We bloggers don’t generally consider the Drug and Device Law sandbox to extend to illegal drugs.  We regard that as a completely separate can of worms.  But what of a drug – like marijuana – that’s in between being legal and being illegal?  In an increasing number of states, marijuana’s current situation is a bit like Schroedinger’s famous cat, legal and illegal at the same time depending on who’s enforcing what law.

The same could be said of sports betting – at least until last week, when the United States Supreme Court decided Murphy v. National Collegiate Athletic Assn., ___ S. Ct. ___, 2018 WL 2186168 (U.S. May 14, 2018).  The federal government had banned sports betting (except in Nevada), but a number of states (including New Jersey, the real plaintiff) were champing at the bet to legalize – and reap tax revenues from – gambling on sporting events.

The Supreme Court basically said that the federal government couldn’t force the states to abstain from legalizing sports betting.  The feds could not “commandeer” state law enforcement and require them to keep sports betting illegal:

The [statutory] provision at issue here − prohibiting state authorization of sports gambling − violates the anticommandeering rule. That provision unequivocally dictates what a state legislature may and may not do. . . .  [S]tate legislatures are put under the direct control of Congress.  It is as if federal officers were installed in state legislative chambers and were armed with the authority to stop legislators from voting on any offending proposals. A more direct affront to state sovereignty is not easy to imagine.

Murphy, 2018 WL 2186168, at *13.  See Id. at *17 (“Just as Congress lacks the power to order a state legislature not to enact a law authorizing sports gambling, it may not order a state legislature to refrain from enacting a law licensing sports gambling.”). The federal scheme “would break down if a State broadly decriminalized sports gambling.”  Id. at *19.

The Court viewed both affirmative and negative demands that the states do what the feds want as barred by that principle:

Here is an illustration.  [The statute] includes an exemption for [Nevada], but suppose Congress did not adopt such an exemption.  Suppose Congress ordered States with legalized sports betting to take the affirmative step of criminalizing that activity and ordered the remaining States to retain their laws prohibiting sports betting. There is no good reason why the former would intrude more deeply on state sovereignty than the latter.

Id.  This example certainly seems to resembles certain noises emanating from the current Department of Justice that it might seek to roll back state legalization of marijuana.

Now, let’s be clear, “commandeering” is not something that dissolves federal powers provided for in the constitution.  It would not allow the department to re-institute Jim Crow, let alone slavery.  Federal powers in the constitution (such as power over interstate commerce) remain:

The legislative powers granted to Congress are sizable, but they are not unlimited. The Constitution confers on Congress not plenary legislative power but only certain enumerated powers.  Therefore, all other legislative power is reserved for the States, as the Tenth Amendment confirms.  And conspicuously absent from the list of powers given to Congress is the power to issue direct orders to the governments of the States. The anticommandeering doctrine simply represents the recognition of this limit on congressional authority.

Id. at *10.  But once the state decides to legalize the activity within its borders, the feds can’t force the states to keep that activity illegal under state lawId. at *18 (“If the people of a State support the legalization of sports gambling, federal law would make the activity illegal.”).  A federal law that only operates only to “undermine[] whatever policy is favored by the people of a State” is both “perverse” and “weird.” Id. at *18.

Thus, what Murphy calls “the anticomandeering principle” is limited.  While it could well prevent DoJ from – as the “example” above indicates – “order[ing] States with legalized [marijuana] to take the affirmative step of criminalizing that activity,” id. at *13, the feds still retain the power, for example, to ban marijuana from interstate commerce.  Murphy also leaves open the possibility that a federal statute, phrased (unlike the law before the Court) explicitly in terms of federal preemption and not directed at states, might have provided means of avoiding the anticomandeering principle.  Id. at *15-16 (“every form of preemption is based on a federal law that regulates the conduct of private actors, not the States”). So that’s another possible source of federal power to continue pothibition, should Congress choose to act in that fashion.

There’s one other place where would be marijuana entrepreneurs – and states wishing to raise revenue from taxing such enterprises – might be able to put the anticomandeering principle to good use.  One big problem has been federal laws that prevent even legalized marijuana businesses from accessing the banking system.  While the feds can certainly continue that practice, whether it’s a good or bad idea, with respect to federally regulated banks, we think that Murphy casts considerable doubt on whether the federal government can tell state banks that they cannot accept deposits from marijuana businesses that the state regulating those banks has declared to be legal.

We don’t claim to know all the ins and outs of anticommandeering – a word we had never seen before reading Murphy.  But if a state, in its wisdom, chooses to legalize commerce in marijuana, it seems equally “perverse” and “weird” to require those legal businesses to bury the money they legally make in their basements rather than to deposit it in a bank regulated by the same government that legalized their activities.

 

If  clients get sued by someone where physical or financial injury seems remote, unclear, or speculative, consider raising the defense of lack of standing.  Courts are for resolving actual disputes among parties.  As we said a little more than a month ago in another post on standing, courts are not debate halls.  The standing issue was front and center in the recent case of Center for Responsible Science v. Gottlieb, 2018 WL 1997266 (D.D.C. April 27, 2018).  Because the plaintiffs lacked standing, the case was dismissed.

The plaintiffs were three individuals and one organization, the Center for Responsible Science (CRS).  They sued over the FDA’s rejection of their Citizen Petition, which demanded that three specific warnings be added to standard informed consent forms for clinical trials.  The proposed warnings would have told trial participants that (1) animal tests might not be predictive of human safety, (2) some participants in clinical trials for investigative drugs died or were seriously injured, and (3) the drugs in the trial might end up proving to be unsafe or ineffective in humans. The FDA denied the Petition because the additional language applied only to drugs, whereas the standard informed consent forms apply to all clinical trials.

Who were the plaintiffs?  How were they harmed by the FDA’s denial of the Petition?  The three individuals included two people who had previously participated in clinical trials, though it seems nothing bad happened to those two.  The third individual lost a son as a result of his participation in a clinical trial.  The organization, CRS, is a non-profit, non-member organization that promotes advances in regulatory science and advocates better results for patients.

Did the individuals have standing?  No, they did not.  The lawsuit sought injunctive relief, so past harm was irrelevant.  The problem for the individuals was that they could not establish future harm traceable to the FDA’s denial of the Petition.  Any future injury would stem from lack of information, but these individuals clearly had the information (that animal tests are not completely predictive of human safety/efficacy, and that clinical trials pose the risk of death/injury).  Oddly, just by bringing the lawsuit, the plaintiffs demonstrated their lack of standing.  You might put this ruling down to sophistry, but the logic is inescapable.

Does the organization have standing?  Not here, not based on the allegations in the complaint.  An organization can bring a lawsuit on behalf of itself or its members.  But remember that CRS does not have members.  So we are thrown back onto organizational standing, the law concerning which is, as the court admits, “not a model of clarity.”  An organization must show the same things an individual must show: injury, causation, and redressability.  The injury must be concrete and demonstrable.  There must be a consequent drain on the organization’s resources.  A setback to the organization’s social interests will not suffice.  Here, CRS alleged standing “because the interests at stake are germane to [its] purposes, and FDA’s response will require further extensive advocacy work on [its] part, placing a significant train on its limited resources, causing a diversion of its resources, and the frustration of its mission.”  The court held that these allegations, plus others, were too conclusory and vague.  You might chalk this conclusion up to TwIqbal, but it is actually a tougher test for plaintiffs to meet because lack of standing is a Rule 12(b)(1) motion that goes to the court’s subject matter jurisdiction.  Thus, the plaintiff’s factual allegations will be subject to “closer scrutiny.”  CRS’s allegations could not survive such closer scrutiny, but the court permitted CRS to amend the complaint to show programmatic, concrete harms that truly would be above and beyond the organization’s day-to-day advocacy mission.

We will not speculate as to whether CRS can satisfy this test on the next go around.  We leave speculation to plaintiffs.

With the nicer weather quickly approaching, we have been told that Chicago, IL is the place to be from June 13-15. Is something special happening in Millennium Park? Are the Cubs playing the Cardinals at Wrigley? Do the ChiSox still exist?

We found something even better.  American Conference Institute, in collaboration with HP, are presenting the first Legal, Regulatory, and Business conference on 3D Printing. This program is a “can’t miss” industry event that prepares those in the 3D printing community with the knowledge they need to tackle the rapidly rising regulatory, IP, and product liability challenges in this space.

In addition to being present to say some friendly hellos, Bexis will be taking part in one of the more anticipated sessions “3D Printing Potential Product Liability Issues” focusing on theories of liabilities companies in the industry will face, potential defenses that can be utilized, and ways in which companies can minimize their product liability risks.

Since we hope to see you at the conference, we wanted to share two pieces of helpful news:

  • First, the discounted rates for the program end Friday, May 11th making now the best time to register for the event, if you have yet to do so.
  • Second, as a thank you for Bexis’s participation in the program, ACI is offering a special registration discount for the conference for the blog’s readers. Make sure to use the code D10-767-BCK10 when you register. You will save 10% off published rates.

We look forward to seeing you in Chicago this June for an outstanding event!

Whenever we examine “right to try” (“RTT”) legislation, on either the state or federal level, one of the most important things we look at is whether the would-be statute provides immunity from civil litigation to our clients – the companies that invent and manufacture the potentially life-saving products that are at issue. Since none of these RTT bills has ever purported to force manufacturer participation, immunity is not surprisingly central to have any chance of obtaining their voluntary consent.

This isn’t merely an abstract consideration.

While most persons receiving access to investigational drugs via a RTT program undoubtedly would be thankful for the assistance, even if the treatment did not succeed, all it takes is one ingrate with a lawyer to ruin things for everybody.  That’s precisely the scenario that occurred in Ward v. Schaefer, 2017 WL 5505405 (D. Mass. Nov. 16, 2017), except that the plaintiff was also his own lawyer.  While Ward did not involve RTT (Massachusetts has no such statute), the plaintiff sued over an experimental drug provided under the FDA’s “compassionate use” program, which is essentially RTT without the right-wing, anti-federal government overlay.  Indeed, Ward may well be the reason that the current federal RTT bill also extends its immunity provisions to cover FDA-supervised compassionate use.

The plaintiff in Ward had a rare genetic condition that caused severe health problems.  Plaintiff sued everybody – the drug manufacturer, a successor company, and the government officers (National Institutes of Health) who were involved in the treatment protocol.  Ward, 2017 WL 5505405, at *4.  Rather than compassionate use, plaintiff complained that defendants were really after pecuniary gain:

The complaint alleges that the four individuals induced [plaintiff] to participate as the only subject in a long-term trial of [the drug] by misrepresenting that the drug would reverse his [condition].  According to the complaint, they withheld their true motivation for the study, which was to test the effect of [the drug] . . . “hoping the drug would be considered a potential breakthrough in the prevention of cardiovascular disease,” as well as to acquire long-term safety data, in order to accelerate the sale of [the manufacturer] to . . . a large pharmaceutical company.

Id. at *2.

The “large pharmaceutical company” successfully had the allegations against it dismissed for failure to state a claim.  Ward v. Auerbach, 2017 WL 2724938, at *8 (D. Mass. June 23, 2017) (“mere knowledge of [defendant’s] treatment − which is all that is alleged in the complaint − is not sufficient to impose liability for any fraud alleged to have induced him to participate in the clinical trial nor any harm caused by the trial”).  Plaintiff failed to establish personal jurisdiction against the manufacturer of the drug.  Id. at *10-13.  Compassionate use programs did not confer immunity.  That defense was never an issue in Ward.

The specific legal ruling in Ward substituted the United States government as an entity for the individual plaintiffs.  2017 WL 5505405, at *5-6.  That hardly matters from our perspective.  To us, the entire Ward litigation demonstrates that our concerns about possible manufacturer liability when unproven investigational drugs are being dispensed outside of the established clinical trial framework are quite valid.  It wouldn’t take many suits like Ward to convince drug manufacturers that, simply to avoid litigation expense, they should have nothing to do with compassionate use or RTT.  Ward lasted for the better part of two years, produced five opinions, and at least one appeal.

The remainder of the litigation, against the United States government for the alleged involvement of federal employees in administering plaintiff’s compassionate use protocol, was ultimately dismissed a couple of months ago on grounds of sovereign immunity.  See Ward v. Schaefer, 2018 WL 1096829, at *6 (D. Mass. Feb. 27, 2018).  In any event, Ward is a stark reminder that litigants will sue over anything, even the most benignly intended programs like compassionate use/RTT if they think there’s a buck to be made in damages.  Thus, immunity from suit is a critical factor to inducing the voluntary manufacturer participation without which these programs cannot possibly succeed.

The first year law school class we most anticipated was Constitutional Law.  Then disappointment greeted us when we learned that the first year course covered only broad institutional topics such as judicial review and separation of powers.  The sexy bits – First Amendment, Fourth Amendment, Equal Protection, and Due Process – were reserved for higher level courses.  Con Law I threatened to be a snooze-fest.  No worries.  Our teacher, Cass Sunstein, kept the class lively and made a compelling case that the institutional architecture of the Constitution was, in fact, the primary source of civil rights.  The Bill of Rights  might get asked to the prom, but checks and balances, jurisdictional doctrines, and even the lonely, oft-forgotten Tenth Amendment are lovely, lifelong companions.  And consider the commerce clause.  (U.S. Const. art. I, section 8, cl. 3.)  You might remember reading how there was enormous controversy as to whether the commerce clause could support enactment of the 1964 Civil Rights Act.  How could Congress regulate the dealings of a little BBQ restaurant in Birmingham or a motel in Atlanta? SCOTUS decided that the commerce clause could support such federal intervention.  And yet, if that is so, what couldn’t the commerce clause support?  Our courts are still wrestling with that question.  Remember the challenges to the Affordable Care Act?    

 

There is a flip side to the endlessly elastic, expansive commerce clause: say hello to the dormant commerce clause, which is like the crazy uncle who falls asleep on the couch and wakes up at odd moments to utter something  loud and inconvenient.  The dormant commerce clause perks up every once in a while to announce that a state’s effort to regulate commerce has gone too far.  James Madison originally harbored doubts that states could impose shipping tonnage duties, given that the commerce clause invested such powers in a unitary, federal authority.  In the judicial context, Chief Justice Marshall first alluded to the dormant commerce clause in Gibbons v. Ogden, 22 U.S. 1 (1824).  The notion is that implicit in the power of Congress to regulate commerce is a corollary constraint on the power of states to enact legislation that interferes with or burdens interstate commerce.  A state cannot regulate commerce occurring wholly outside its borders.  A state law violates the dormant commerce clause’s extraterritoriality principle if it either expressly applies to out-of-state commerce or if it has that practical effect, regardless of the legislature’s intent.

 

When we were in law school, the big dormant commerce clause case was City of Philadelphia v. New Jersey, 437 U.S. 617 ((1978), in which SCOTUS held that New Jersey could not exclude Philly’s garbage.  (Insert your favorite Jersey jokes here.)  To a certain extent, the dormant commerce clause came to be thought of as primarily prohibiting a state from discriminating against commerce from another state.  But there is more to the dormant commerce clause than a nondiscrimination principle.  Think of Kassel v. Consolidated Freightways Corp., 450 U.S. 662 (1981), where SCOTUS struck down Iowa’s law against double/tandem tractor trailers as constituting an unreasonable burden on interstate commerce.  There wasn’t discrimination against commerce from another state, but the rule would have had a deleterious affect on trucks rolling through Iowa and other states.

 

All that being said, Justices Scalia and Thomas essentially decried the dormant commerce clause doctrine as a judicial fraud.  That was and remains a minority position.  We certainly do not think the dormant commerce clause is a fraud, and we have hosted a couple of excellent guest posts on this blog about whether the dormant commerce clause might stop states from using their corporation registration statutes to extend personal jurisdiction over companies that played no actual in-state role in the matter being litigated.  See here and here for example.

  

Todays case, Ass’n for Accessible Meds v. Frosh, 2018 U.S. App. LEXIS 9265, 2018 WL 1770978 (4th Cir. April 13, 2018), involves an interesting application of the dormant commerce clause.  It applied to drugs, so we aren’t wandering too far afield.  Maryland enacted a statute (the Act) concerning “Public Health – Essential Off Patent or Generic Drugs – Price Gouging – Prohibition” that regulated drug pricing both inside and outside Maryland.  The Act prohibited manufacturers and wholesale distributors from charging an “unconscionable” price even on initial, upstream sales of drugs that occurred outside Maryland.   A prescription drug manufacturer trade association filed a lawsuit challenging the Act on the grounds that it violated the dormant commerce clause and was unconstitutionally vague.  The district court denied the plaintiff’s motion for a preliminary injunction, and the matter went up to the Fourth Circuit.  The appellate court held that the district court got it wrong, that the antigouging Act’s reach beyond Maryland’s borders was a violation of the dormant commerce clause, and that judgment should be entered in favor of the plaintiff.  Adios, antigouging Act.

 

Only one member of the plaintiff trade association was a drug manufacturer actually based in Maryland.  Drug manufacturers typically sell their products to wholesale pharmaceutical distributors – not one of which was based in Maryland.    Thus, very few of the sales regulated by the Act took place within Maryland’s borders.  In defending the Act, Maryland was forced to acknowledge that it intended to reach the series of upstream, wholesale transactions, not merely the downstream sales to Maryland consumers.  Maryland argued that the effects on upstream, out-of-Maryland sales were indirect effects that could not implicate the dormant commerce clause.  But it is hard to see how such outside-Maryland effects were indirect when they were fully intended by the legislature.  Moreover, the Act explicitly prohibited a manufacturer’s use of a defense that it did not directly sell to a consumer in Maryland.    The inescapable fact is that the Act was a price control on sales outside Maryland.  The Fourth Circuit held that Maryland cannot impose its price preferences outside its borders, even if it thinks it has to do so to create lower prices for consumers within its borders. 

 

Further, the Fourth Circuit considered how the Act might interact with the legitimate regulatory regimes of other states.  Different states could subject prescription drug manufacturers to conflicting requirements with respect to wholesale pricing.  The commerce clause protects against inconsistent legislation arising from the projection of one state regulatory regime onto the jurisdiction of another state. None of this was intended by the Fourth Circuit to say that states cannot enact legislation to secure lower prescription drug prices.  (There was a vigorous dissent in the case, which was longer than the majority opinion and which excoriated the majority for blessing price gouging).  The issue is how a state goes about regulating prices within its borders.  If it tries to do so by  regulating external transactions, it runs afoul of the dormant commerce clause.

 

We cannot read the Frosh case without daydreaming about how its logic applies to the sorts of cases we deal with every day.  We know from preemption precedents that jury verdicts can be treated as a species of state legislation.  When juries are permitted to rewrite product labels and Instructions for Use, how are they not imposing extraterritorial effects?  How are they not setting up prescription drug and device manufacturers to face inconsistent regulatory regimes?  How are they not interfering with interstate commerce?  Perhaps you think that we are extending the logic of the dormant commerce clause too far, but at least, unlike the crazy-quilt of jury verdicts we read about every day, it is logic.

 

 

 

 

 

 

We have made some technical upgrades to the blog that should help you access our research posts more quickly and efficiently. Now, at the very top of the blog – above even our “Drug and Device Law” caption, you will find several new category titles: Scorecards, General Research, State-By-State Research, and Cheat Sheets. If you click on them, or on the hyperlinks in this post, which lead to the same place, you will be taken to lists – with hyperlinks – for all of our research posts that fit in each of these categories.

These lists are organized identically to the lists in our “Where to Find Our Research 3.0” post we published at the beginning of 2018, except that these are more up to date, and you don’t have to worry about finding the individual posts that contains the list. Check them out and tell us what you think. You can save your clients a lot of money by seeing what we have on any given topic before starting your own research from scratch. Re-inventing the wheel does nobody any good.

 

We recently read an editorial in The New York Times advocating lawsuits as a means of regulating an industry. Politicians are gripped by paralysis – so the argument goes – thus we must entrust the issue to litigators, smart judges, and good-hearted jurors.  After all, hadn’t years of product liability litigation resulted in safer products?

Well, … no.  Data doesn’t  show that litigation leads to safer products.  Fewer products, probably.  More expensive products, definitely.  But litigation is a perfectly awful way to impose safety regulations on an industry.  Say what you will about politicians, but at least they are somewhat representative of people’s will.  Say what you will about regulators, but at least they possess some expertise.  If there is paralysis in the halls of a legislature or government agency, that paralysis reflects a lack of consensus, a clash of passions, or a genuine conflict in the science.  Litigation is an eccentric means of ruling on general issues – it is off-center.  The peculiarities of one lawyer’s eloquence, or one judge’s bent for social engineering or twelve jurors’ emotions can produce a verdict with profoundly puzzling and profoundly enormous implications.  It is a rotten way to lay out general safety rules.  (Mind you, we are not talking about constitutional issues that may require judicial intervention.)  The various say-sos of jurors or even judges can be unpredictable, unbalanced, and inconsistent.  Lawsuits are not designed to determine safety science or policy.  Instead, they resolve disputes between parties.

Enter the judicial doctrine of standing. You cannot pursue a lawsuit merely because you are sure you have the right idea of How It’s Got to Be.  Rather, you must be actually injured in fact.  Injured sensibilities are not enough.  Not every Nosy Nellie qualifies as a plaintiff.  The doctrine of standing means that lawsuits pertain to actual disputes.  Courtrooms are not debating societies.  If there are judges anywhere in the land, say, in Brooklyn or Boston or Los Angeles or anywhere else who think they have a great idea about how to regulate consumer products, great; write a letter or comment to a legislator or regulator, but don’t glom onto a lawsuit as a way of playing the role of Philosopher King.  Maybe the judiciary is not always the “least dangerous branch,” but limiting doctrines such as standing are intended to make it so.

Standing is the key issue in today’s case, Debernardis v. IQ Formulations, LLC, 2018 U.S. Dist. LEXIS 52445 (S.D. Fla. March 29, 2018).  Debernardis was a purported class action alleging that certain dietary supplements contained a stimulant that was unlawful and, therefore, rendered the supplements “adulterated” or “misbranded.”  The plaintiffs parsed the FDCA regulations to justify this allegation.  While the FDCA does not provide for a private right of action, there are a number of state consumer protection laws that incorporate FDCA labelling provisions and provide a mechanism for private suits.  Accordingly, the plaintiffs in Debernardis contended that the makers of the supplements had violated Florida, Illinois, and New York deceptive practices acts and other laws.  The plaintiffs alleged that they suffered economic injury because they would not have purchased the supplements had they known that one of its ingredients had not been approved by the FDA. Importantly, the plaintiffs did not allege that they had suffered any physical harm or that the supplements did not work as advertised.

The defendants moved to dismiss the class complaint, arguing, inter alia, that the plaintiffs lacked standing to bring the action.  The Debernardis court began with an overview of the standing requirement, describing the actual injury requirement, as well as the need for plaintiffs to demonstrate “a causal connection between the injury and the conduct complained of.”  As we argued in a recent post, it is remarkable how many cases come down to the issue of causation.  The Debernardis court also mentioned the requirement that plaintiffs must show “a likelihood that a court ruling in [the plaintiff’s] favor would remedy [his] injury.”  These standing requirements are in no way relaxed for class actions.  The named plaintiffs still must still allege that they personally have been injured such as to satisfy the test for standing.
We are pleased to report that the key standing cases cited by the defendants in Debernardis were three cases residing within the Third Circuit.   One in particular, Hubert v. Gen. Nutrition Corp., 2017 WL 3971912 (W.D. Pa. Sept. 8, 2017), was very similar to Debernardis and arrived at a dismissal for want of standing.  In Hubert, the plaintiffs offered only a “threadbare allegation” that they paid more for supplements than they would have if the supplements had been accurately labeled.  Without supporting factual allegations, such conclusory statements did not establish injury in fact.  Moreover, the Hubert court rejected a benefit-of-the-bargain theory because the plaintiffs alleged no adverse health consequences nor that the supplements failed to perform as advertised.  Exactly the same weaknesses bedeviled the Debernardis complaint.  No actual, concrete injury was set forth in the complaint.  (The plaintiffs in Debernardis relied on two cases from the Eleventh Circuit. That circuit was the winner of a big, fat No-Prize from us last year, as it generated the most cases in our Bottom Ten list.  In any event, the Eleventh Circuit cases had some meat to their price differential theories – something wholly lacking in Debernardis.)
The Debernardis court confronted the issue of standing squarely and concluded that the plaintiffs did not have it:  “The broad claim that they would not have purchased the Supplements at all had they known that [the defendant] had failed to follow the FDA’s approval procedure regarding an ingredient is insufficient to confer standing.” Similar reasoning might apply to some of the drug and device cases we encounter.

We’ve always been against the concept of class action tolling:  that merely by filing a class action – the class action does not have to have any merit – a class action lawyer magically stops the running of the statute of limitations for everybody in the class.  To us, this gives Fed. R. Civ. P. 23 a substantive effect, which violates the Rules Enabling Act (you can read more about that, here, and here, in other contexts).  It also confers an automatic one-way benefit on putative class members, although in other circumstances the class action lawyers perpetrating this sleight of hand will cheerfully tell courts that “no class exists before certification.”

The Supreme Court first allowed class action tolling in American Pipe & Construction Co. v. Utah, 414 U.S. 538 (1974), an antitrust case, ostensibly to “further[] the purposes of litigative efficiency and economy,” so that no “protective litigation” (by plaintiffs fearing their own claims would be time barred) would clog up the federal courts.  Id. at 553-54.  The impact on defendants would be minimal, suggested the majority, because “[d]uring the pendency of the [certification] determination . . ., which is to be made ‘as soon as practicable after the commencement of an action,’ potential class members are mere passive beneficiaries.”  Id. at 552 (quoting former Rule 23(c)(1)).

We had hopes that this rule, being “specifically grounded in policies of judicial administration,” Smith v. Bayer Corp., 564 U.S. 299, 314 n.10 (2011), would be abolished after its encouragement of inequitable gamesmanship became clear, and once other, less prejudicial methods of judicial administration to address protective filings – such as the inactive dockets widely used in asbestos litigation – were invented.  However, the Court dodged abolition in California Public Employees’ Retirement System v. ANZ Securities, Inc., 137 S. Ct. 2042 (2017), holding only that American Pipe did not apply to statutes of repose . Id. at 2052-53.  The Court did, however, point out that concern about protective filings was much “overstated.”  Id. at 2054 (“courts, furthermore, have ample means and methods to administer their dockets and to ensure that any additional filings proceed in an orderly fashion”).

In any event, all of the Supreme Court’s class action tolling cases, American Pipe, supra, Crown, Cork & Seal Co. v. Parker, 462 U.S. 345 (1983), and Chardon v. Soto, 462 U.S. 650 (1983), involved successive suits in the same jurisdiction – federal-question cases brought in federal court.  So-called “cross-jurisdictional” class action tolling, is much worse, and has intruded at times directly into our sandbox (although thankfully, class action have largely gone extinct in personal injury cases).  As we said in an earlier post:

“Cross-jurisdictional” tolling, on the other hand, refers to allowing a failed class action filed in jurisdiction “A” to toll the statute of limitations on an individual action later filed by a putative class member in jurisdiction “B.”  In a lot of cases that means a state court action filed after a failed federal court class action.  In other cases it means filing an individual action in one state after class certification is denied in a different state.  In either case, the policy of avoidance of protective filings doesn’t work.  In fact, the opposite is true.  A liberal tolling rule only invites more suits to be filed in the jurisdiction that has it.  Thus, even on its own terms, cross-jurisdictional tolling based upon meritless class actions doesn’t make sense.

Thus, going back to the Bone Screw litigation, we have vehemently criticized cross-jurisdictional class action tolling.  Back then plaintiffs asserted that statutes of limitations all over the country were tolled by a baseless class action, In re Orthopedic Bone Screw Products Liability Litigation, 1995 WL 273597 (E.D. Pa. Feb. 22, 1995), in which certification was denied and no appeal even attempted.  Even this relatively quick adjudication took almost 14 months (from 12/30/93, when the class action was filed until denial of certification on 2/22/95).  We litigated cross-jurisdictional tolling to favorable results in Maestas v. Sofamor Danek Group, 33 S.W.3d 805, 808-09 (Tenn. 2000), and Wade v. Danek Medical, Inc., 182 F.3d 281, 287-88 (4th Cir. 1999), while also appearing as amicus curiae in Portwood v. Ford Motor Co., 701 N.E.2d 1102, 1104 (Ill. 1998).  Given that cross-jurisdictional class action tolling inherently involves litigation in one state attempting to toll the statute of limitations in another state, this issue can also be framed as one implicating states-rights, and where one of the courts is federal, federalism.

Over time most states have recoiled from cross-jurisdictional class action tolling.  Largely because of our Bone Screw experience, we maintain a scorecard on the issue.  According to our list, 35 jurisdictions (Alabama, Alaska, Arizona, Arkansas, California, Colorado, DC, Florida, Idaho, Illinois, Iowa, Kansas, Kentucky, Louisiana, Maryland, Massachusetts, Minnesota, Mississippi, Missouri, Montana, Nebraska, New Mexico, New York, North Carolina, Oklahoma, Oregon, Pennsylvania, Puerto Rico, South Dakota, Tennessee, Texas, Utah, Virginia, Washington, Wyoming) reject cross-jurisdictional class action tolling; one state (Michigan) allows it where the original class was certified; and six or seven states (Delaware, Hawaii, Montana, New Jersey, Ohio, West Virginia, and maybe Connecticut) allow tolling even for meritless, out-of-state class actions.  We do not credit a couple of LIBOR decisions in which that court blatantly ignored state law.

One of the states that does recognize cross-jurisdictional class action tolling is Delaware.  See Blanco v. AMVAC Chemical Corp., 67 A.3d 392, 398-398 (Del. 2013).  A recent Delaware Supreme Court decision throws into sharp relief why such tolling is a bad idea, and offensive not only to the statute of limitations, but also to the very judicial efficiency considerations that such tolling purports to further.  See Marquinez v. Dow Chemical Co., ___ A.3d ___, 2018 WL 1324178 (Del. March 15, 2018).  Marquinez is a poster child for delay – the very sort of stale and desultory litigation that is why statutes of limitations exist in the first place.  “The plaintiff-appellants (“the plaintiffs”) worked on banana plantations in Costa Rica, Ecuador and Panama at various times in the 1970s and 1980s.”  The first purported class action wasn’t filed until 1993, in Texas.  Marquinez, 2018 WL 1324178, at *2.  Then the following things happened:

  • Removal to federal court on the basis of the Foreign Sovereign Immunities Act (one defendant was owned by a foreign government).
  • MDL consolidation in federal court.
  • Dismissal on forum non conveniens in 1995, with a “return jurisdiction” caveat – if any foreign country ruled no jurisdiction, then plaintiffs could come back to Texas.
  • The forum non conveniens ruling denied as moot all pending motions, including class certification.

Id. at *1-2.  That’s two years of post-litigation delay – between 1993 and 1995 class certification was never ruled upon.  Don’t forget that the “1970s and 1980s” claims were already at least 13 years old before the initial suit was filed.

Plaintiffs really didn’t want to be in federal court – a sure sign of substantively weak litigation.  They appealed the exercise of Foreign Sovereign Immunities jurisdiction all the way to the United States Supreme Court.  Id. at *2.  that appeal took until 2001.  Id.   Then the plaintiffs, accompanied by their lawyers, reluctantly went home.  “[T]hey were unable to prosecute their claims in other countries” so they returned to Texas, where they sought to resurrect their claims under the “return jurisdiction” caveat.  Id.  While that was going on, the Supreme Court rejected Foreign Sovereign Immunities jurisdiction in another case involving identical litigation in another state.  See Dole Food Co. v. Patrickson, 538 U.S. 468 (2003).

So in 2003 – ten years after the original class action was filed, and between 23 and 33 years after the actual events claimed in the suit, the case was remanded to Texas state court.  Then the following things happened:

  • Defendants sought to have the case thrown out due to plaintiffs’ failure to comply with prerequisites to their exercise of “return jurisdiction” rights.
  • The “return jurisdiction” provision, along with the entire forum non conveniens ruling, was declared void for want of subject matter jurisdiction.
  • Plaintiffs again moved for class certification, this time under Texas state law.
  • Defendants removed to federal court a second time, under CAFA.
  • CAFA removal failed because the litigation pre-dated CAFA.

Marquinez, 2018 WL 1324178, at *2-3.  Finally, “[o]n June 3, 2010, class certification was denied in Texas state court.” Id. at *3.

At this point plaintiffs had had enough of Texas.  They started creating satellite litigation.  In mid 2011 one plaintiff filed an individual action in Delaware state court and others filed a class action in federal court in Louisiana.  Id.

Finally, less than a week before two years elapsed after the Texas denial of class certification – on May 31, and June 2, 2012 – two new class actions were filed in Delaware federal court.  Id.

But….

Plaintiffs had screwed up, or so it appeared.  The identical suit being already pending for a year in Louisiana, the Delaware federal court dismissed the Delaware action under the “first filed rule.”  Id.  That was appealed, and eventually reversed by the Third Circuit sitting en banc.  See Chavez v. Dole Food Co., 836 F.3d 205 (3d Cir. 2016) (en banc).

While that was going on, the remaining plaintiffs (those not already litigating in Louisiana (after fleeing Texas)) were dismissed on the statute of limitations.  The District Court in Delaware “h[e]ld[] that class action tolling stopped in July 1995 when [the original court] dismissed the case for forum non conveniens.”  Id. That was in 2014.  Those plaintiffs appealed.  The Third Circuit punted the matter, on certification, to the Delaware Supreme Court.

As in Blanco, the Delaware Supreme Court seemed unduly frightened by the prospect of “placeholder” suits:

If members of a putative class cannot rely on the class action tolling exception to toll the statute of limitations, they will be forced to file “placeholder” lawsuits to preserve their claims. This would result in wasteful and duplicative litigation.

Marquinez, 2018 WL 1324178, at *4 (quoting Blanco, 67 A.3d at 395).

Did the court not look at its own description of this litigation’s ridiculously long procedural history?  Between 1993 when the action was first filed, and denial of class certification in mid-2010 not a single “placeholder” suit was filed in Delaware state or federal court.  That was despite plaintiffs’ extended lack of success in advancing the litigation.

Although nowhere mentioned in Marquinez, the Delaware statute of limitations for tort cases is two years.  10 Del. C. §8119.  Making a mockery of that legislative judgment, Marquinez held that the pendency of a meritless class action can toll the statute of limitations for many multiples of that two-year period – here 17 years, or 8½ times the statutory period – because a “clear and unambiguous” rule is necessary:

[A] clear and unambiguous rule avoids uncertainty over the starting and ending dates for statutes of limitation in cross-jurisdictional class action tolling cases.  Thus, we adopt a rule that furthers the certainty interest − cross-jurisdictional class action tolling ends only when a sister trial court has clearly, unambiguously, and finally denied class action status.

Marquinez, 2018 WL 1324178, at *5.

The mind boggles.  Seventeen years hardly corresponds to the assumption in American Pipe that class certification will be decided “as soon as practicable after the commencement of an action,” and indeed those words don’t even appear in Rule 23 any longer.  Justice Stewart, who wrote American Pipe, would no doubt be appalled.  Seventeen years is more than half the time of Justice Stewart’s tenure on the Supreme Court.

The Delaware statute itself imposed a “clear and unambiguous” rule – two years.  Is the Delaware Supreme Court going to abolish the discovery rule, fraudulent concealment and all the other factbound doctrines that toll the statute of limitations in certain situations, and thus have created uncertainty?  Defendants argue for “clear and unambiguous” rules all the time (e.g., product identification, affirmative prescriber warning causation testimony, relative risk of two).  Why here, in a situation that is certain to make Delaware the dumping ground for Latin American toxic tort litigation.

And is this rule even “clear and unambiguous”?  The Texas plaintiffs never appealed the 2010 class certification denial.  What if they had?  Does “sister trial court” then morph into an further need for certainty, tolling the statute of limitations until the first state’s denial has been “clearly, unambiguously, and finally” been affirmed on appeal?

Marquinez demonstrates why courts should never start down the slippery slope of cross-jurisdictional class action tolling.  Right after proclaiming its “clear and unambiguous” rule, the decision plunges into the minutiae of the Texas litigation, spending seven paragraphs parsing through what the Texas court’s “return jurisdiction” language – in an order void for lack of subject matter jurisdiction – must have meant.  Marquinez, 2018 WL 1324178, at *6-7.  In so doing Marquinez ended up disagreeing with two other courts also forced into that exercise by plaintiffs’ satellite litigation.  Id. at *8-9 (“respectfully disagree[ing] with the Fifth Circuit’s and the Hawai’i Supreme Court’s application of class action tolling”).  If Delaware had rejected cross-jurisdictional class action tolling in the first place, none of that Talmudic exercise would have been necessary.

Judicial efficiency is hardly furthered by forcing the courts of one state to comb through the proceedings of litigation filed elsewhere in an effort to figure out when exactly plaintiffs should not be required to rely on an arguably meritless class action filing for fear that it won’t be certified.  As Marquinez demonstrates, that exercise itself can lead to disparate results.  And now what happens?  The litigants get to engage in the costly, and probably impossible, task of piecing together what happened in the forests and fields of Latin America 40-some years ago when Nixon was president and we though Watergate was as bad as things could get.  There are some cases where no litigation is the correct answer.  If the courts of these plaintiffs’ home countries weren’t willing to entertain this litigation, there is no good reason for Delaware, or any other state, to become the dumping ground for the Third World’s unwanted lawsuits.  Like Justice Stewart, we know a bad result when we see it.

Maybe it doesn’t matter.  Maybe, between Bauman and BMS, would-be non-resident class-action plaintiffs won’t be able obtain personal jurisdiction to file the same lawsuit over and over again in different jurisdictions (here, at least Texas, Louisiana, and Hawai’i before Delaware).  Maybe courts will resort to forum non conveniens to throw these Latin American cases out for good.  See Aranada v. Philip Morris, USA, Inc., ___ A.3d ___, 2018 WL 1415215 (Del. March 22, 2018) (similar overseas chemical exposure case pitched for inconvenience, even though another forum not available).  Maybe the Supreme Court will again re-examine American Pipe, and at least do away with piling meritless class actions on top of other meritless class actions.

But conversely, Bauman and BMS also mean that Delaware, as the “home” of many large corporations, will be assuming outsized importance in the litigation landscape.  Delaware courts are going to have enough to do without being required to sift through the detritus of other jurisdictions’ failed class action litigation.

Finally, there’s a message here for any other jurisdiction considering cross-jurisdictional class action tolling – don’t go there.  Don’t go anywhere near there.

 

 

As our loyal readers know, your bloggers like to keep an eye on advances affecting our drug and device clients – and take particular interest in the product liability implications of such advances.

Which brings us to pharmacogenomics, the study of how human genetic information impacts drug response. Rapid advances in our understanding of this area mean we now know that genetic differences between individuals can affect everything from the drug or drug class most likely to provide benefit to the likelihood of drug toxicity.

Pharmacogenomics is already affecting product liability litigation, and we’d place our bets on further impact being just around the corner. That’s why Bexis and frequent guest blogger/Reed Smith associate Matt Jacobson are presenting a free, 60-minute webinar on “Pharmacogenomics and Product Liability: What’s Already Happened, and What’s Just Around the Corner” on April 5 at 3 p.m. ET.

This webinar is presumptively approved for 1.0 general CLE credit in California, Illinois, New Jersey, Pennsylvania, Texas and West Virginia. For lawyers licensed in New York, this course is eligible for 1.0 credit under New York’s Approved Jurisdiction Policy.

The program is free and open to anyone interested in tuning in, but you do have to sign up, which you can do here.

The DRI’s Drug and Medical Device Committee will present its annual seminar on May 10-11 at the New York Marriott Marquis. The presentations will include the latest mass tort trends, including litigation funding; the current status of the expanding opioid litigation; the internet of things and the increasing cyber security risk of new technology and medical devices; the importance of the power of persuasion in jury trials with a unique look at millennials; and current themes to expect during plaintiffs’ counsels’ closing arguments. These presentations will be made by in-house counsel, outside attorneys, law school academicians, experienced trial counsel and a jury consultant. For more information on the seminar, you may refer to the attached brochure and you may register here.