.  T.H. is not the first time we’ve seen an opinion putting the “duty” rabbit in the hat like this to support a novel liability theory; Lance (2014-2) did the same to allow a stop-selling “negligence” theory.  Lance has preemption problems, and T.H. might, too, at least on the case-specific off-label use facts.  The majority appears to believe that off-label risk warnings can be added “unilaterally,” which they can’t.  Somewhere, Justice Traynor, who conceived of product liability as ensuring the liability followed profit from product sales and ability to control product quality, must be spinning in his grave.  Innovator liability violates both principles, and also lets off the hook the party that profited from the product and directly controlled its risk.  Almost as bad – and even more extreme – is the second holding that innovator liability is effectively perpetual.  Bookending California’s expansive “product line” form of successor liability, T.H. creates “product line” predecessor liability; so that even sale of all rights to the product before (here, six years before) the relevant product sale does not extinguish liability.  It must have been a clear day, since the majority was able to foresee forever.  On this issue T.H. was 4-3 (with the vote of a randomly selected “assigned” justice being the difference), with the dissenters rightly focusing on:  (1) lack of control over a successor’s warnings; (2) overwarning of scientifically questionable risks; (3) insufficient deterrence of the actual product manufacturers; (4) “destabilization” of the pharmaceutical industry by perpetual, unlimited liability; (5) liability spillover to other products; (6) an unrealistic attitude towards corporate transactions; (7) relative lack of moral blame; and (8) unavailability of insurance for risks of competing products and the resultant increase in the price of branded drugs.  Although T.H. is a bit less blunt in expressing the motivations for its novel liability holding than Weeks (2014-1), the California court’s underlying intent to use common-law liability to hold branded drugs hostage to federal action eliminating generic preemption is found in both in the majority’s footnote 2 and the first paragraph of the concurrence.  We trashed T.H. here, and will undoubtedly be doing that again.

We posted our 2017 “Worst 10 decisions” list a day too soon, because the California Supreme Court issued its anticipated decision in TH v. Novartis, No. S233898, slip op. (Cal. Dec. 22, 2017) today, and if it is not the worst drug and device decision of 2017, it is awfully close.  With an emphasis on awful.

This case presents two issues of duty: (1) Does an innovator prescription drug manufacturer owe a duty to patients who used a competitor’s generic product; and (2) does that manufacturer also owe a duty to patients who used a competitor’s product years after the innovator sold the NDA and stopped selling the drug altogether?  The California Supreme Court decided “yes” on both counts, and in doing so it has broken away from decades of precedent placing responsibility for defective products on the companies that made and sold the products.

We will have more to say on this opinion, but our first read reveals that the Supreme Court fundamentally misframed the issue as whether the Court should create an “exception” to the duty to warn that all branded drug manufacturers owe. That is exactly backwards, and the Court framed “duty” in absurdly broad fashion (everyone owing a duty to everyone else not to be negligent in giving warnings) in order to posit an “exception” rather than what is really happening, that being a huge expansion of liability.  The law in every jurisdiction, including California, is that one manufacturer generally does not owe duties to those who use other manufacturers’ products.

So how did the California Supreme Court justify its departure from this general rule? Let’s take innovator liability first.  The Court held unanimously that an innovator drug manufacturer can be liable for its competitors’ generic products, with a particular fixation on a listed manufacturer’s exclusive right to “unilaterally” update a label.  For one thing, the Court considerably overstates a listed manufacturer’s ability to “unilaterally” change a label under the CBE regulations, which require “newly acquired information” among other things.  On the case-specific facts – off-label use – the opinion is simply wrong.  Only the FDA, and not a company “unilaterally,” can require a warning about an off-label use – it’s right there in the regulations.

The main problem, however, is the Court’s overreliance on foreseeability to define a new tort duty. Although the Court discusses other factors, its core rationale is that a listed manufacturer can foresee that a generic manufacturer will use substantially the same label.  Fine, but why does the law not require more than that to deviate from decades of product liability law?  And why are other factors not as relevant?  The Court, for example, quantifies the burden on brand-name manufacturers’ as “zero,” which is astonishing as it is potentially shifting 100% of liability onto 10% (if that) of the prescription drug market.  The Court also assumes that insurance against this new liability would be readily available.  If any reader knows of such a policy actually existing, please tell us.  When expanding duties so fundamentally, we are not sure how the Court can purport to draw these conclusions.

The opinion on predecessor liability—or as we would call it, “perpetual liability”—deviates from prevailing law by equal measure, if not more. By a vote of 4 to 3 (with the margin provided by an “assigned” judge filling an open seat), the Court held that an innovator owes duties to users of a competitor’s product, even after the innovator has sold the NDA and stopped selling the drug.  Again, the focus is on foreseeability, because a listed drug manufacturer purportedly can foresee that another manufacturer will make a generic product using a similar label in the future.  Is such a manufacturer supposed to “foresee” off-label promotion (alleged in the complaint but not mentioned in the opinion) as well?  We will definitely have more to say on this, but to start, what exactly can the innovator foresee and for how long?  Who will sell the product?  For how long, to whom, and for what purposes?  What scientific developments will come down the pike, and what will the new owner of the product do with the label, into which the innovator now has no input?  The result goes far beyond any other version of innovator liability ever adopted, in particular leaving in the dust the time limited, learned intermediary rule-respecting version adopted in the briefly extant Weeks v. Wyeth decision in Alabama.

We also take issue with the majority framing the issue as whether selling a product line “automatically terminates” liability for its negligence. The defense never proposed such a thing—a product manufacturer will continue to owe duties to users of its own products, even after it has left the market.  We again think the Court has it backward:  The issue is not whether liability “terminates”; the issue is whether the law should create a new form of liability in the first place.

We cannot help but think that the Court was motivated to create a remedy for plaintiffs who otherwise may not have one. Footnote 2 suggests that the decision is, at least in part, intended to lobby the FDA (and federal authorities generally) to trade generic preemption for elimination of this radical new innovator liability theory.  In this regard, the opinion treats innovators like insurers of competing products, potentially forever, and seeks to hold them hostage in a larger, more political game.  More to come.

A lot of us attended the annual ACI Drug & Medical Device Litigation Conference in New York City last week.  One of the messages sent loud and clear from the initial client round table panel is that our clients don’t like surprises, and it is helpful to them to know information about potential litigation possibilities (read:  threats), even if they are not current targets.

So that’s what we’re doing here today – about a topic that wasn’t even the topic of a separate presentation at this year’s ACI Conference. That threat is innovator liability.  For those of you not familiar with litigation jargon, this is the term that litigators, particularly those on our side of the “v.,” use for plaintiff-side litigation theories seeking to hold manufacturers of branded drug products liable for injuries caused by competing generic products that our clients didn’t make.

Yes, innovator liability is an inherently absurd theory that contravenes the most foundational principle of strict liability – that the manufacturer of a defective product should be responsible for injuries caused by that product.  That’s why innovator liability is usually brought on a misrepresentation/fraud theory, rather than under “traditional” product liability theories.  Because branded manufacturers are required by federal law to allow generic products to take (for free) their labels and use them verbatim, innovator liability theories posit that it is “foreseeable” that “fraud” or “misrepresentation” purportedly occurring with respect to branded labels could lead physicians to prescribe generic drugs bearing the same labeling at some unknown future date.  It also lets the actual manufacturer of the allegedly “defective” product that actually caused harm off the hook, even though the manufacturer controls everything else about how the product is manufactured and promoted.

Since 90% or so of the current prescription drug market is generic, innovator liability is a very dangerous – indeed existential – threat to the branded drug industry.  Potentially 10% of the prescription drug market share would be forced to shoulder 100% of possible liability, not only with that additional liability bailing out current business competitors, but also being effectively uninsurable because it does not arise from a defendant’s own products and is potentially unlimited in both amount and time.

Plaintiffs pursue innovator liability currently for one reason only – the deterrent effect of preemption on claims brought against the manufacturers of generic products.  Such preemption is now likely to continue in full effect for the foreseeable future, with the FDA’s regulatory attempt to change the rules to eliminate generic preemption now effectively over, and with the threat of additional appointments of anti-preemption Supreme Court justices very likely minimal as well, for the time being.

Innovator liability was not even a separate topic at this year’s ACI conference.  With good reason.  As detailed in our innovator liability scorecard and in our 50 state survey, the defense side has been winning the overwhelming majority of the decisions that have addressed such theories.

Here’s the big however.

Most of this litigation so far has been decided in federal court, and in federal court, with jurisdiction based on diversity of citizenship, the Erie principle favoring conservative applications of state law over radical changes has worked strongly to the defense’s advantage in federal cases.  No federal circuit court has ever recognized innovator liability, and given the state of Illinois law (see our 50 state survey), we don’t see the Seventh Circuit becoming the first.

No, the problem is with state courts of last resort, which are not constrained by Erie.  So far there have been two high court decisions on innovator liability – and our side’s success rate there is only 50%.  We lost in Wyeth, Inc. v. Weeks, 159 So.3d 649, 656-76 (Ala. 2014).  Weeks was overturned by the legislature almost before the ink was dry, so it looks like a hiccup, but we have to wonder, if it could happen in Alabama, could it happen anywhere?  The answer was “no” in Iowa, the only other high court decision so far. See Huck v. Wyeth, Inc., 850 N.W.2d 353, 369-81 (Iowa 2014).  Huck, however, was actually a 4-4 split decision that operated as an affirmance only because the defendant had won below, and the Huck justices who saw things our way did so in part (how much a part is unclear) because of the pendency of the FDA’s now-dead rule on generic labeling.  Id. at 380-81 (“the FDA’s proposed rule . . . would abrogate the Mensing holding, permitting consumers of generic drugs to bring a claim against generic manufacturers”).

Plaintiffs are aware of this.  We’re not giving anything away here.  They have thus been trying to move the innovator liability theater of litigation operations to state-court appeals for years.  And they have finally been able to do so.  Right now, the issue is pending in three high courts:  California, T.H. v. Novartis Pharmaceuticals Corp., 199 Cal. Rptr.3d 768, 774-82 (Cal. App. 2016), review granted & depublished, 371 P.3d 241 (Cal. June 8, 2016) (discussed here); Massachusetts, Rafferty v. Merck & Co., 33 Mass. L. Rptr. 464, 2016 WL 3064255, at *5-7 (Mass. Super. May 23, 2016) (discussed here), appeal granted, No. SJC-12347 (Mass. 2017); and West Virginia, McNair v. Johnson & Johnson, 694 Fed. Appx. 115, 120 (4th Cir. 2017) (discussed here), certified question accepted, No. 17-0519 (W. Va. Sept. 1, 2017).

The California and Massachusetts appeals have been argued, and we wish we had better news to report.  As we discussed, the California argument was mostly about the “perpetual liability” aspects of the case (that the defendant branded company had left the market years before the plaintiff was exposed to a generic product), so there is a distinct possibility that the California Supreme Court will either bypass the basic innovator liability question or worse allow it.  In Massachusetts – another notoriously liberal tort jurisdiction – too many members of the Supreme Judicial Court for our liking were asking questions about under what conditions (such as scienter) innovator liability could be permitted.  The West Virginia Supreme Court of Appeals is not as radically pro-plaintiff as it was back when it rejected the learned intermediary rule, see Johnson & Johnson v. Karl, 647 S.E.2d 899 (W. Va. 2007).  However, one judge remains from the Karl majority, and the situation of generic drug using plaintiffs without anyone they can sue is certainly present.  After all, if it could happen in Alabama, it could happen anywhere.

So what happens if the tide starts to turn in 2018 on innovator liability?  It certainly could, and because of the magnitude of the potential threat, we can’t ignore it.  As stated at ACI, our clients don’t like surprises, particularly surprise threats, so we’re letting you know that from our perspective, the threat is real.  Moreover, particularly in California and Massachusetts, we can’t expect a legislative fix of the sort that came through in Alabama.

And if state high courts start what the other side could argue to be a “trend,” what does that do to the current monolith of federal court decisions?

So what’s Plan B?

Congress appears right well paralyzed on any issue like this.  Aside from cutting their donors’ taxes, we don’t expect much there.

That leaves the FDA.  Could it be persuaded to issue a regulation preempting innovator liability?  There is that 1962 uncodified “direct conflict” preemption clause, and a lot of FDA statements about how its regulatory scheme is not supposed to change the standards of common-law liability.  That is one plausible outcome, but plaintiffs would be active, too, demanding an end to preemption of generic products.  Does a regulatory fix for innovator liability thus degenerate into a three-way fight between branded, generic, and plaintiffs?  That’s a recipe for paralysis, as well.

How does one litigate an innovator liability case?  Unlike a product liability case, the defendant isn’t a manufacturer, so it doesn’t have access to design, manufacturing, warning, and adverse report information about the product that actually caused (allegedly) the plaintiff’s harm.  At minimum that’s a serious discovery problem.  Will the solution be joining generic drug manufacturers as third-party defendants?  That would be a fine finger-pointing mess, and what would the consequences be for preemption?  Even the DDLaw Blog might be forced to take sides, which for eleven years we have been able to avoid doing.  Who knows, depending on where a plaintiff chose to sue, it might be difficult under BMS to obtain personal jurisdiction over the generic manufacturer.  These are just a few of the questions that broader adoption of innovator liability would pose.

We don’t like being the ones to point out the dark clouds on the horizon.  We’d much rather celebrate defense wins – and we hope we do in T.H., Rafferty, and McNair.  But our clients don’t like surprises, and given the size of the threat posed by innovator liability, we’d be remiss not to point out what we know/fear is out there.  After all, innovator liability is not even on the ACI’s own agenda (although it was mentioned) this year.  So a word to the wise.  Don’t be caught napping.  Think about Plan B.