What follows is a rather involved guest post by Reed Smith‘s Kevin Hara.  Actually, Kevin has contributed enough to the Blog over the last couple of years that he’s more of a crypto-blogger than a guest.  Instead of the more common case-specific post, Kevin has put together his own 50-state survey on state statutes of repose.  A lot of states have a variety of different statutes of repose.  Some of these statutes (such as those based on useful life) can be useful in prescription medical product liability litigation, others (like those involving fixtures to real property) – not so much.  Anyway, in this guest post Kevin endeavors to sort things out on a nationwide basis.  As always our guest bloggers deserve 100% of the credit, and any blame, for their work.

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Although this relatively recent Law360 article discussed statutes of repose, this powerful affirmative defense remains underutilized, so this post revisits it and digs a little deeper.  This defense, where applicable, provides a potentially swift conclusion to an action with accompanying cost savings for the client.  Further, defense counsel may move to dismiss at the pleading stage, where the applicability of the defense is apparent from the complaint.  Many courts view statutes of repose as substantive, rather than procedural, unlike statutes of limitation – so the plaintiff cannot escape by becoming a litigation tourist.

The state of Tennessee’s statute of repose serves as a perfect example of a bright line application in a prescription product liability action, regardless of a plaintiff’s knowledge wherein “a delay, even without knowledge of the hazard involved in the delay, may preclude the bringing of an otherwise meritorious claim.”  Montgomery v. Wyeth, 580 F.3d 455, 463, 466 (6th Cir. 2009) (applying Tennessee law).  Tennessee courts have explained this rule succinctly:

A statute of limitations governs the time within which suit may be brought once a cause of action accrued. A statute of repose limits the time within which an action may be brought, but it is entirely unrelated to the accrual of a cause of action and can, in fact, bar a cause of action before it has accrued.

Jones v. Methodist Healthcare, 83 S.W. 3d 739, 744 (Tenn. App. 2001) (emphasis added).

The Texas Supreme Court provided a thoughtful analysis of that state’s clear-cut statute of repose:

Indeed, the key purpose of a repose statute is to eliminate uncertainties under the related statute of limitations and to create a final deadline for filing suit that is not subject to any exceptions, except perhaps those clear exceptions in the statute itself.  In recognizing the absolute nature of a statute of repose, we have explained that while statutes of limitations operate procedurally to bar the enforcement of a right, a statute of repose takes away the right altogether, creating a substantive right to be free of liability after a specified time.  The whole point of layering a statute of repose over the statute of limitations is to fix an outer limit beyond which no action can be maintained.  One practical upside of curbing open-ended exposure is to prevent defendants from answering claims where evidence may prove elusive due to unavailable witnesses (perhaps deceased), faded memories, lost or destroyed records, and institutions that no longer exist.

Methodist Healthcare Sys. of San Antonio v. Rankin, 307 S.W.3d 283, 286-87  (Tex. 2010 ) (internal citations and marks omitted) (emphasis added)

The Tennessee and Texas statutes of repose are elegant in their simplicity:  you are either in, or you’re out.  Period.  No ifs, ands, or buts.  Iowa, Connecticut, and North Carolina are a few of the states with similarly straightforward statutes of repose.  However, perhaps because they are so unyielding – and unlike statutes of limitation, the vast majority of which are subject to the discovery rule – statutes of repose are often more limited in scope, and therefore not uniformly applicable to manufacturers of prescription medical products.

That said, statutes of repose add a significant item to any defense practitioner’s toolbox because they can take a case, and simply “nip it in the bud,” a common expression that is illustrative here.  Indeed, it is a phrase that sometimes gets mixed up, such as with the malapropism “nip it in the butt,” which got us to thinking about something else that often leads to confusion: music.  All too often, people misapprehend the words to a song, and there are a multitude of websites with compilations of some of the more notable – and incidentally, most humorous – misheard song lyrics, including Mentalfloss , Huffington Post, and New Musical Express, but here are some of the best.  Perhaps the most famous example is the Jimi Hendrix classic “Purple Haze,” with famous phrase “Excuse me while I kiss the sky,” interpreted erroneously as: “Excuse me while I kiss this guy.”

Who can forget the San Francisco Bay Area’s own all-time great rock band Creedence Clearwater Revival’s song “Bad Moon Rising,” with part of the chorus, “There’s a bad moon on the rise,” replaced with “There’s a bathroom on the right.”  (In fact, this error became prominent that front man John Fogerty was known to purposefully sing that rendition and gesture to the proverbial restroom.)  Another prime example is the upbeat Johnny Nash song “I Can See Clearly Now,” with the line from the refrain “I can see clearly now, the rain is gone,” somehow thought to be: “I can see clearly now, Lorraine is gone.”  It would be remiss not to mention The Monkees, and their hit “I’m A Believer,” with the eternally ecstatic line, “Then I saw her face, now I’m a believer!” instead substituted with the diametrically opposed – and frankly cruel, but evocative – “Then I saw her face, now I’m gonna leave her!”

Bexis pointed out that one could interpret the chorus of British band ELO’s chart topper “Evil Woman,” “Evil woman,” as “You need a woman.”  He also misunderstood for years (until the advent of lyrics services on the Internet) the line in Steppenwolf’sFrom Here To There Eventually” as “cause benign, rather than “caused by man.”

These faux pas are fitting metaphors for failing to comprehend the importance of statutes of repose.  While it is easy enough to have a chuckle when a friend butchers a line in a favorite song, failing to seize an opportunity to secure a dismissal with prejudice is no laughing matter.  Defense counsel should thoroughly consider and explore all possible options for resolving a case quickly in the name of expediency and client satisfaction.

To assist with those aims, here is a rundown of the applicable statutes of repose for all 50 jurisdictions, including discussions of which states apply the discovery rule, which utilize presumptions rather than complete defenses, and other subtle variations, beginning with those states whose statutes are most likely to apply to prescription product claims.

States With Statutes That Are Applicable To Prescription Product Liability Claims

 Alabama – Alabama applies a unique, common law, 20 year rule of repose which “arose within the context of property disputes,” but according to the Alabama Supreme Court “the rationale underlying the rule is not so limited and, accordingly, the rule has been applied in other contexts, including those alleging tort claims.”  Ex parte Liberty National Life Insurance Co., 825 So. 2d 758, 763-64 (Ala. 2002); see also Owens-Illinois, Inc. v. Wells, 50 So.3d 413, 420 (Ala. 2010) (ruling that “Alabama’s 20-year common-law rule of repose does not begin to run on a claim until all the essential elements of that claim, including an injury, coexist so that the plaintiff could validly file an action”).

Colorado – Col. Rev. Stat. § 13-21-403(3).  Applies a presumption of non-defectiveness more than “[t]en years after a product is first sold.”  See Mile Hi Concrete, Inc. v. Matz, 842 P.2d 198, 205 (Colo. 1992).

Connecticut – Conn. Gen. Stat. § 52-577a.  An action is foreclosed “more than 10 years after the manufacturer relinquished “possession or control of the product,” absent fraud or express warranty.

Florida – Fla. Stat. § 95.031(b).  A products liability action is barred “more than 12 years after delivery of the product,” with exceptions for latent disease or injury, and fraudulent concealment.

Georgia – O.C.G.A. § 51-1-11(b)(2).  Precludes any action “after ten years from the date of the first sale for use or consumption” of a product that causes injury.

Idaho – Idaho Code § 6-1403(b).  Rebuttable presumption that injury “caused more than ten (10) years after time of delivery” occurred after product’s safe life, rebuttable “by clear and convincing evidence.”

Illinois – 735 ILCS 5/13-213(b).  Forbids any “product liability action” on any theory after 12 years from the first sale or 10 years after the purchase by an initial consumer, unless brought within two years of discovery of alleged injuries.   Davis v. Toshiba Mach. Co., 710 N.E. 2d 399, 401 (Ill. 1999) (weakening statute of repose by allowing discovery rule in cases not involving latent injuries).

Indiana – Ind. Code § 34-20-3-1(b).  Action must commence within “10 years after delivery of the product to initial user,” but may be brought within two years after accrual. See, e.g., Land v. Yamaha Motor Corp., 272 F.3d 514, 515-516 (7th Cir.2001) (ruling that where it was “undisputed” that injury and filing suit occurred more than 10 years after product purchase by initial user, statute of repose barred product liability action.) (emphasis added).

Iowa – Iowa Code § 614.1(b). Bars product liability action on any theory 15 years after purchase of a product absent express warranty or concealment. See Albrecht v. GMC, 648 N.W.2d 87, 95 (Iowa 2002) (the “allegations of the petition establish[ed] that the present suit falls with the scope of section 614.1(2A)(a) and was brought more than fifteen years after the product in question was first purchased,” precluding plaintiff’s action); Cf. Merner v. Deere & Co., 176 F. Supp.2d 882, (E.D. Wis. December 18, 2001) (under Wisconsin’s borrowing statute that 15 year Iowa statute of repose barred plaintiff’s claims).

Kansas – Kan. Stat. Ann. § 60-3303(a)(b)(1).  A presumption arises that a product’s “useful safe life,” expires 10 years after delivery, rebuttable by “clear and convincing” evidence; see also Kan. Stat. Ann. § 60-513(b), barring claims more than 10 years old.  The useful safe life statute of repose applies to prescription drugs.  Baughn v. Eli Lilly & Co., 356 F. Supp. 2d 1166, 1172 (D. Kan. 2005).  In Ehrenfelt v. Janssen Pharms., ___ F. Appx. ___, 2018 WL 2945911 (6th Cir. June 11, 2018), a prescription drug product liability case, the Court of Appeals for the Sixth Circuit held “that the exceptions in Kan. Stat. Ann. § 60-3303(b)(2)(D) [for latent injuries] appl[ied] even when the harm was caused less than ten years after delivery.”   Id. at *2.  Therefore, the plaintiff’s claims for alleged injuries from use of a drug was not barred under the general 10 year statute of repose, § 60-513(b).

Kentucky –  K.R.S § 411.310(1).  Presumption that a product was not defective for injury “more than five (5) years after the date of sale . . . or more than eight” years after manufacture, rebuttable by a preponderance of evidence.

Michigan – Mich. Comp. Laws § 600.5805(13).  Technically not a statute of repose, but after a product has “been in use for not less than 10 years,” the plaintiff is not entitled to any presumption improving his case.  But see Hall v. GMC, 582 N.W.2d 866, 867 (Mich. App. 1998) (“claim could be pursued under Michigan law, which has no statute of repose,” and where statute of limitations did not prevent claim).

Minnesota – Minn. Stat. § 604.03.  Provides an affirmative defense for injuries occurring after “the expiration of the ordinary useful life of the product,” which is a jury issue.   Hodder v. Goodyear Tire & Rubber Co., 426 N.W.2d 826, 830 (Minn. 1988) (“We hold, therefore, that … [product’s useful life] is a factor to be weighed by the jury in determining the fault of the manufacturer and the fault of the user.”).

Nebraska – Neb. Rev. Stat. § 25-225.  Bars claims filed more than 10 years after product manufactured in Nebraska, otherwise the statute of repose of the state of manufacture applies, not to exceed 10 years, or 4 years from date of injury if no statute exists, applicable to prescription products.  King v. Pfizer, Inc., 2016 U.S. Dist. Lexis 111456, 17-18 (D. Neb. Aug. 19, 2016) (fraud based claims for injuries allegedly resulting from prescription drug are “grounded in product liability,” such that the substantive right of the statute of repose cannot be removed “by court action,” whereby passage of the 10-year period, following  plaintiff’s first prescription “vested the Defendants with a substantive right under § 25-224(2),” barring the action).

North Carolina – N.C. Gen. Stat. § 1-46.1.  Prohibits product liability claims “more than 12 years after . . . initial purchase for use or consumption.”  See Willoughby v. Johnston Memorial Hosp. Authority, 2016 WL 4091370, at * 13-14, 791 S.E.2d 283 (table) (N.C. App. Aug. 2, 2016) (affirming summary judgment for manufacturer of surgical table, including indemnity claim, notwithstanding that alleged injuries occurred in 2009, and actual loss in 2015); In re Mentor Corp. Obtape Transobturator Sling Prods. Liab. Litig., 2016 WL 4385846, at *3 (M.D. Ga. Aug. 15, 2016) (applying North Carolina law) (plaintiff suffered alleged injuries when she experienced mesh erosion, which foreclosed claims per statute of repose).

Ohio – Ohio Rev. Code § 2305.10(C)(1).  Precludes claims more than 10 years after product delivery to first consumer, but applies discovery rule to prescription drugs, which reduces the provision’s utility.

Oregon – Or. Rev. Stat. § 30.905(2).  An action “must be commenced before the later of 10 years after” product’s purchase, or the expiration of the statute of repose in state of manufacture.  Wrongful death actions must be brought within 3 years after death or 10 years after product purchased, whichever occurs sooner.  O.R.S. § 30.905(3)-(4).  Dortch v. A. H. Robins Co., 650 P.2d 1046, 1052-53 (Or. App. 1982), overruled on other grounds, (IUD manufacturer properly dismissed; statute of repose limited “manufacturer’s liability to ten years and [gave] each plaintiff a full two years to commence an action after the cause of action accrue[d],” and finding that the claim was barred.); Philpott v. A.H. Robins Co., 710 F.2d 1422, 1425 (9th Cir. 1983) (plaintiff’s claims “barred by ORS 30.905,” where “she did not learn of a causal connection between her pelvic disorders and the Dalkon Shield until . . . nine years and eight months after she purchased and began using” the product).

Tennessee – Tenn. Code Ann. § 29-28-103(a).  An action must be brought “within ten (10) years” from purchase, or “one (1) year after the expiration” of product life. See, e.g., Jenkins v. Novartis Pharmaceutical Corp., 2013 WL 1760762, at *3 (E.D. Tenn. Apr. 24, 2013) (implied warranty claim against prescription drug manufacturer was prohibited by statute of repose where motion to amend was filed more than 10 years post injury “by both the six-years-from-injury provision of § 29-28-103(a) and the ten-years-from-purchase provision of § 29-28-103(a)).” Tennessee case law bars any discovery rule or fraudulent concealment exception to the statute. Greene v. Brown & Williamson Tobacco Corp., 72 F. Supp.2d 882, 886 (W.D. Tenn. 1999) ( “[a]n equitable ‘discovery rule’ is not available to toll the statute of repose” and holding that “the Tennessee Supreme Court would decline to create an equitable exception for fraudulent concealment”).

Texas – Tex. Code Ann. § 16.102(b) cuts off actions 15 years “after the date of the sale of the product” with exceptions for latent disease and express warranty, but is not subject to tolling.  See Methodist Healthcare System v. Rankin, 307 S.W.3d 283, 290 (Tex. 2010) (“the essential function of all statutes of repose is to abrogate the discovery rule and similar exceptions to the statute of limitations” and a “statute of repose, by design, creates a right to repose where the applicable statute of limitations would be tolled or deferred”); Salgado v. Great Dane Trailers, 2012 WL 401484, at *2 (S.D. Tex. Feb. 6, 2012) (“[a] statute of repose … does not run from the time a cause of action arises, but from some other date or event selected by the Legislature,” and is “not subject to judicially crafted rules of tolling or deferral”) (internal citations and quotations omitted).

Washington – Wash. Rev. Code Ann. § 7.72.060(1)(b)(i-iii).  Rebuttable presumption that an injury “more than twelve years after . . . delivery,” occurred after expiration of a product’s useful life, with exceptions for express warranty, concealment, and latent injuries.

Wisconsin – Wis. Stat. § 895.047(5-6).  Precludes action for products manufactured “15 years . . . or more” before a claim with exceptions for negligence, latent disease, and express warranty, and asbestos actions).

States With Statutes That Are Not Applicable To Prescription Product Claims

By contrast, the following states have statutes of repose that are inapplicable to prescription product liability actions, generally because they have statutes that pertain only to real property improvements or the statutes contain exclusions for defective products.

Alaska – Alaska Stat. § 09.10.055(2).  Actions must be brought “within 10 years,” of the “last act alleged to have caused the personal injury,” property damage, or death, but expressly excludes defective products.

Arkansas – Ark. C. Ann. § 16-56-112.  Applicable to property actions only; Brown v. Overhead Door Corp., 843 F. Supp. 482, 490 (W.D. Ark. 1994) (ruling that statute of repose was limited to real property improvements, holding that “Arkansas courts when called upon to do so will hold that the manufacturers of mass produced fungible goods do not fall within the protection of the statute, particularly when the defendant manufacturer is not involved in the installation of the product and had nothing to do with the design of the improvement within which it is installed”).

California – Cal. Civ. Proc. Code § 337.15 (10 years for latent deficiencies).  See McCann v. Foster Wheeler LLC, 225 P.3d 516, 529 (Cal. 2010) (finding that California’s statute of repose was applicable to latent deficiencies in real property improvement, “not to personal injury actions.”).

Delaware – 10 Del. C. § 8127.  Applicable only to claims pertaining to real property improvements, within six years of substantial completion.

District of Columbia – D.C. Code § 12-310.  Real property claims only, within 10 years of substantial completion of project.

Hawaii – Haw. Rev. Stat. § 657-8.  Available only for claims within 10 years of substantial completion of improvement to real property, and two years after accrual.

Maine – 14 M.R.S.A. § 752-A.  Statute applicable only to real property, within 10 years of the project or services rendered, but no more than 4 years after discovery.

Maryland – Md. Code Ann. § 5-108.  Does not apply to product liability, but for property improvements within 20 years and 10 years against architect or engineer.

Massachusetts – Mass. Ann. Laws Ch. 260 § 2B.  Allows claims within 6 years of substantial completion of improvement, and owner taking possession.

Mississippi – M.C.A. § 15-1-41.  Claims must be brought within 6 years of acceptance or actual occupancy for real property improvement.

Missouri – Mo. Rev. Stat. § 516.097.  Applicable to real property improvement claims within 10 years of substantial completion.

Montana – Mont. Stat. § 27-2-208.  Statute allows claims within 10 years of improvement, including to damage caused by a defective product related to the improvement.

Nevada – N.R.S. § AB 125, § 2.  Applies to real property improvements, six-year statute of repose.

New Jersey – N.J.S.A. § 2A: 14-1.1.  Real property improvements only, within 10 years of substantial completion.

New Mexico – N.M.S.A. § 37-1-27.  Repose only for improvements to real property, 10 years of substantial completion.

New York – While New York has no true statute of repose, courts require notice of an action to any party responsible for professional performance, such as architects and engineers, after 10 years have elapsed.  Six year statute of limitations for construction defects, N.Y. C.P.L.R. § 214-d.

Oklahoma – 12 Okla. Stat. Ann. Tit. 12 § 109.  Claims for real property improvements must be brought within 10 years of substantial improvement.

Pennsylvania – Although the statute of repose, 42 Pa. C.S.A. § 5536(a), is generally applicable only to real property improvements, it may apply to product manufacturers in certain cases, such as to manufacturers of asbestos.  See, e.g., Graver v. Foster Wheeler Corp., 96 A.3d 383, 386-87 (Pa. Super. 2014) (granting j.n.o.v., applying the 12 year statute of repose relating to real property improvements to 13 story boiler in asbestos action because statutes of repose are substantive, and may bar actions before they accrue).

South Carolina – S.C. Code Ann. § 15-3-640.  Must be brought within 8 years of substantial completion of improvement to real property.

South Dakota – S.D.C.L. § 15-2A-3.  Applicable to real property improvements only, within 10 years of substantial completion.

Utah – U.C.A. § 78B-2-225.  Actions for real property improvements may not be brought later than nine years after completion.

Vermont – Vt. Stat. Ann. Tit. 27A, § 4-116(a).  Applicable only to Common Interest Ownership claims within six years after the cause of action arose.

Virginia – Va. St. § 8.01-250.  Claims must be brought within five years for injuries resulting from improvements to real property, but does not apply to manufacturers of equipment.

West Virginia – W. Va. Code § 55-2-6a.  Applies to claims related to real property, construction or design within 10 years of occupancy or acceptance, but excludes product manufacturers.

Wyoming – Wyo. Stat. § 1-3-111.  Applicable only to real property improvements, if a claim is brought within 10 years of substantial improvement.

States In Which Courts Ruled That Statutes Of Repose Were Unconstitutional

New HampshireHeath v. Sears, Roebuck & Co., 464 A.2d 288, 296 (N.H. 1983) (statute of repose unconstitutional where plaintiffs were “deprived arbitrarily of a right” to sue).

North DakotaDickie v. Farmers Union Oil Co., 611 N.W. 2d 168, 173 (N.D. 2000) (product liability statute of repose violated equal protection clause).

Rhode IslandKennedy v. Cumberland Eng’g Co., 471 A.2d 195, 201 (R.I. 1984) (holding that state “Constitution forbids absolute bars to recovery” prior to accrual).

ArizonaHazine v. Montgomery Elevator Co., 861 P. 2d 625, 630 (Ariz. 1993) (holding statute of repose unconstitutional, ruling “A.R.S. § 12-551 abrogated that constitutional right [to bring action] by barring the action even before the injury occurred,” and that “the attempted statutory abrogation of their claim fails.”).

 

Statutes of repose can be a defense counsel’s best friend by providing an inexpensive and decisive avenue for disposal of an action, even before the claims have accrued in certain jurisdictions. However, each state is different, and practitioners need to research potentially relevant provisions thoroughly.  After all, a missed opportunity to end the case before it begins is no song and dance.

Your Reed Smith bloggers are part of their firm’s Life Sciences Health Industry Group — a collective that includes not only your bloggers’ compatriots in drug/device product liability defense, but esteemed colleagues assisting health and life sciences companies with issues and opportunities related to regulatory compliance, IP, tech, transactions, and many other areas.

We mention this because we recently received an invitation to a free CLE webinar that two of our regulatory colleagues – Celeste Letourneau and Katie Pawlitz – will be presenting on Wednesday, July 11. It’s on “Clinical Trial Contracts and Investigator-Initiated Study Grant Contracts.”

Typically, we try not to be overly shameless with our shameless plugs. We usually restrict ourselves to just letting our loyal readers know about their bloggers’ upcoming speaking engagements or key drug/device defense industry events.

But we found ourselves just so personally interested in this webinar that we couldn’t help but share it with you. Here’s the webinar description:

Understanding the regulatory underpinnings related to the conduct of clinical trials serves to support compliance with applicable laws and promote efficient negotiation. This program is intended to describe the standards, regulations and requirements that are, or should be, addressed in contracts for the conduct of clinical trials to support FDA applications. The speakers will also address the various FDA and health care laws commonly referenced in clinical trials contracts and discuss fraud and abuse considerations related to clinical trial contracts and investigator-initiated study grant contracts, including the Anti-Kickback Statute, as well as transparency laws related to the same, such as the federal Sunshine Act.

The webinar (and CLE credit) are free, but you do have to register, which you can do here.

Here’s another guest post on the Dormant Commerce Clause by our guest guru on that subject, Dick Dean over at Tucker Ellis.  He reports on another possible use for the Dormant Commerce Clause that could provide a win for the our side in an innovator liability situation.  As always our guest bloggers deserve 100% of the credit, and any blame, for their postings.

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On April 25, 2018 this blog advised “Don’t Sleep on the Dormant Commerce Clause.”  It was right.  That post discussed a Fourth Circuit case involving a drug pricing regulation attempt by the State of Maryland.  Since then, two other Circuit court decisions have followed; it’s the Dormant Commerce Clause gone wild.  And both decisions involve subject matter areas of direct interest to readers of this blog.

In Daniels Sharpsmart, Inc. v. Smith, 889 F.3d 608 (9th Cir. 2018), the Ninth Circuit upheld a District Court decision which invoked the Dormant Commerce Clause to strike down the enforcement of a California regulation beyond the state’s border.  Daniels was an Illinois-based corporation that made systems for the disposal of biohazardous medical products including waste syringes and blood collection devices.  It also transported and treated medical waste.  It had a medical waste treatment facility in Fresno, as well as others in several different states.  California’s Medical Waste Management Act (CMWMA) required that California-generated medical waste must be incinerated.  And if medical waste was transported out-of-state, it was required to be “consigned” to a waste treatment facility “permitted” in the “recovery state.”  As of 2014, there were no incinerators within California to treat Daniels’ biohazardous medical waste (why that is the case is not discussed in the decision), and so Daniels transported that waste to other states to have it incinerated.  Eventually, Daniels shipped that waste to Kentucky and Indiana, where that waste was treated by methods other than incineration consistent with the regulations in those states.  In Kentucky, the waste was treated by a method called autoclave; in Indiana, the method was “thermal deactivation.”  Both treatment methods are less expensive than incineration.

California regulators took the position that biohazardous medical waste originating in California had to be incinerated in Indiana and Kentucky, even though the regulations and laws of other states permitted an alternative method.  To that end, the regulators proposed daily fines against Daniels for failure to do so.  Daniels filed a complaint in the Eastern District of California arguing that state officials had violated the Dormant Commerce Clause by its extraterritorial application of the MWMA.  The District Court granted Daniels’ motion for a preliminary injunction and in a short, focused decision, the Ninth Circuit affirmed. It characterized the regulation as “an attempt to reach beyond the borders of California and control transactions that occur wholly outside of the State after the material in question . . . has been removed from the State.”  Id. at *4.  Attempts at direct regulation of out-of-state conduct have generally been struck down without further inquiry.  See Brown-Forman Distillers Corp. v. N.Y. State Liquor Auth., 476 U.S. 573, 579 (1986); and Healy v. Beer Inst., 491 U.S. 324, 336 (1989).  Laws neutral on their face, but which have an impermissible protectionist purpose and effect, have also been struck down.  But where there is no obvious protectionist purpose and a state law has only incidental impact on interstate commerce, such laws are subject to a more lenient standard of review.  They are usually upheld unless the burden they impose on interstate commerce exceeds their local benefits. Pike v. Bruce Church, Inc., 397 U.S. 137, 144–46 (1970).

Such a standard was employed in Garber v. Menendez, 888 F.3d 839 (6th Cir. 2018).  The case involved Ohio’s tolling statute, which stops the statute of limitations from running when the defendant is out-of-state.  O.R.C. 2305.15.  This statute had been construed by the Supreme Court in Bendix Autolite Corp. v. Midwesco Enterprises, Inc., 486 U.S. 888 (1988).  There, in a commercial dispute between corporations, the Supreme Court struck down the tolling statute noting:

The State may not withdraw such defenses [i.e., statutes of limitation] on conditions repugnant to the Commerce Clause.  Where a State denies ordinary legal defenses or like privileges to out-of-state persons or corporations engaged in commerce, the state law will be reviewed under the Commerce Clause to determine where the denial is discriminatory on its face or an impermissible burden on commerce.

Id. at 893.

Innovator liability, like the tolling statute, withdraws the legal defense of lack of product exposure so it neatly fits the language of Bendix (more later on that issue). In Bendix, the Supreme Court struck down the tolling statute under the Commerce Clause because Ohio could not justify its statute as a means of protecting its residents given the provisions of the Ohio long-arm statute.  It did not engage in any detailed discussion of the impact on commerce—almost assuming one from the statute.  Concurring in the result only, Justice Scalia noted that applying the Pike balancing factors “is more like judging whether a particular line is longer than a particular rock is heavy.”  Id. at 897 (Scalia, J., concurring).  He wrote that he would not know how to do such a balancing.

In Garber, the District Court and the Sixth Circuit took very different views of Bendix. The District Court, confronted with same statute held to violate the Dormant Commerce Clause in Bendix, not surprisingly reached the same result.  But the Sixth Circuit distinguished Bendix, finding that the statute forced out-of-state companies like Midwesco to face liability forever as a cost of doing business across state lines and noting the Supreme Court’s application of the Pike test in that context.  It viewed the transaction in Garber, which involved one patient suing one doctor (who had left the state), as yielding a different result under the Commerce Clause with there being no demonstrable effect on the same.  In the absence of a record establishing such an effect—there was no such record apparent in Bendix—the challenge failed.

Putting the facts of Garber aside, Bendix clearly remains good law.  Defenses cannot be withdrawn in a way “repugnant” to the commerce clause.  Is there an impact on commerce from the largest state in the country (population wise) radically changing product exposure rules?  At an elementary level, if drug companies are going to have to defend and pay settlements and judgments on products made by other companies in California, that will have a dramatic impact on drug pricing throughout the country.  The difference between the District Court and the Sixth Circuit here is one of what is in the record.  It would not take a particularly high powered economist to establish such a record in regard to the impact of innovator liability.

The Dormant Commerce Clause has been used to invalidate state registration statutes.  See here and here.  So it is not surprising that in addition to the argument that innovator liability may be precluded by lack of personal jurisdiction (see here and here), there is also a Dormant Commerce Clause argument in regard to innovator liability.  Once again—don’t sleep on the Dormant Commerce Clause.

 

Today is our favorite holiday of the year.  It is about BBQ, beach, and conviviality to some extent, but it is chiefly a celebration of the first official public announcement of the Declaration of Independence here in Philadelphia two hundred and forty two years ago.  The delegates of the Second Continental Congress actually approved the Declaration two days earlier.  The vote was twelve in favor of independence, with one abstention (New York – which made it unanimous after the fact).  John Adams predicted that July 2 would become a day of jubilation that would be “solemnized with Pomp and Parade, with shews, Games, Sports, Balls, Bonfires and Illustrations from one end of the Continent to the other from this Time forward forever more.”  Well, aside from being off by two days, Adams turned out to be right.  The announcement date became more important than the vote itself.  Plus, July 4 is the date on the signed document that sits in our National Archives.

 

Adams, by the way, was originally proposed to be the author of the Declaration, but he deferred to Jefferson.   Even so, Adams and other members of the drafting committee (including Benjamin Franklin) edited Jefferson’s draft with a heavy quilled pen.  Jefferson thought that the edits “mangled” his work, but we’d say the document turned out fairly well.  The Declaration was really a legal brief supporting separation from Great Britain.  But its second sentence also set out our country’s mission statement, which perseveres no matter how many times we manage to fall short:  “We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among them are Life, Liberty, and the pursuit of Happiness.”  We’ll take that single sentence over the Parthenon, Colosseum, Notre Dame, Tower Bridge, or Great Wall (or any other wall).

 

The Fourth of July is a quintessentially American holiday.  It is hot, loud, and rambunctious.  We meant to order four big pieces of red, white, and blue bunting, but clicked the wrong button and ended up with eight.  No matter.  We climbed a ladder and hung it all over the front porch.  John Philip Sousa would love our house. Meanwhile, the dog trembles in anticipation and terror.  He seems to know that lots of cooked cow and pig and chicken flesh is coming his way, followed by a festival of sparklers,  cherry-bombs, and Roman candles in the backyard.

 

Many other important American historical moments occurred on July 4, some purposefully coinciding with that date, and some being purely accidental.  For example:

 

July 4, 1817 – Construction of the Erie Canal commences.  Some point to the canal as the major reason why New York overtook Philly as the nation’s preeminent metropolis.  Some of us still haven’t gotten over it.  The 2009 World Series didn’t help.

July 4, 1826 – Both Thomas Jefferson and John Adams perish 50 years after the first Independence Day.

July 4, 1827 – Slavery was abolished in New York. It is shocking and sad to think how long slavery lingered even in the northern states that claimed the moral high ground only a few decades later. (One of the edits that Jefferson believed “mangled” the Declaration was deletion of a passage condemning slavery.)

July 4, 1845 – Henry David Thoreau set up house on the shore of Walden Pond.  Why?  We can hardly improve on Thoreau’s explanation:  “I went to the woods because I wished to live deliberately, to front only the essential facts of life, and see if I could not learn what it had to teach, and not, when I came to die, discover that I had not lived.”  The book marked another declaration of independence, this time with literary, cultural, economic, and spiritual ambitions.

July 4, 1855 – Walt Whitman published the first edition of Leaves of Grass.  Like America, the book was always a work in progress.  Over the years, it grew in size, greatness, and reputation.

July 4, 1863 – The Confederate Army withdrew from Gettysburg and Vicksburg surrendered.  While the Civil War would wreak carnage and calamity for almost another two years, the conclusion now seemed inevitable.

July 4, 1881 – Tuskegee Institute opened.

July 4, 1910 – Jack Johnson knocked out Jim Jeffries.

July 4, 1939 –A stricken Lou Gehrig told a Yankee Stadium crowd that he was “the luckiest man on the face of the earth.”

July 4, 1966 – LBJ grudgingly signed the Freedom of Information Act into law.

 

The Fourth of July also witnessed the birth of people who exemplified the American character in various ways:  Stephen Foster (1826) began the American songbook, Rube Goldberg (1883) conjured up crazy, convoluted machines to perform simple tasks, thereby giving rise to a wonderful adjective (“Goldbergian”), and George Steinbrenner (1930) contributed to that pesky New York dominance alluded to above.  (Grrrr.)

 

Whether or not you manage to make history today, we hope you manage to make merry with loved ones.  If it is too hot outside, take in a “shew.”  If you light any fireworks or bonfires, by all means be careful! Go ahead and pursue happiness.  Maybe you’ll even catch it.

 

It’s been a few years since we talked about the conundrum facing pharmacies if they suspect prescriptions are medically unnecessary or improper. Back in 2015, two cases were decided within days of each other that allowed claims to go forward suggesting that a pharmacy could be potentially liable for both filling suspect prescriptions (see here) and for not filling suspect prescriptions (see here). Hence “damned if you do (question a prescription) and damned if you don’t.” We obviously have issues with both decisions as our prior posts explain. We don’t like the creation of new, ill-defined duties and we don’t like anything that creeps around in learned intermediary territory. But this is also a state-by-state issue and we have found other states not willing to make the leap to find that pharmacies have a duty to monitor patients or warn about excessive prescriptions. See Hernandez v. Walgreen Company, 2015 Ill. App. LEXIS 986 (Ill. App. Ct. Dec. 28, 2015). So, there is no bright line regarding what a pharmacy should do and it certainly seems at a minimum that pharmacies in different states are going to have to follow different rules – interesting when you consider the vast majority of prescriptions are filled by large national chains.

While the overarching question remains unanswered, a recent Seventh Circuit decision took a closer look at the substance of a “damned if you don’t” case that made it all the way to trial and found that most of it shouldn’t have survived summary judgment.

In Mimms v. CVS Pharmacy, Inc., — F.3d —, 2018 WL 2126720, *1 (7th Cir. May 9, 2018), plaintiff was a pain management physician who prescribed, among other things, opioids. On several occasions, CVS pharmacy employees informed customers that they would not fill Dr. Mimms’s prescriptions leading Dr. Mimms to sue CVS for alleged defamation. Id.   By the time the case went to trial it was based on four statements allegedly made by CVS employees:

  • “CVS doesn’t fill Dr. Mimms’[s] prescriptions or prescriptions for any other pill mills.”
  • “Dr. Mimms went to jail.”
  • “Dr. Mimms has been … or will be arrested.”
  • “Dr. Mimms is under DEA investigation.”

Id. Defendant moved for summary judgement on all four statements which was denied. Id. Defendant moved for judgment as a matter of law as to the first three statements at the conclusion of plaintiff’s case at trial. That too was denied and a verdict was entered in favor of plaintiff. Id.

Under Indiana law, to prove defamation, plaintiff had to establish that the speakers acted with actual malice. That is that they either knew their statements were false or had serious doubt as to their truth. Id. The district court found that plaintiff had met its burden regarding knowledge of falsity by showing that “CVS’s corporate office had concluded an investigation of Mimms and had not stopped stores from filling his patients’ prescriptions.” Id. In other words, the court imputed the knowledge of the principal to its agent which it is not permitted to do. Id. at *2 (citing New York Times v. Sullivan, 376 U.S. 254, 287 (1964)). Plaintiff had to prove that the employees themselves knew their statements were false or had serious doubts about their truth, which he did not do. Plaintiff pointed to emails from corporate officers to store supervisors asking supervisors to remind employees that company policy is not to make derogatory statements when refusing to fill prescriptions. Id. But there was no evidence that the email was sent to any of the speakers and more importantly it contained no information that would have informed speakers about the truth or falsity of their statements. So, plaintiff had no evidence from which a reasonable juror could conclude that the first three statements were made with actual malice. The court granted judgement as a matter of law as to those statements.

There was, however, some evidence that created a genuine dispute as to whether the speaker of the fourth statement – plaintiff was under DEA investigation – doubted its veracity. Id. So, while that statement would have survived summary judgment, the court found that CVS is entitled to a new trial based on erroneous trial rulings. At trial CVS was not allowed to offer evidence that Dr. Mimms’s former clinic had been subpoenaed for records of his prescriptions. That evidence CVS argued went to whether the statement was in fact true – a complete defense to defamation. Id. at *3. Even though Mimms had left the clinic at the time the subpoena was issued, “the fact that the DEA was seeking records for Mimms’s patients shortly after he left the practice supports CVS’s claim that Mimms was under investigation.” Id. CVS was also prohibited from introducing a transcript from a criminal trial in which a Health and Human Services agent testified that he investigated Mimms with a DEA agent. The Seventh Circuit found that the unduly prejudicial portions of the transcript could be redacted. It also concluded that the district court unnecessarily relieved plaintiff of his stipulation not to assert a hearsay objection to the transcript at trial. CVS relied on that agreement in deciding not to seek live testimony of the agent. Id. Finally, CVS was prohibited from offering evidence that Mimms’s professional reputation was already tarnished. While prejudicial, of course, the state of plaintiff’s reputation in a defamation action is critical to the issue of damages. Not allowing the evidence was an abuse of discretion. Add it all up and CVS is entitled to a new trial – one that feels like it should be drastically different than the first one.

 

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 anticommandeering 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 anticommandeering 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 prohibition, 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 anticommandeering 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.