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

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

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

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

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

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

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

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

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

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

Direct Preemption

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

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

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

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

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

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

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

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

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

Id. at 29-30.

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

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

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

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

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

Id. at 1215 (emphasis added).

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

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

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

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

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

Lack of Personal Jurisdiction

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Setting up a Prophylactic Preemption Defense

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

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

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

Why?

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

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

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

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

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

*          *          *          *

To our in-house readers:

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

Sure, it was enjoyable to read In re DePuy Orthopaedics, Inc., Pinnacle Hip Implant Product Liability Litigation, ___ F.3d ___, 2018 WL 1954759 (5th Cir. April 25, 2018) (“Pinnacle Hip”), to see plaintiffs’ counsel hoisted on their own petard of improper and prejudicial evidence and arguments.  But there’s more to Pinnacle Hip than “Lanier-on-a-spit,” as it has been described in these parts.  Indeed, blogging plaintiffs’ attorney Max Kennerly, dropped a comment to our first Pinnacle Hip post (which we published – we scrub only spam, not opposing views) asserting that “the rest of the opinion was a huge win for plaintiffs.”

We largely disagree with Max’s comment, and this post explains why.

Initially, we note that the defendant in Pinnacle Hip was swimming decidedly upstream in all of its legal arguments, since it was opposing a jury verdict entered against it and seeking entry of judgment as a matter of law in its favor.  2018 WL 1954759, at *2.  That means all the trial evidence is construed in the plaintiffs’ favor.  Id. at *3 (“JMOL is warranted only if a reasonable jury would not have a legally sufficient evidentiary basis to find for the nonmovant.”) (citations and quotation marks omitted).

Design Claims

The first claim addressed in Pinnacle Hip was design defect.  See 2018 WL 1954759, at *3-9.  The defendant raised several arguments, all unsuccessfully.  First, the defendant argued that plaintiff had failed to satisfy the Texas alternative design requirement because that alternative that the plaintiffs offered – a “metal on plastic” (“MoP”) hip implant – was really a “different product” from the defendants’ metal-on-metal design (“MoM”), and thus cannot serve as a design alternative.  This is an argument we have featured several times on the blog.  In Pinnacle Hip, the conclusion was that “based on the record, that MoP is a viable alternative design to MoM.”  Id. at *4.

While we would have liked to win this, on the facts, this distinction between alternative product and design is more difficult for the defense than in the cases we’ve discussed in our prior posts, which usually involve not using the product at all, or using some other product that is much less suited for the use in question.  Our classic example of alternative cause abuse is Theriot v. Danek Medical, Inc., 168 F.3d 253 (5th Cir. 1999), a Bone Screw case in which the supposed “alternative” was a different type of surgery not using the product at all.  That’s distinct from redesigning one part of a device system to use a different material, as indeed, Pinnacle Hip pointed out.  2018 WL 1954759, at *9.  Pinnacle Hip reaffirmed that similar-use products that “fail[] to perform the discrete kinds of functions for which the alleged defective was designed” or with a “wide disparity in price” cannot be considered alternative designs.  Id. at *4, *7.  However , the risk/utility defect test “contemplates that a proposed alternative design might reduce a product’s utility . . . without rendering the alternative an entirely different product.”  Id. at *5.  That means some variation has to exist without “moot[ing] the entire defect test.”  Id.

Construing the record to favor plaintiffs, Pinnacle Hip resulted in another point on the uncertain, “practically impossible to settle in the abstract,” id., at *4, line between different design and different product.  While we’d like to have won, Pinnacle Hip does not move the line itself in any lasting fashion prejudicial to the defense.  The ultimate holding was that a “cross-linked” MoP is not sufficiently different from the defendant’s MoP design to be considered a different product.  2018 WL 1954759, at *6 & n.13.  The underlying principle that the distinction between product and design seeks to protect is preventing automatic liability against whole classes of products – cigarettes, motorcycles, birth control pills, or pedicle screw fixation devices – for simply being what they are and having certain inherent risks.  That principle remains intact after Pinnacle Hip.

The defendants also lost a preemption argument – that design defect claims “’stand[] as an obstacle to the accomplishment and execution of the full purposes and objectives’ reflected in the MoM-related regulations of the FDA.”  2018 WL 1954759, at *7.  According to the defendants, because the plaintiffs were seeking “categorical” liability, that all MoMs should be “banned outright,” there should be preemption. Id. at *8.  But that’s not what the Fifth Circuit found was what happened:

[I]t is not the case that plaintiffs’ theory reached all possible MoMs.  All would agree that, despite the sweeping language with which plaintiffs presented their case, their claims were impliedly limited to presently available technologies and the adverse health effects they allegedly engender.

Id.  But the record showed that “[t]he FDA effectively withdrew all MoMs from the market . . . and left open a single door in the form of PMA.”  Id.  On this set of facts, it could not be said that banning something that the FDA had already essentially removed from the market, save for an alternative that has not yet produced an FDA-approved product, was an interference with “the FDA’s regulatory objectives.”  Id.

While losing a preemption argument is not something we would recommend, this particular type of preemption argument has never been successful that we are aware of, so it’s no great loss.  We’ve advocated at some length that the Medtronic, Inc. v. Lohr, 518 U.S. 470 (1996), decision be overturned.  But that argument is predicated on changes to 510(k) clearance created by Congress in 1990.  In Pinnacle Hip, “MoMs were sold before 1976 and have traditionally been treated as pre-amendment class III devices.”  2018 WL 1954759, at *8.  So Pinnacle Hip doesn’t affect even the distinctions that we draw from Lohr.  The preemption argument rejected in Pinnacle Hip would require the complete reversal of Lohr, even on Lohr’s facts, to succeed.

By far the better preemption argument, based on current law, with respect to 510(k) design defect claims, is that they amount to “major changes” that require prior FDA review, and probably an entirely new supplemental submission, before they could be implemented.  That should put design defect claims at odds with the “independence principle” in PLIVA, Inc. v. Mensing, 564 U.S. 604 (2011), and Mutual Pharmaceutical Co. v. Bartlett, 570 U.S. 472 (2013), resulting in preemption of all design claims that could make a difference in a product liability action.  That argument, which does not depend on Lohr either way, was not addressed at all in Pinnacle Hip.

Finally, the defendants in Pinnacle Hip also lost on their Restatement (Second) of Torts §402A, comment k (1965), argument, which was that Texas law holds all prescription medical products, including medical devices, to be “unavoidably unsafe” within the meaning of comment k, so that those “unavoidable” risks can only be warned about and not treated as design defects.  Pinnacle Hip was unwilling to expand Texas’ application of comment k from prescription drugs to include prescription medical devices.  2018 WL 1954759, at *9.  That places Pinnacle Hip in a distinct minority position, since literally hundreds of cases, and the Third Restatement, apply limits on design defect claims equally to all types of prescription medical products.  Bexis’ book collects these cases.  Drug & Medical Device Product Liability Deskbook §2.02[2] at pp. 2.02-13 to -16 n.14 (for the proposition that “almost all courts have extended the unavoidably unsafe product exception to medical devices”).  However, as the Fifth Circuit correctly pointed out, not many of those opinions are under Texas law.

The further discussion of case-by-case versus across-the-board comment k application in Texas, 2018 WL 1954759, at *9, is more troubling, as the trend in Texas courts (in drug and vaccine prescription product cases) has favored the “blanket” approach.  Pinnacle Hip complained, in a footnote, that “Texas caselaw offers almost no guidance on how to go about that case-by-case inquiry.”  Id. at *9 n.22.  There is good reason for that lack of precedent – because Texas law has not employed tests that require such inquiry.  See Reyes v. Wyeth Laboratories, 498 F.2d 1264, 1273 (5th Cir. 1974) (applying comment k without case-by-case analysis to a vaccine; holding that the only viable claim was inadequate warning); Gonzalez v. Bayer Healthcare Pharmaceuticals, Inc., 930 F. Supp.2d 808, 817-18 (S.D. Tex. 2013) (applying comment k to prescription drug without case-by-case analysis); Woodhouse v. Sanofi-Aventis United States LLC, 2011 WL 3666595, at *3-4 (W.D. Tex. June 23, 2011) (holding, without further analysis, that “comment k applies to products such as [defendant’s prescription drug]”); Holland v. Hoffman-La Roche, Inc., 2007 WL 4042757, at *3 (N.D. Tex. Nov. 15, 2007) (“Prescription drugs are not susceptible to a design defect claim where, as here, the drug is ‘accompanied by proper directions and warning.’”) (quoting comment k); Carter v. Tap Pharmaceuticals, Inc., 2004 WL 2550593, at *2 (W.D. Tex. Nov. 2, 2004) (“Under Texas law, all FDA-approved prescription drugs are unavoidably unsafe as a matter of law”); Hackett v. G.D. Searle & Co., 246 F. Supp.2d 591, 595 (W.D. Tex. 2002) (“under Texas law and comment k of the Restatement, Defendants can only be held strictly liable if the drug was not properly prepared or marketed or accompanied by proper warnings”).  Contra: Adams v. Boston Scientific Corp., 177 F. Supp.3d 959, 965 (S.D.W. Va. 2016) (refusing to apply comment k across-the-board in medical device case) (applying Texas law).  The comment k portion of Pinnacle Hip is where we think that Max is on the firmest ground.  The decision made Texas law worse.  This issue will ultimately be won in Texas appellate courts or perhaps before the Texas legislature, where it would be quite simple to extend the warning related presumption of §82.007 to all medical devices approved or cleared by the FDA.

Warning Claims

As to warning claims (which Texas law calls “marketing defects”), the defendants lost on adequacy as a matter of law.  Pinnacle Hip, 2018 WL 1954759, at *10.  Unfortunately, defendants usually lose on this ground, so it’s big news – and trumpeted on this blog – when a defendant wins a judicial holding that its warning is adequate as a matter of law.  No surprise there.  In Pinnacle Hip, that discussion ended:

Not until after the FDA issued its proposed rule in 2013 did defendants specifically warn about the metallosis, pseudotumors, and tissue necrosis − the sorts of conditions that plaintiffs maintained caused their revision surgery.

Id. at 11.  As defense counsel, we interpret the Fifth Circuit’s observation as an invitation to seek an adequacy as a matter of law ruling as to post-2013 claims (if there are any) in the litigation.

In the causation discussion pertaining to the warning claims, Pinnacle Hip of course followed the learned intermediary rule.  It discussed the role of “objective” evidence of causation:

At the threshold, the parties debate the relevance, under Texas law, of “objective evidence” − that is, evidence “that a different warning would have affected the decision of a reasonable doctor.” . . . Here, plaintiffs proffered objective evidence in [expert] testimony that, if the full risks of MoM were known to physicians, “they would run to [a different product].”

2018 WL 1954759, at *11 (citations omitted).  As we’ve discussed before, “objective” expert testimony about what “reasonable physicians” would have done is usually disallowed in learned intermediary cases.

On this point, however, Fifth Circuit law, has not been as favorable as other courts.  In Thomas v. Hoffman-LaRoche, Inc., 949 F.2d 806, 812 (5th Cir. 1992), the court actually allowed expert testimony on what a “reasonable” physician might have done – but that case was under Mississippi law.  See Ackermann v. Wyeth Pharmaceuticals, Inc., 526 F.3d 203, 212 (5th Cir. 2008) (suggesting that Thomas would not apply to Texas law).  We’ve been aware of the brief Texas Supreme Court passing reference to “objective” evidence in Centocor, Inc. v. Hamilton, 372 S.W.3d 140, 171 (Tex. 2012) (plaintiffs “presented no objective evidence”), but felt no reason to let the other side know it was there.

Now it’s been discovered, however.  The Fifth Circuit allowed such evidence to be admissible, 2018 WL 1954759, at *12 (“objective evidence is at least relevant”), but did not find it decisive in situations where the plaintiff would otherwise have suffered dismissal.  Critically, Pinnacle Hip did not allow unsupported “expert” testimony about what an objectively “reasonable physician” would have done be enough to let plaintiffs survive when they didn’t have prescriber testimony – which would have been the equivalent of allowing a heeding presumption in Texas, something the Fifth Circuit rejected outright in Ackerman, 526 F.3d at 212-13.

Relevance, however, does not imply sufficiency.  In the [learned intermediary] context, causation entails two distinct factual predicates:  first, that the doctor would have read or encountered the adequate warning; and second that the adequate warning would have altered his treatment decision for, or risk-related disclosures to, the patient.  Centocor addressed only the latter, suggesting a jury might be allowed to presume a particular physician would respond “reasonably” to fuller disclosure.  But that presumption must yield to contrary subjective testimony by the treating physician, and Centocor fails to explain how objective evidence would apply to whether that doctor would have read or encountered the warning in the first instance.  When considered for the limited purpose intimated in Centocor, objective evidence would have little bearing on any of [these] plaintiffs’ claims.

Pinnacle Hip, 2018 WL 1954759, at *12 (footnotes omitted) (emphasis original).  Thus, where the plaintiffs had no testimony from their prescribing physicians, those claims continue to fail, and some “expert” claiming otherwise cannot change the result.  Id. (granting JMOL in no-prescriber testimony cases).  Likewise, any “objective” testimony “must yield to contrary subjective testimony by the treating physician.” Id.  So plaintiffs cannot create questions of fact with expert testimony where the prescriber has affirmatively testified that a different warning would not have changed what s/he did.

Only what the Fifth Circuit described as “mixed bag” prescriber testimony (the prescriber said different things in different parts of his testimony) cases got to the jury in Pinnacle Hip, id. at *13, and those have always been harder cases for the defense anyway.  At best, for plaintiffs, paying some expert to opine that a “reasonable” physician would have heeded a warning won’t save any plaintiff who lacked a plausible warning causation case in the first place.  At worst, Pinnacle Hip means more plaintiff-side noise at trial in cases already going to trial on warning causation.  All in all, the defense side is better off after Pinnacle Hip than where it had been in the Fifth Circuit with only the Thomas precedent.  We definitely don’t agree with Max here.

Personal Jurisdiction

In Pinnacle Hip, the manufacturer’s parent corporation was held potentially liable because of the amount of guidance and control permitted by an inference from the facts (based on a “clear error” standard).  2018 WL 1954759, at *15.  Those facts allowed the court to conclude that more than a “passive parent-subsidiary relationship” existed as to this product.  Id. at *16.  To us that’s “big whoop” for two reasons.  First, the “clear error” standard does not apply at the district court level where jurisdictional motions are initially decided.  Second, and more important going forward, the plaintiffs proceeded under a “stream of commerce” theory where the Fifth Circuit had previously “embraced [the] more expansive” (Brennan) side of the 4-4 split in Asahi Metal Industry Co. v. Superior Court, 480 U.S. 102 (1987).  Pinnacle Hip, 2018 WL 1954759, at *15.  As we’ve discussed, that broad “stream of commerce” jurisdictional theory is probably toast after Bristol-Myers Squibb Co. v. Superior Court, 137 S. Ct. 1773 (2017).  Pinnacle Hip did not even cite BMS in its discussion of personal jurisdiction, so we guess that this argument wasn’t raised.  In light of the BMS precedent, the Pinnacle Hip jurisdictional holding should be treated as something of a “one-off” applicable to this MDL, but not to future litigation where BMS will stand front and center.

Miscellaneous Claims

Pinnacle Hip includes the Fifth Circuit’s full-throated reaffirmance of our favorite Erie principle:

[T]hat debate [about what a Texas court might do] is beside the point.  When sitting in diversity, a federal court exceeds the bounds of its legitimacy in fashioning novel causes of action not yet recognized by the state courts.  Here, despite ample warning, the district court exceeded its circumscribed institutional role and expanded Texas law beyond its presently existing boundary.

2018 WL 1954759, at *17 (footnote, citations, and quotation marks omitted) (emphasis added).  The court therefore threw out the spurious invention of an “aiding and abetting” cause of action that had no reasonable predicate in Texas law.  Id.

The court did allow two arguably weird theories against the parent corporation – all product liability theories imposing liability against a non-manufacturing parent under a theory not also cognizable against the manufacturing subsidiary are likely to be weird − to survive.  One of those, so-called “nonmanufacturer seller” was tied to statutory exceptions to immunity for nonmanufacturers.  Id. at*18.  The court held, instead, that the parent was only held liable for old-fashioned design or warning liability, after the record (again, construed in favor of plaintiffs as verdict winners) established one of statutory exceptions from nonmanufacturer immunity.  Id. That’s a little peculiar to non-Texas lawyers, but since Texas has this statute, it must mean something.

The other oddball claim that survived is one of those “last refuge of a scoundrel” theories, negligent undertaking” (a/k/a “Good Samaritan”) liability.

Texas caselaw reveals no precise control threshold a parent must cross before undertaking a duty to its subsidiary’s customers.  Texas courts have made clear that mere possession of “the authority to compel” a subsidiary is not enough − the parent “must actually” exercise that authority in a manner relevant to the undertaking inquiry.

Pinnacle Hip, 2018 WL 1954759, at *19 (footnote omitted).  Based on the stringent standard for interpreting record evidence, the court let this one slide.  Id.  Not good, but not likely to arise very often.

But there’s more afoot than just these three theories. Two years ago, we awarded In re DePuy Orthopaedics, Inc., 2016 WL 6268090 (N.D. Tex. Jan. 5, 2016), our ranking as the number six worst decision of that year, chiefly because of the large number of unprecedented theories under Texas law that this opinion permitted:

(1) extending negligent misrepresentation beyond “business transactions” to product liability, unprecedented in Texas; (2) ignoring multiple US Supreme Court decisions that express and implied preemption operate independently (as discussed here) to dismiss implied preemption with nothing more than a cite to the Medtronic v. Lohr express preemption decision; (3) inventing some sort of state-law tort to second-guess the defendant following one FDA marketing approach (§510k clearance) over another (pre-market approval), unprecedented anywhere; (4) holding that the learned intermediary rule does not apply whenever a defendant “compensates” or “incentivizes” physicians to use its products, absent any Texas state or appellate authority; (5) imposing strict liability on an entity not in the product’s chain of sale, contrary to Texas statute (§82.001(2)); (6) creating a claim for “tortious interference” with the physician-patient relationship, again utterly unprecedented; (7) creating “vicarious” breach of fiduciary duty for engaging doctors to serve as expert witnesses in mass tort litigation also involving their patients, ditto; and (8) construing a consulting agreement with a physician as “commercial bribery” to avoid the Texas cap on punitive damages, jaw-droppingly unprecedented.

While only item (5) was at issue in Pinnacle Hip, the Fifth Circuit’s invocation of Erie conservatism bears ill for all of the other judicial flights of fancy that have been allowed during the course of the Pinnacle Hip litigation.

Constitutionality of Punitive Damages Cap

For completeness, plaintiffs also lost their constitutional challenge to the Texas statute capping punitive damages at twice compensatory damages.  “Plaintiffs’ cross-appeal is meritless, and we dispose of it by footnote.”  Pinnacle Hip, 2018 WL 1954759, at *1 n.4.  That footnote went further, and characterized those constitutional claims as “frivolous.”  Id. at *23 n.72.  No matter what the constitutional challenge, a punitive damages cap “need only survive rational-basis review,” which it did in Pinnacle Hip “by injecting predictability into exemplary damages awards and preempting potentially unconstitutional awards.”  Id. (citations omitted).

Conclusion

When all is said and done, we view Max’s characterization of Pinnacle Hip as a “huge win for plaintiffs” as mostly overblown hyperbole, perhaps worthy of inclusion in the closing arguments that the Fifth Circuit held warranted a new trial.  The Fifth Circuit did some damage to comment k, but all the rest of the legal holdings were trivial, fact-bound, not likely to be useful in future cases, or some combination of those.  The forceful reiteration of conservative principles of Erie predictions of state law leave us hopeful that the Pinnacle Hip MDL will see some Fifth Circuit-mandated clean up – or, if not, perhaps the appellate court’s not-so-veiled Parthian, parting shot may have to be fired in earnest:

[D]efendants, despite their serious critiques of the district judge’s actions in this case and related MDL proceedings, see In re DePuy Orthopaedics, Inc., 870 F.3d 345, 351 (5th Cir. 2017) (finding “grave error”), have not asked us to require these cases to be reassigned to a different judge under “this court’s supervisory power to reassign,” United States v. Stanford, 883 F.3d 500, 516 (5th Cir. 2018).  We express no view on the issue but note that reassignment is both “extraordinary” and “rarely invoked.”  Id. (citation and internal quotation marks omitted).

Pinnacle Hip, 2018 WL 1954759, at *27, n.83.  Obviously, the Fifth Circuit in Pinnacle Hip was uncomfortable with the prospect of overruling the JPMDL’s assignment of this MDL, but this final footnote stands as a clear warning that, if further provoked (such as by continuing consolidated trials, or resort to other prejudicial evidence that the court noted but did not rule on), it will consider doing so.

As soon as Daimler AG v. Bauman, 571 U.S. 117 (2014), we made a point of warning defendants that personal jurisdiction was waivable.  Waiver was in the second paragraph of our Bauman Personal Jurisdiction In-House Counsel Checklist – before the checklist itself:

Personal jurisdiction defenses, however, are waivable.  They have to be pleaded and asserted at the outset of the litigation, or else the other side will argue – more persuasively, the more time that has passed – that a defendant has slept on its rights while other parties and the judicial system itself have expended valuable time and effort litigating in the plaintiffs’ forum of choice.  Thus, corporate defendants have to act quickly to evaluate and raise Bauman-based jurisdictional defenses at the outset of the case.

But just suppose that somebody didn’t listen to us.  Perhaps not recognizing the significant changes in personal jurisdiction practice (if not necessarily in constitutional Due Process doctrine itself) wrought by Bauman and Bristol-Myers Squibb Co. v. Superior Court, 137 S. Ct. 1773 (2017), a defendant might not plead a personal jurisdiction defense, thinking it futile – as indeed it likely was under prior practice in most places.  Or even if personal jurisdiction was one of those 28 boilerplate defenses included at the end of every answer to a complaint, perhaps the defendant didn’t file a motion to dismiss under Fed. R. Civ. P. 12(b)(1) at the outset of the litigation….

Now the defendant has seen the light and wants to raise personal jurisdiction as a potentially dispositive defense (in the current forum, anyway).  Plaintiff raises waiver.  Is the defendant out of luck?

It’s not a good situation to be in, but it’s not hopeless, at least not in all jurisdictions.  Today we’re discussing arguments against waiver that have succeeded in Bauman/BMS personal jurisdiction decisions.

In Gucci America, Inc. v. Weixing Li, 768 F.3d 122 (2d Cir. 2014), decided not long after Bauman, the plaintiffs’ waiver argument failed even though the defendant “appeared in the district court and did not argue there that the court lacked personal jurisdiction.”  Id. at 135.  In between Bauman was decided.  “While arguments not made in the district court are generally waived, a party cannot be deemed to have waived objections or defenses which were not known to be available at the time they could first have been made.”  Id. (citations and quotation marks omitted).  Bauman’s enforcement of the “at home” test for general jurisdiction meant that the world had changed:

[A] defendant does not waive a personal jurisdiction argument − even if he does not make it in the district court − if the “argument that the court lacked jurisdiction over the defendant would have been directly contrary to controlling precedent in this Circuit.  Prior to Daimler [which we call Bauman because there are a lot more Mercedes-Benz cases], controlling precedent in this Circuit made it clear that a [defendant] with a branch in New York was properly subject to general personal jurisdiction here.  Under prior controlling precedent . . . through the activity of its New York branch, [defendant] engaged in a “continuous and systematic course of doing business”. . . .  Therefore, we conclude that [defendant] did not waive its personal jurisdiction objection.

Id. at 135-36 (citations and quotation marks omitted).  We believe that the same thing can be said about BMS and case-linked personal jurisdiction – both as to disapproving California’s sliding scale and as to the insufficiency of relationships with in-state distributors.  Accord Strauss v. Credit Lyonnais, S.A., 175 F. Supp.3d 3, 14 (E.D.N.Y. 2016); In re LIBOR-Based Financial Instruments Antitrust Litigation, 2015 WL 4634541, at *31 (S.D.N.Y. Aug. 4, 2015); 7 West 57th Street Realty Co., LLC v. Citigroup, Inc., 2015 WL 1514539, at *5-7 (S.D.N.Y. March 31, 2015) (all following Gucci).  “It was only after the Supreme Court issued its decision in [Bauman] that the scope of [the] ‘at home’ test was appreciated.” Klieman v. Palestinian Authority, 82 F. Supp.3d 237, 243 (D.D.C. 2015).  Thus, the worse any given jurisdiction’s personal jurisdiction law was before Bauman and/or BMS, the more likely it is that futility precludes waiver.

As similar defense to waiver – based on BMS as the intervening decision − prevailed recently in Practice Management Support Services, Inc. v. Cirque du Soleil, Inc., ___ F. Supp.3d ___, 2018 WL 1255021 (N.D. Ill. March 12, 2018) (which we discussed for other reasons, here), where the defendant had not initially raised personal jurisdiction against “unnamed, nonresident class members,” either in “their answer” or while “litigating this case for many years.”  Id. at 17.  Citing precedent from around the country, Practice Management held that the defendants nonetheless “raise[d] their personal jurisdiction defense in a motion that timely followed [BMS].”  Id.

[A] party cannot be deemed to have waived objections or defenses which were not known to be available at the time they could first have been made, especially when it does raise the objections as soon as their cognizability is made apparent. . . .  [A] party can be excused for failing to raise a defense where the defense, if timely asserted, would have been futile under binding precedent.  Like [other] cases, the Court finds that raising a personal jurisdiction defense as to unnamed, nonresident class members would have been “futile” prior to [BMS]. The Court therefore finds that the defense was not then available” to defendants and declines to find it forfeited.

Id. (citing, and in some cases quoting: Hawknet, Ltd. v. Overseas Shipping Agencies, 590 F.3d 87, 92 (2d Cir. 2009); Bennett v. City of Holyoke, 362 F.3d 1, 7 (1st Cir. 2004); Glater v. Eli Lilly & Co., 712 F.2d 735, 738 (1st Cir. 1983); Holzsager v. Valley Hospital, 646 F.2d 792, 795-96 (2d Cir. 1981)).  See Feller v. Transamerica Life Insurance Co., 2017 WL 6453262, at *4 (C.D. Cal. Dec. 11, 2017) (no waiver because “it is not clear that [defendant] would have had a viable basis for challenging personal jurisdiction with respect to their claims” before BMS).

But be careful – this “dramatic new development” exception to waiver comes with a limited shelf life, and BMS is rapidly approaching its first anniversary.

Practice Management also found it proper to excuse any waiver on an alternative ground, that it would be contrary to “proper construction of governing law” to allow a questionable waiver to preserve litigation that – after BMS – was now clearly barred by Due Process limits on personal jurisdiction.

[E]ven if defendants had waived this defense, the Court finds that it would be appropriate to excuse the forfeiture. . . .  [T]he court retains the independent power to identify and apply the proper construction of governing law, even where the parties fail to advert to the applicable rule in their own briefing.  Given the Supreme Court’s clear holding in [BMS] concerning the proper framework for analyzing personal jurisdiction in cases like this one . . ., exercising the court’s discretion to excuse the forfeiture [is] warranted.

Id. (quoting and following Greene v. Mizuho Bank, Ltd., ___ F. Supp.3d ___, 2017 WL 7410565, at *6 (N.D. Ill. Dec. 11, 2017)).  See Levine Hat Co. v. Innate Intelligence, LLC, 2017 WL 3021526, at *3 (E.D. Mo. July 17, 2017) (excusing technical waiver; “federal courts will generally deem a Rule 12(b)(2) motion timely if the defendant’s previously-filed answer expressly includes the lack of personal jurisdiction as an affirmative defense”).  So if your jurisdictional argument is good enough, and the plaintiff’s jurisdictional argument is the opposite, a sympathetic court can find grounds to avoid a claimed waiver.

Another useful case for defeating waiver arguments is Hinrichs v. General Motors of Canada, Ltd., 222 So.3d 1114 (Ala. 2016).  First, Hinrichs turns the waiver argument around, holding that the plaintiff had himself waived the waiver argument by not asserting it clearly or timely.  Id. at 1120.  See In re Plavix Related Cases, 2014 WL 3928240, at *6 (Ill. Cir. Aug. 11, 2014) (“Plaintiffs also fail to specifically identify what Defendants did that resulted in waiver.  Plaintiffs have thus waived their waiver argument”).  So even if the defendant wasn’t on its toes, if the plaintiff wasn’t either, the plaintiff may waive a waiver argument.

Second, Hinrichs excused the defendant’s three-year (until after the U.S. target defendant declared bankruptcy) delay because of the plaintiffs’ procrastination in actually pursuing his supposed claim.

[Plaintiff] repeatedly sought extensions of the trial court’s scheduling order and took no action to pursue his claims against [defendant] during this period.  When it appeared that the trial court would not further amend its scheduling order, [defendant] filed its motion reasserting its defense to personal jurisdiction. . . .  [Plaintiff] cannot point to [defendant’s] having at any time caused the trial court to address a potentially dispositive issue that would have been moot had its defense of lack of personal jurisdiction been later sustained.

Id.  Thus, due to the plaintiff’s own dilatory conduct in pursuing any claim against what had been a secondary defendant, that defendant “did not waive its defense of lack of personal jurisdiction.”  Id.  See Statek Corp. v. Coudert Bros. LLP, 2018 WL 834227, at *12 (D. Conn. Feb. 12, 2018) (no waiver of personal jurisdiction while action was stayed by bankruptcy).

The dilatory plaintiff scenario occurs with startling frequency, especially in MDL situations where weak plaintiffs seek to lie low and do nothing while hoping for a settlement.  Another frequent source of plaintiff-side dilatory conduct of not pursuing pleaded claims is asbestos, where many defendants languish until something (usually a settlement; sometimes a bankruptcy) causes the plaintiff finally to pay attention to a low level defendant with an inchoate personal jurisdiction defense.

Finally, as we already mentioned, a number of decisions (all authored by the same judge) considered the BMS decision an “other paper” that restarted the 30-day period for removal under 28 U.S.C. §1446(b)(3).  Douthit v. Janssen Research & Development, LLC, 2017 WL 4224031, at *6 (S.D. Ill. Sept. 22, 2017):

Correctly, defendants attest BMS conclusively established the Due Process Clause prohibits non-[resident] plaintiffs from filing claims against defendants in [this] state[‘s] courts.  The Court agrees with defendants and finds plaintiffs’ argument unfounded.  When a different case resolves a legal uncertainty concerning the existence of original federal jurisdiction, removal is allowed on that basis.

Id. (citation and quotation marks omitted).  Accord Braun v. Janssen Research & Development, LLC, 2017 WL 4224034, at *6 (S.D. Ill. Sept. 22, 2017); Bandy v. Janssen Research & Development, LLC, 2017 WL 4224035, at *6 (S.D. Ill. Sept. 22, 2017); Pirtle v. Janssen Research & Development, LLC, 2017 WL 4224036, at *6 (S.D. Ill. Sept. 22, 2017); Roland v. Janssen Research & Development, LLC, 2017 WL 4224037, at *5 (S.D. Ill. Sept. 22, 2017); Woodall v. Janssen Research & Development, LLC, 2017 WL 4237924, at *6 (S.D. Ill. Sept. 22, 2017) (all by Herndon, C.J.).  While that ruling was favorable to those defendants which acted in time after BMS, it is not going to help anyone now, since the thirty days have long since run.

While there are ways around a possible waiver of personal jurisdiction, defendants really don’t want to have to go there.  First of all, there are plenty of cases going the other way – we’re just not going to do the plaintiffs’ research for them.  Second, defense counsel never wants to be in a position of having to explain an adverse ruling on waiver to their client.  Third, after Bauman and BMS, it’s really a lot more fun for our side to be challenging personal jurisdiction on the merits.

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

*******

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

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

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

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

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

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

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

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

The personal injury decisions Daimler AG v. Bauman, 571 U.S. 117 (2014), and Bristol-Myers Squibb Co. v. Superior Court, 137 S. Ct. 1773 (2017), are gifts that keep on giving.  The latest development is Wilson v. Nouvag GmbH, 2018 WL 1565602 (N.D. Ill. March 30, 2018), where the plaintiff went to the “home” state of an overseas defendant’s United States distributor and unsuccessfully sought to obtain personal jurisdiction over the parent as well.

Wilson was a wrongful death case filed almost exactly two years after the death at issue.  Id. at *1.  That suggests, although it isn’t stated, that it was filed on eve of the running of the statute of limitations (two years is a common limitations period for personal injury claims, and “death” is often an absolute date for the calculation of limitations periods in death cases).  We’ll come back to that.

The corporate structure of the defendant medical device manufacturer in Wilson is hardly uncommon.  The parent manufacturer is located overseas.  It sells its product, still overseas, to an affiliated distributor that the parent also owns.  The overseas affiliated distributor then sells the products to a similar affiliated distributor in the United States.  That United States distributor then sells the products throughout the country.  Only the United States distributor knows about, and sells to, particular United States customers.  Wilson, 2018 WL 1565602, at *1.

Bauman held that personal jurisdiction rules are intended to “permit out-of-state defendants to structure their primary conduct with some minimum assurance as to where that conduct will and will not render them liable to suit.”  571 U.S. at 762 (citation and quotation marks omitted).  In Wilson that happened.  The corporate structure described above is sufficient to preclude the overseas parent from being sued in product liability anywhere in the United States.

The plaintiff in Wilson, a resident of Virginia, brought suit in Illinois, where the defendant’s United States distributor was undisputedly “at home.”  2018 WL 1565602, at *3.  While that was certainly sufficient to reach the distributor, it did not confer specific “case-linked” jurisdiction (plaintiff conceded no general jurisdiction existed) over the overseas parent or its overseas distributor.

First, although the parent “intentionally directed distribution of its [device] into the United States through an Illinois company,” that didn’t establish specific jurisdiction in Illinois.  Id. at *4.  The product simply passing “through Illinois” into the rest of the country was not enough.  The parent defendant “had no knowledge or influence” over where its products were sold by its American distributor.  Id.  Mere knowledge of its distributor’s location was insufficient.  Id. (FDA filings with Illinois address did not “provide any information about the distribution of the product in the United States”).

Second, the plaintiff “ha[d] not established that [the overseas parent] itself had any contacts with the State of Illinois, as is required to establish specific jurisdiction.”  Id. at *5.  “The Supreme Court has ‘consistently rejected attempts to satisfy the defendant-focused ‘minimum contacts’ inquiry by demonstrating contacts between the plaintiff (or third parties) and the forum State.’” Id. (quoting Walden v. Fiore, 134 S. Ct. 1115, 1122 (2014)).

The fact that [the overseas parent’s] customer distributed its product through a subsidiary based in Illinois is not enough to indicate that [the parent] purposefully availed itself of the privilege of conducting activities within Illinois.

Wilson, 2018 WL 1565602, at *5.

Third, personal jurisdiction could not be based on a stream of commerce theory.  “The ‘stream of commerce’ is a metaphor for the concept of purposeful availment.”  Id.  Stream of commerce without purposeful availment has never commanded a Supreme Court majority.  Id.

[T]his leaves the “stream of commerce” concept of questionable significance in resolving questions of personal jurisdiction. . . .  [A] majority of the Court has never held that jurisdiction premised on the placement of a product into the stream of commerce is, without more, sufficient to establish a constitutionally adequate connection to the forum State.

Id. (citation omitted).  Further, the foreign parent “had no contractual arrangement with” its United States distributor – only its overseas distributor did.  Id.  Thus, there was no basis for stream of commerce jurisdiction “even [under] the more relaxed standard.”  Id.  Finally, the plaintiff produced no evidence that the particular product that caused injury “actually passed through Illinois on [its] way to Virginia.”  Id. at *6.  The mere fact that a distributor was located in Illinois was not proof that any particular unit of the device passed through Illinois in the stream of commerce.  Id.

Fourth, plaintiff couldn’t establish personal jurisdiction through agency, either.  Plaintiff offered only “conclusory allegations.”  Id.

To plead the existence of an agency relationship, a plaintiff must allege some facts that support the inference of agency.  Furthermore, unsupported allegations by a plaintiff are insufficient to support personal jurisdiction.

Wilson, 2018 WL 1565602, at *6 (citation omitted).  “The test for agency is whether the alleged principal has the right to control the agent, and whether the alleged agent can affect the legal relationships of the principal.”  Id. (citation and quotation marks omitted).  The overseas parent’s FDA submissions did not speak at all to the elements of agency.  Id.  As an overseas parent, two steps removed from its United States distributor, the parent “has no knowledge or influence over what happens to the [devices] after they are sold,” in Europe, to its overseas distributor.  Id.

Fifth, even if the plaintiff had proven that the overseas parent had some sort of “contacts” with Illinois, plaintiff failed to establish that the “alleged connection with the State of Illinois has any relation to the claims in this lawsuit” as required by BMS.  Id. at *7.

[Plaintiff] does not allege that any specific conduct related to his claims took place in Illinois.  Specific jurisdiction exists only if there is “an affiliation between the forum and the underlying controversy, principally, an activity or an occurrence that takes place in the forum State.”

Id. (quoting BMS, 137 S. Ct. at 1781).  BMS was “particularly relevant,” as it also involved product liability claims against a prescription medical product.  Wilson, 2018 WL 1565602, at *7.  Under BMS, “a defendant’s contract with a distributor in the forum State is not itself enough to establish personal jurisdiction in the State.”   Id.  The overseas parent “did not design, manufacture, label, or sell its [devices] in Illinois,” therefore product liability allegations about such conduct were not case-related contacts with the state.  Id.

Finally, plaintiff was “not entitled to jurisdictional discovery because he has not made a prima facie showing of personal jurisdiction.”  Id. at *8.  Plaintiff’s attempt to harass the overseas parent with “interrogatories, requesting documents, and conducting depositions on 17 wide-ranging topics” also failed.  Id.  Any discovery along those lines would have to be directed to the United States distributor over which jurisdiction existed.  Id.

In sum, the plaintiff utterly “fail[ed] to establish that any suit-related conduct, by [the overseas distributor] or other defendants, took place in the State of Illinois.”  Wilson, 2018 WL 1565602, at *8 (emphasis added).  That holding means that even the United States distributor was not subject to specific, case-linked jurisdiction (although general jurisdiction existed as to the Illinois-based company) for failure to establish that its purportedly injury-causing product passed through the forum state.

[T]his Court cannot exercise specific jurisdiction over a foreign defendant for claims that have no connection to Illinois.  [Plaintiff] has not shown any affiliation between the forum and the underlying controversy to allow the exercise of specific jurisdiction in Illinois over [the overseas parent].

Id.

*          *          *          *

Wilson is thus a successful example of what Bauman held was proper – “out-of-state defendants [being able] to structure their primary conduct” so as to avoid suit in the United States.  If an overseas parent cannot be subject to jurisdiction in the only state where its United States distributor is actually located, it can hardly be subject to jurisdiction anywhere else in the country.  See also Fed. R. Civ. P. 4(k)(2) (providing relief in this situation only for claims “aris[ing] under federal law”).  A corporation’s vertical integration:  (1) overseas parent selling to (2) overseas distributor selling to (3) a viable (we are not addressing alter ego claims not raised in Wilson) United States distributor – is thus a model for other overseas entities selling products into the American market that wish to structure their affairs so as to limit their product liability exposure to the assets of the American entity.  Indeed, Bauman/BMS also provides a degree of insulation from excessive American discovery, at least as a party to litigation.

Furthermore, as we mentioned earlier, the plaintiff in Wilson was apparently up against the statute of limitations when suit was filed.  The Bauman/BMS limits on personal jurisdiction have another beneficial effect.  The statute of limitations is often considered “procedural” for choice of law purposes (in the absence of a forum “borrowing statute”), which has in the past allowed otherwise time-barred plaintiffs to flock to those jurisdictions with longer statutes of limitations or broader tolling exceptions to their statutes.  No longer.  Due process in personal jurisdiction now precludes tardy plaintiffs from filing belated claims in states with no “case-related” contacts simply because those states have more permissive statutes of limitations.

We have written a lot about personal jurisdiction and class actions, and we have particularly questioned how, after BMS, anyone could proceed with a nationwide class action applying state law in a forum where there is no general personal jurisdiction over the defendant.  We are not the only ones posing this question, but as has so often been the case, Bexis has led the way with two extraordinarily useful posts surveying the cases.  You can review these must-read posts here and here.  You can also get Bexis’ Washington Legal Foundation white paper on the topic here.

The issue is whether a court can exercise specific personal jurisdiction over claims asserted on behalf of out-of-state class members.  Take for example a putative nationwide class action in which a California class representative sues a New York defendant in California in connection with goods purchased in California.  Can this class representative purport to represent absent class members who reside and purchased goods outside California?  We think the answer clearly is no, since those non-Californians cannot establish specific personal jurisdiction over the New York defendant in California.

Most courts agree with us, and judging from our prior posts, the issue is often decided on a motion to dismiss. But is a motion to dismiss the only way to invoke BMS and its limitations on specific personal jurisdiction in a nationwide class action?  If you move fast, you can probably use BMS to oppose class certification, which is what happened last week in another Illinois case, Practice Management Support Services, Inc. v. Cirque du Soleil, Inc., No. 14 C 2032, 2018 WL 1255021 (N.D. Ill. Mar. 12, 2018).  In Practice Management, an Illinois company filed a nationwide class action in Illinois under the Telephone Consumer Protection Act (“TCPA”) against a Canadian company after received a fax advertising a circus performance in Illinois.

The case had been proceeding in federal court for several years, apparently including briefing on the plaintiffs’ motion for class certification, when the Supreme Court decided BMS.  The defendants therefore filed a supplemental brief asserting that BMS “prevents this Court from asserting personal jurisdiction over the Defendants with respect to the claims of putative class members located outside of Illinois” and that the case was therefore relevant to class certification. Id. at *15.

The district court agreed with the defendants, and its marquee holding is that BMS’s limitations on specific personal jurisdiction apply to class actions in federal court.  After citing other district judges who had so found, the district court made this broad ruling:

This Court agrees with these courts. Indeed, it [is] not clear how [Plaintiff] can distinguish the Supreme Court’s basic holding in Bristol-Myers simply because this is a class action.  The Supreme Court has emphasized that “Rule 23’s [class action] requirements must be interpreted in keeping with Article III constraints, and with the Rules Enabling Act, which instructs that the [federal court] rules of procedure ‘shall not abridge, enlarge, or modify any substantive right.’” Amchem Prods. v. Windsor, 521 U.S. 591, 592 (1997) . . .  The Supreme Court held in Bristol-Myers that the Fourteenth Amendment’s due process clause precludes nonresident plaintiffs injured outside the forum from aggregating their claims with an in-forum resident. Bristol-Myers, 137 S. Ct. at 1781.  Under the Rules Enabling Act, a defendant’s due process interest should be the same in the class context.

Id. at *16. This reasoning is essentially bulletproof, and the district court’s holding is bookended by another significant ruling—that the defendants did not waive their personal jurisdiction challenge. Id. at *17.  Remember, the defendants litigated this case in the Illinois federal court for years, and they did not raise personal jurisdiction in their answers.  But here, BMS was a game changer.  The district ruled that a personal jurisdiction challenge would have been futile before BMS and that the defendants “timely raise[d] their personal jurisdiction defense in a motion that timely followed the Supreme Court’s decision.” Id. Because other defendants sued before BMS are surely in a similar position, the district court’s no-waiver holding should not be overlooked.

If you stopped reading here, you would have the gist of Practice Management.  But the plaintiffs made other arguments, too.  They argued that the district court could exercise jurisdiction over a nationwide class under Phillips Petroleum Co. v. Shutts, 472 U.S. 797 (1985), where the Supreme Court held that courts could exercise personal jurisdiction over absent class member’s claims without violating the class members’ due process rights. Id. at *16.  But that is apples and oranges.  The issue in Practice Management was the defendants’ due process rights.  An absent class member has the right to notice and opt out before being bound to a class judgment.  A defendant whose objection to jurisdiction is overruled is being compelled to answer the out-of-staters’ claims and has no choice.  That’s a big due process difference.

The plaintiffs also argued that BMS left open the question of whether the Fifth Amendment’s due process clause imposed the same restrictions on the exercise of personal jurisdiction by a federal court.  We are aware of a handful of district judges who have bought this argument, and suffice it to say that we do not agree that due process under the Fifth Amendment is fundamentally different from due process under the Fourteenth Amendment when it comes to personal jurisdiction.  In Practice Management, it did not matter:  The TCPA does not authorize nationwide service of process and looks to state law for limitations on personal jurisdiction in any event. Id. at *16.  Thus, BMS applies.

The district court therefore followed BMS and ruled that it did not have jurisdiction over nonresidents’ claims:  “Because these nonresidents’ claims do not relate to defendants’ contacts with Illinois, exercising specific personal jurisdiction over defendants with respect to them would violate defendants’ due process rights.” Id. at *18.

The practical impact of this ruling is that this class action is now limited to Illinois only. In the portion of the order that we have not discussed, the district court granted class certification.  But instead of a class of fax recipients from anywhere, the district court redefined the class to include Illinois residents who received faxes in Illinois.  Maybe that is small consolation, but it is consolation nonetheless, and by raising their challenge when they did, the defendants created a published order on personal jurisdiction that will help us all.  We will be sure to thank them when the circus is over.

With a little luck on our part, by the time you read this we will be vacationing in a sunnier clime.  Our beachfront cottage is an Oddjob’s hat-toss away from where Ian Fleming wrote the James Bond novels.  Mind you, we are not pretending to be serving On Her Majesty’s Secret Service.  If anything, with the secluded location of our holiday, the absurd luxury, and our ever-expanding girth, we are more appropriately cast as a Bond villain.  That suits us just fine.  More than one plaintiff lawyer has called us Dr. No. And more than once, we have reached under our desk, probing for a trap-door button that would plunge an opponent into the piranha pool.



The judge in today’s case, Livingston v. Hoffman-LaRoche Inc., No. 17C-7650-MEA (N.D. Ill. March 7, 2018), pushed the button, holding that there was no personal jurisdiction.  Livingston was yet another Accutane case, with allegations of bowel injury.  We have written frequently on the aggregated forms of this litigation in both the federal and New Jersey court systems.  The Livingston case is different.  To be sure, the Livingston opinion last week was largely an obvious application of the SCOTUS Bauman and BMS cases, but there was a scary threat lurking just off-stage.  More on that later.  Moreover, anything good on jurisdiction from Illinois is noteworthy.

 

The history of the Livingston case is more complicated than the plot of The World is Not Enough.  The case was originally filed in Cook County, Illinois – a fabulous pro-plaintiff jurisdiction.  The case was then removed.  Then it was remanded — nine years ago.  The case sat in state court with little happening.  The generics got out on Pliva v. Mensing in the meantime, but by then the branded defendant could no longer remove the case because of the one-year bar.  Then the plaintiff lawyers did the defense a great favor (not the last) by taking their one dismissal in Illinois, which allowed them to refile within a year.  The plaintiff eventually did refile in Cook County, and the branded defendant removed.  That’s the case in our sights today.  The case was initially assigned to a different judge, but then it got reassigned to the same federal judge who remanded a long time ago.  The defendant would have been entitled to view that as a bad sign.  But it wasn’t.

So much for foreshadowing.  Here are the facts, at least the ones that matter for this decision.  The plaintiff took Accutane to treat his acne in Wisconsin in 1999 and in Ohio in 2004.  In 2005, the plaintiff had a surgical procedure to remove his colon.  The gravamen of the plaintiff’s lawsuit is that Accutane made this surgery necessary.  More specifically, the plaintiff claimed that the product was defectively designed and was accompanied by inadequate warnings.  But we are getting ahead of ourselves.  The plaintiff moved to Illinois in 2007. There, he was prescribed a generic version of the drug that allegedly caused him the earlier harm, and the plaintiff asserted that his Illinois doctor committed malpractice.  It is because the plaintiff lived in Illinois that he filed his lawsuit there, even though the manufacturer of branded Accutane was not “at home” in Illinois and the branded prescription and the alleged injury occurred outside of Illinois.


It is thus no surprise that the branded defendant moved to dismiss for lack of personal jurisdiction.  The plaintiff filed no opposition.  The Livingston court references a reply brief filed by the defendant.  Presumably, that reply brief was one of those short, triumphal papers pointing out that the plaintiff’s silence amounts to a concession, so a ruling for the defendant should be compulsory and easy.  And, in fact, the dismissal for want of personal jurisdiction was compulsory and easy.  We’ve seen a report on this case in one of the major online legal publications, and for some reason that report focused on general jurisdiction.  That aspect of the decision is certainly the least interesting part.  The manufacturer of Accutane was not incorporated in Illinois and did not locate its headquarters there.  To our mind,  Bauman makes that a no-brainer.
No, for us there are two angles to the decision that are much more interesting.  First, the Livingston court followed what seems to be the emerging consensus rule for federal courts faced with simultaneous issues of subject matter jurisdiction (is there diversity?  is there fraudulent joinder?) and personal jurisdiction (can this particular defendant be sued by this particular plaintiff here?).  Plaintiffs would prefer the district court to handle the subject matter jurisdiction issue first, conclude that the defendant had not met the difficult test for fraudulent joinder, and then remand the case to state court without ever getting to personal jurisdiction.  Defendants would prefer the federal court to look at personal jurisdiction, find it does not exist, and then dismiss the case without ever getting to subject matter jurisdiction.  It turns out the defendants are right and the plaintiffs are wrong (you’re not exactly surprised to hear us say this, are you?) for a simple reason — literally a simple reason: the personal jurisdiction issue is simple, and the fraudulent joinder issue is not.  That is what the Livingston court concluded, alluding to the “enormous judicial confusion” engendered by the fraudulent joinder doctrine, while viewing the personal jurisdiction issue as being “straightforward” and not presenting “a complex issue of law.”  As addressed above, the general jurisdiction prong of personal jurisdiction truly was simple here: no incorporation or headquarters means no general jurisdiction.
The specific jurisdiction prong was almost as simple, though we are mindful that some plaintiff lawyers and some courts now seem determined to make it much less simple.  (We recently read of a court from one of the very worst jurisdictions deciding to tackle the subject matter jurisdiction issue first, because the plaintiffs had successfully muddied the personal jurisdiction waters.  We don’t recall the judge’s name.  Perhaps Blofeld?)  As SCOTUS set forth in Walden v. Fiore, to support the exercise of specific personal jurisdiction, “the defendant’s suit-related conduct must create a substantial connection with the forum state.”  Here, the plaintiff’s Accutane prescription and treatment occurred outside of Illinois.  Predictably, the plaintiff alleged that the branded defendant “marketed, distributed, and sold” Accutane all over the United States, including Cook County.  The answer to that is: So what?  That conduct played no role in the plaintiff’s injury.  What about the fact that the plaintiff does currently reside in Illinois?  Again, Walden supplies the refutation: “[T]he plaintiff cannot be the only link between the defendant and the forum.  Rather, it is the defendant’s conduct that must form the necessary connection with the forum state that is the basis for its jurisdiction over him.”  Go back and read the facts of the Walden case, and you will understand how the plaintiff’s residence, absent some connection to the defendant’s conduct, cannot unilaterally establish specific personal jurisdiction.  End of story.  Push the button. Cue the piranhas.



But there is one additional, potentially interesting aspect of this opinion.  The physician who prescribed the generic version of the drug was, in fact, a citizen of Illinois.  Again, the court regarded this as a big fat So-what:  “The claim against the local doctor did not mention the manufacturer of Accutane, involved the generic product only, “comprises different time periods, and entails different injuries.”  Swell.  But we must admit that as we read the final portion of the Livingston opinion, we were haunted by a spectre.  It is very, very nice that the bottom line of Livingston is that the prescription of a generic drug in Illinois did not create personal jurisdiction over the brand defendant. For a moment, though, a terrible dread wormed its way into our brain-pan.  We alluded above to the fact that Illinois is the home of some awful personal jurisdiction opinions.  Illinois has also been crazy-bad on the issue of innovator liability.  One might have feared that an Illinois court might contrive to find a way to merge innovator liability with the “arise out of”/”related to” prong of specific jurisdiction and thereby keep the case in Illinois. If a branded company can be on the hook for injury allegedly caused by a generic, why not require the branded company come to the forum where the generic was consumed.  An utterly crazy syllogism is at work there.  But Illinois is the one jurisdiction batty enough (well, along with California) to throw out all of tort and jurisdictional law on grounds of foreseeability and misplaced judicial compassion.  Such an outrageous opinion would have made the judicial sky fall. Mercifully, that did not happen in the Livingston case.  Indeed, now defendants have a precedent to argue that it never should.


We offer a tip of the cyber-cap to the winning lawyers, a defense all-star team including longtime friend-of-the-blog Michael Imbroscio (Covington), as well as Colleen Hennessey (Peabody), and Sherri Arrigo (Donohue Brown).

Several decisions since the beginning of the year, and two appellate rulings in the last couple of weeks, highlight another aspect of Bristol-Myers Squibb Co. v. Superior Court, 137 S. Ct. 1773 (2017) (“BMS”), that should be valuable to defendants.  BMS – which dealt with what the Court called “case-linked” (also known as “specific”) personal jurisdiction, had some choice things to say about what kind of forum-related contacts suffice to confer jurisdiction.

Under BMS, case-linked jurisdiction “must “arise out of or relate to the defendant’s contacts with the forum.”  Id. at 1780 (internal quotes omitted) (emphasis original).  Where the “relevant conduct occurred entirely” out of state, “the mere fact that this conduct affected plaintiffs with connections to the forum state did not suffice to authorize jurisdiction.”  Id. (internal quotes omitted) (emphasis original).  Without a plaintiff/case-specific factual hook, “specific jurisdiction is lacking regardless of the extent of a defendant’s unconnected activities in the State.”  Id.

Finally, the BMS court reiterated that a defendant’s distributing a product through independent third parties doesn’t create case-linked jurisdiction either.

A defendant’s relationship with a third party, standing alone, is an insufficient basis for jurisdiction.  In this case, it is not alleged that [defendant] engaged in relevant acts together with [its distributor] in [the forum]. . . .  The bare fact that [the defendant] contracted with a [forum] distributor is not enough to establish personal jurisdiction in the State.

Id. at 1783 (various citations and quotation marks omitted).  BMS also cited (many times) and followed World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286 (1980), which BMS described as holding that an “isolated occurrence” is not capable of supporting jurisdiction where “the defendant carried on no activity” in the state “whatsoever” and one of its products, in a “fortuitous circumstance,” caused injury when it “happened to suffer an accident while passing through” the state.  BMS, 137 S. Ct. at 1782.

And, of course, as we’ve mentioned before, there is also the federalism aspect of BMS:

[T]he primary concern is the burden on the defendant. . . .  [E]ven if the defendant would suffer minimal or no inconvenience from being forced to litigate before the tribunals of another State; even if the forum State has a strong interest in applying its law to the controversy; even if the forum State is the most convenient location for litigation, the Due Process Clause, acting as an instrument of interstate federalism, may sometimes act to divest the State of its power to render a valid judgment.

Id. at 1780-81 (several internal quotation marks from World-Wide Volkswagen omitted).

The discussion in BMS – particularly given that it was authored by Justice Alito – suggested to us that so-called “stream of commerce” (“SoC”) jurisdiction is also likely on its way out.  SoC jurisdiction, for those of you who don’t live with this stuff day in and day out, doesn’t involve litigation tourists.  Rather, it is s theory that plaintiffs advance when they claim to be injured in the forum by the product of a defendant that has nothing to do with that forum, except that in Tinker to Evers to Chance to Steinfeldt to Kling to Sheckard to Slagle to Schulte fashion, its product wound up in the state due to the independent actions of others.  The product causing harm in the jurisdiction, without more, is purportedly enough to create case-linked personal jurisdiction under this theory.  The defendant need not have intended, or even be aware, that its products were present in the forum state.

As we discussed here, in connection with the last time the United States Supreme Court addressed this variant of case-linked jurisdiction directly, SoC jurisdiction, particularly in its more extreme forms, does not depend the defendant having deliberately acted to market its products in the forum state.  Instead “stream of commerce” is just what it sounds like.  The only connection between the defendant and the jurisdiction is happenstance, in that random acts of intermediate product distributors-owners-sellers-whoever happened that brought the particular injury-causing product into the jurisdiction.

SoC jurisdiction has never commanded a majority on the Supreme Court. The best it ever did was four justices in Asahi Metal Industry Co. v. Superior Court, 480 U.S. 102 (1987), which not surprisingly arose from California.  In Asahi, Justice Brennan, speaking for four justices, stated:

As long as a participant in this process is aware that the final product is being marketed in the forum State, the possibility of a lawsuit there cannot come as a surprise.  Nor will the litigation present a burden for which there is no corresponding benefit.  A defendant who has placed goods in the stream of commerce benefits economically from the retail sale of the final product in the forum State, and indirectly benefits from the State’s laws that regulate and facilitate commercial activity.  These benefits accrue regardless of whether that participant directly conducts business in the forum State, or engages in additional conduct directed toward that State.

480 U.S. at 117.  This passage was dictum (no jurisdiction existed on the facts of Asahi) in a concurring opinion, but the concept of SoC jurisdiction in the absence of any forum-directed conduct by the defendant has persisted for decades.

In 2011, the Supreme Court held that SoC jurisdiction could not be asserted as a form of general jurisdiction in Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 929 (2011).  However, due to a concurring opinion by Justice Alito, the Court was unable to administer the coup de grâce in J. McIntyre Machinery, Ltd. v. Nicastro, 564 U.S. 873 (2011).  Four justices “conclu[ded] that the authority to subject a defendant to judgment depends on purposeful availment,” thus rejecting “the undesirable consequences of Justice Brennan’s approach” in Asahi.  Id. at 885.  This Nicastro plurality held:  (1) “jurisdiction is in the first instance a question of authority rather than fairness”; (2) “personal jurisdiction requires a forum-by-forum, or sovereign-by-sovereign, analysis”; and (3) “a defendant may in principle be subject to the jurisdiction of the courts of the United States but not of any particular State.”  Id. at 883-84.

However, Justice Alito, joined by Justice Breyer, refused “to announce a rule of broad applicability” that would have consigned SoC jurisdiction to the dustbin of history.  Id. at 887.  Instead, they agreed only that “a single sale of a product in a State does not constitute an adequate basis for asserting jurisdiction over an out-of-state defendant, even if that defendant places his goods in the stream of commerce, fully aware (and hoping) that such a sale will take place.”  Id. at 888-89.

We’ve thought, ever since BMS, that Justice Alito’s enunciation (discussed above), of the federalist model of jurisdiction in BMS should be the deathblow to the kind of SoC jurisdiction without purposeful availment that has bedeviled product liability defendants for decades.  He’s now on-board with what he wasn’t willing to join in Nicastro.  But our thoughts and a dime will get us a cup of coffee.  Now, however, several recent post-BMS decisions suggest that we’re right.

First, the Oklahoma Supreme Court the other day decided Montgomery v. Airbus Helicopters, Inc., ___ P.3d ___, 2018 WL 1164671 (Okla. March 6, 2018), and held that BMS eliminated the remaining jurisdictional underpinnings of SoC jurisdiction.  “[S]ubsequent, to [BMS] we must conclude that any ‘stream of commerce’ test applied to [defendants’] products . . . cannot establish Oklahoma jurisdiction”:

[BMS] requires an affiliation between the forum and the underlying controversy, an activity or an occurrence that takes place in the forum State, which subjects the cause to the State’s regulation.  The adjudication of issues must derive from, or be connected with, the very controversy that establishes jurisdiction.  Accordingly, a “sliding scale” approach, or “totality of the contacts” or “stream of commerce” approach is insufficient to establish specific personal jurisdiction.

Id. 2018 WL 1164671, at *9.  While Oklahoma had “an interest in adjudicating this case,” since “most of the harm” occurred there, “these facts alone, without [defendants] having further direct and specific conduct with this State directly related to the incident giving rise to the injuries, is insufficient for asserting specific personal jurisdiction over them” after BMS.  Id. at *10.  Montgomery thus wipes out a pro-plaintiff decision on SoC jurisdiction handed down within weeks of BMS.  See Tarver v. Ford Motor Co., 2017 WL 3527710 (W.D. Okla. Aug. 16, 2017).

Second, as discussed last week, Shuker v. Smith & Nephew, PLC, ___ F.3d ___, 2018 WL 1096185 (3d Cir. March 1, 2018), disposed of a SoC–based jurisdiction claim against the target defendant’s parent.  The Third Circuit had for decades avoided taking a position on Asahi-style SoC jurisdiction, neither adopting nor definitively rejecting it.  See, e.g., D’Jamoos v. Pilatus Aircraft Ltd., 566 F.3d 94, 105-06 (3d Cir. 2009) (avoiding SoC issue by holding that airplane crashing in state did not “enter” the stream of commerce “as that term is generally understood”).  But, with BMS on the books, the court flatly rejected SoC jurisdiction in Shuker.  “We perceive no merit in [plaintiffs’] stream-of-commerce theory of personal jurisdiction.”  2018 WL 1096185, at *14.  Observing that “[a] plurality of Supreme Court Justices has twice rejected the stream-of-commerce theory,” Shuker took notice of (as did we) of the relevant language in BMS:

Indeed, the Supreme Court has recently held that “[t]he bare fact that [a non-resident defendant] contracted with a [resident] distributor is not enough to establish personal jurisdiction in the State.”  [citing BMS]  We thus have no cause to revisit our Court’s precedent on this issue, and we decline to adopt [plaintiffs’] stream-of-commerce theory of specific personal jurisdiction.

2018 WL 1096185, at *14 (affirming rejection of SoC jurisdiction without any discovery).  The Third Circuit’s precedential rejection of broad SoC jurisdiction in Shuker calls into question some backward-looking district court decisions that we came across in writing this post, those being Antonini v. Ford Motor Co., 2017 WL 3633287 (M.D. Pa. Aug. 23, 2017), and Lindsley v. American Honda Motor Co., Inc., 2017 WL 3217140 (E.D. Pa. July 28, 2017).

Third, Venuti v. Continental Motors, Inc., ___ P.3d ___, 2018 WL 312532 (Utah App. Jan. 5, 2018), similarly rejected SoC jurisdiction in another plane crash case.  Beyond selling the product generally, “there [wa]s no evidence that [defendant] took any additional steps to target [the forum state] for the sale of the product.”  Id. at *4.  “[A] series of third-party sales” rather than “any deliberate action on the part of” the defendant brought the product into the state.  Id. at *5.  “[M]erely placing a product into the stream of commerce knowing that it could be swept into the forum state does not subject a manufacturer to personal jurisdiction.”  Id.  Without some “target[ing]” of the forum, that the defendant sold a lot of products generally doesn’t create jurisdiction, particularly after BMS:

When there is no connection between the forum and the underlying controversy, “specific jurisdiction is lacking regardless of the extent of a defendant’s unconnected activities in the State.”

Id. at *6 (quoting BMS, 1347 S. Ct. at 1781).

Fourth, also in 2018, Moseley v. Suzuki Motor, Inc., 2018 WL 539330 (D. Idaho Jan. 24, 2018), reached the same conclusion.  The plaintiff in Moseley asserted SoC jurisdiction over a foreign product manufacturer without even bothering to allege how the product, which had been sold by a now-defunct independent distributor in Utah in 2008, made its way to Idaho by 2015, where it was involved in a fatal accident.  Id. at *1; see id. at *2 (“Plaintiffs have failed to explain how the motorcycle even ended up in Idaho”).

In the absence of any evidence that the defendant manufacturer ever “specifically targeted” the forum state, id. at *2, the Moseley court rejected SoC jurisdiction.  Where “only the distributor, but not the manufacturer, purposefully availed itself of the benefits of doing business” in a state, personal jurisdiction over the manufacturer does not exist, even if the distributor, in this particular case, was a corporate subsidiary of the defendant.  Id. at *3.

Courts are thus starting to get it.  While BMS was not a SoC jurisdiction case, it did authoritatively delineate the standards for case-linked personal jurisdiction, which under Goodyear is the only possible basis for SoC jurisdiction.  The holding in BMS that merely having in-state distributors is not enough for case-linked jurisdiction should therefore be fatal to non-purposeful availment versions of SoC jurisdiction, which rest on “contacts” (if they can even be called that) that are less significant..  In that respect, it should not matter that – unlike BMS – the plaintiffs in SoC jurisdiction cases are not litigation tourists, but rather resident plaintiffs.  If, and only if, “purposeful availment” rather than the “fortuitous” conduct of third persons brought the product into the jurisdiction, can there be personal jurisdiction under any sort of SoC jurisdiction theory after BMS – as courts now appear to be recognizing.

This post is from the non-Reed Smith side of the blog.

We’ve posted on two other occasions about the Shuker v. Smith & Nephew case as the Eastern District of Pennsylvania systematically dismantled the case on the grounds of preemption and pleading deficiencies. You can find those posts here and here. Unfortunately, the recent Third Circuit opinion deciding plaintiff’s appeal isn’t the full affirmance we had been hoping for. But before you get the wrong idea, the Third Circuit got the most important issue right – when you have a multi-component medical device, PMA preemption is to be addressed on a component-by-component basis. After that, however, the appellate decision does some unraveling of the district’s dismissal of the claims that survived preemption and so the case is going back to the Eastern District.

Briefly, the facts are that plaintiff underwent a hip replacement surgery in which his surgeon opted to use a Smith & Nephew device that consisted of several component parts, one of which was the R3 metal liner. Shuker v. Smith & Nephew, PLC, 2018 U.S. App. LEXIS 5160, *11 (3d Cir. Mar. 1, 2018). Unlike the other components of the device, the liner had undergone FDA Pre-Market approval. Id. And, the parties are in agreement that the surgeon’s decision to use the R3 metal liner with this particular device was an off-label use. Id. at *12. Plaintiff suffered complications that required additional revision surgeries.

In its first decision, the district court tossed out almost all claims as preempted and any non-preempted claims for being inadequately pleaded. When plaintiff filed an amended complaint attempting to correct the pleading deficiencies for the non-preempted claims, he again missed the mark and his remaining claims were dismissed with prejudice. The district court also entered a decision finding that it lacked personal jurisdiction over Smith & Nephew, PLC – a foreign parent company. Those three rulings are what the Third Circuit addressed in last week’s decision.

The question of how to apply PMA-preemption to a multi-component device was one of first impression in the Courts of Appeal. Id. at *2. And it is an important question because surgeons engaging in off-label use do mix and match parts with different regulatory backgrounds. The Third Circuit did a precise analysis that landed at the proper conclusion. However, the analysis does start up with a bit of a hiccup. Since we are talking about PMA-preemption, we are dealing with express preemption. Yet, in a footnote the court refused to follow the Supreme Court’s recent abolition of the presumption against preemption in the express preemption context set forth in Puerto Rico v. Franklin Cal. Tax-Free Tr., 136 S.Ct. 1938 (2016), because that decision wasn’t a products liability case and therefore did not directly concern the “historic police powers of the States.” Shuker, at *16n.9. We respectfully disagree with this conclusion for all the reasons we mention in our post discussing Franklin and simply point out that other courts have reached the opposite conclusion. Accord Watson v. Air Methods Corp., 870 F.3d 812, 817 (8th Cir. 2017) (following Franklin and rejecting presumption against preemption in express preemption case); EagleMed LLC v. Cox, 868 F.3d 893, 903, (10th Cir. 2017) (same); Atay v. Cty. of Maui, 842 F.3d 688, 699 (9th Cir. 2016) (same); Conklin v. Medtronic, Inc., ___ P.3d ___, 2017 WL 4682107, at *2 (Ariz. App. Oct. 19, 2017) (under Franklin courts may not invoke a presumption against preemption in PMA preemption cases); Olmstead v. Bayer Corp., 2017 WL 3498696, at *3 n.2 (N.D.N.Y. Aug. 15, 2017) (plaintiff’s assertion of presumption against preemption in PMA preemption case held “frivolous” after Franklin).

Fortunately, that did not derail the Third Circuit from ultimately concluding that plaintiff’s negligence, strict liability, and breach of implied warranty claims were all preempted under Riegel. To do that, the court had to determine to what device it was applying the preemption analysis. Plaintiff argued that you have to look at the device that was implanted as a whole. Whereas defendant, bolstered by an amicus brief filed by the FDA at the court’s request, maintained that the proper focus is on the component of the device with which plaintiff takes issue. Shuker, at *18. Agreeing with the defense position, the court anchored its decision on three findings. First, the FDCA defines “device” to include “components, parts, and accessories.” Id. at *19. Second, the FDCA’s off-label provisions specifically acknowledge that a physician can and will use components separately from the system for which the FDA approved use. Id. at *20. And despite the use to which the component is put, the FDA’s PMA-regulations for the component follow with it. In other words, “premarket approval requirements apply equally to the components, as manufacturers generally may not deviate from the requirements imposed through premarket approval regardless of how [a component] is used.” Id. (citation and quotation marks omitted). Third, the FDA’s position is that the device is not limited to the device as a whole but includes components. Further, the FDA is charged with assuring the safety and effectiveness of components as well as finished devices. Id. at *21-22.

Therefore,

[t]aken together, the statutory definition of “device,” the treatment of off-label uses, and the guidance of the FDA all counsel in favor of scrutinizing hybrid systems at the component-level. . . .. And the Riegel test is properly framed at Step One as “whether the Federal Government has established requirements applicable” to a component of the hybrid system.

Id. at *22-23. Because the part of the device plaintiff attacked was the R3 metal liner which was premarket-approved, any state tort claim that seeks to impose requirements that are different from or in addition to the FDA’s requirements for that component are preempted. That includes plaintiff’s negligence, strict liability, and implied warranty claims.

The appellate court next reviewed the dismissal of plaintiff’s claims that survived preemption – negligence and fraud claims based on alleged off-label promotion in violation of federal law – and found the negligence claim was adequately pleaded but that plaintiff failed again to satisfy Rule 9’s heightened standard for pleading fraud. As to negligence, the court found TwIqbal satisfied as to duty, breach, causation where plaintiff alleged:

  • the R3 metal liner was approved only for use with a different system and therefore under federal law defendant had a duty to refrain from false or misleading advertising;
  • in a press release, defendant misleadingly marketed the R3 metal liner as an option for the system used by plaintiff’s surgeon (one other than the one it was approved for); and
  • plaintiff’s surgeon “either read” or “was aware” of the press release.

Id. at *28-29. Like the district court, the Third Circuit considered and relied upon the press release cited in plaintiff’s complaint. Unlike the district court, the Third Circuit appears to only focus on the portions of the press release upon which plaintiff relied (see prior post for more details) and concludes that’s enough to get plaintiff to the discovery stage. Id. at *29n.18. Although we wonder if the court’s calling plaintiff’s allegations enough to “nudge” the claim over the threshold is a veiled acknowledgement of just how narrowly the complaint squeaked by. See id. at *30.

Meanwhile, plaintiff’s fraud claim needed more than a nudge and it didn’t get even that. The court focused on plaintiff’s failure to plead justifiable reliance on the alleged misrepresentation. The “read” or “was aware” of allegation that sufficed for negligence lacked the requisite details regarding how the press release “induced or influenced” plaintiff’s surgeon for a fraud claim. Id. at *33-34. Plaintiff has to allege the “circumstances of the alleged [influence on Mr. Shuker’s surgeon] with sufficient particularity to place [defendant] on notice of the precise misconduct with which it is charged.” Id. at *34. Despite this having been plaintiff’s second failed attempt at meeting the pleading standard on fraud, the Third Circuit decided to give plaintiff another chance and found the claim should only be dismissed without prejudice.

Finally, there was a separate finding by the district court that it did not have personal jurisdiction over Smith & Nephew, PLC, a foreign parent company. The Third Circuit agreed with the district court that specific personal jurisdiction was not conferred on a stream-of-commerce theory. Id. at *36-37. We’ve talked about this before and more recently in light of BMS v. Superior Court, and like the Third Circuit “we have no cause to revisit” the precedent on the issue (but you should feel free to). But the court did think plaintiff alleged enough in his complaint to allow some limited jurisdictional discovery on possible alter ego based personal jurisdiction. Id. at *38-40. Emphasis on the limited part. See id. at *40n.20 (“District Court should take care to circumscribe the scope of discovery . . . to only the factual questions necessary to determine its jurisdiction;” further referencing proportionality amendment to Rule 26(b)(1)).

So, on the third pass plaintiff got a little life breathed back into this case which is unfortunate, but as the first appellate decision on component preemption – we’ll put it in the win column.