We know that most of our clients, manufacturers of prescription medical products (for purposes of this post), if they have insurance at all, have coverage that is subject to large self-insured retentions (“SIRs”). While the Blog doesn’t usually follow insurance matters, the decision discussed in this guest post is very good news for insureds with SIRs, and appears to be a matter of first impression. Thus, we invited David Weiss, Cristina Shea, and Connor O’Carroll from Reed Smith’s Insurance Recovery Group (who were writing the case up anyway) to provide this guest post. If this case starts a trend, pharmaceutical and medical device insureds (like many other insureds) will be much better off.

**********

In Deere & Co. v. Allstate Ins. Co., ___ Cal. Rptr.3d ___, 2019 WL 912151 (Cal. Ct. App. Feb. 25, 2019), a California Court of Appeal recently held that an insured’s SIR was considered part of the policy’s underlying limit of liability, and thus only had to be satisfied once.  SIRs are similar to deductibles, in that they represent a sum of money that the insured must pay before it is able to access its coverage.  The insurers’ rejected position in Deere was that the SIR had to be satisfied again and again to access each layer of excess insurance.  This case represents another example of the California appellate courts shooting down insurance companies’ attempts to overreach.  Deere is only binding in California, so insurance companies will continue to argue for multiple SIRS in other states to avoid providing the coverage they contracted to provide.  Policyholders must always be vigilant.

This particular dispute arose over insurance coverage for several asbestos personal injury claims made against manufacturer Deere & Company (“Deere”) arising from products it manufactured from 1958 through 1986.  For that period of time, Deere had coverage in place via a series of first-layer umbrella policies (providing primary coverage) for personal injury claims; above which were several layers of excess insurance that provided additional coverage.  In all, 49 policies were at issue representing $200 million in contracted for coverage.  Every one of Deere’s its first-layer umbrella polices required it to pay an SIR before the coverage would be available.  Deere’s excess policies “followed form” to the first-layer policies, except for the excess policies’ different limits of liability.

The excess insurers argued that “follow form” meant that their higher-layer excess coverage was also conditioned on Deere paying an additional SIR before each level of their excess coverage attached.  Thus, the excess insurers sought to treat Deere effectively as an underlying self-insurer or else to treat its SIR for the underlying policies as “insurance” that must be exhausted a second time to invoke coverage, even though Deere had already paid the full SIR to trigger the first-layer policies.  At trial, the excess insurers’ position prevailed.  The trial court reasoned that, although the SIR was not “limits of liability,” it could be considered a part of the underlying limit of liability such that it necessitated repayment to reach excess coverage.

The appellate court reversed.  It found the trial court’s reasoning “enigmatic.”  Instead, it held that SIRs are not insurance, but “the antithesis of insurance” because the essence of insurance is shifting risk away from the insured.  Further, after rejecting the trial court’s articulation of the issue, the reframed issue became:  to determine whether coverage under Deere’s higher-layer excess polices was triggered after the aggregate underlying limits have been satisfied—without Deere paying additional SIRs for all subsequent claims submitted.  The appellate court answered affirmatively.

Assum[ing] that a certain first-layer policy provides coverage to Deere in excess of $5,000 (SIR) and up to $200,000, with a $20,000 per occurrence limit; the second layer would kick in once the $200,000 had been expended.  Assume further, that numerous claims have been lodged against Deere.  For each claim, Deere pays $5,000, with the first layer paying $20,000 per occurrence.  After 10 claims, the first layer’s $200,000 aggregate limit would be exhausted, and the aggregate limits of the higher excess policies would be triggered.  The issue is whether for the eleventh claim Deere must pay another $5,000 before the higher levels are triggered.  The answer to this question is no.

Deere, 2019 WL 912151, at *8.

The appellate court reasoned that when Deere paid its SIR, it triggered coverage for its first-layer polices’ coverage.  The triggering event for the excess layers was not Deere’s payment of any SIR, but rather exhaustion of the first-layer policies.  The Court of Appeal held that, although the excess policies followed form to the first-layer policies, the excess policies had different limits of liability.  The court ruled that SIRs are written in terms of limits of liability, and therefore, they are not encompassed by the follow form provisions in the excess policies.  Deere cited analogous precedent from California and elsewhere in reaching this result, but none of these other cases involved excess insurance.  Thus, Deere appears to be a matter of first impression as to the type of insurance most commonly held by prescription medical product manufacturers.

In sum, Deere reaffirms that there is no basis in insurance contracts or insurance law to conclude that an insured’s SIR obligations survive the exhaustion of its first-layer of coverage to be incorporated into higher-layer policies.  Every company with an SIR and excess insurance stands to benefit from this decision by the Court of Appeal.

You’ll find plenty of decisions from the amiodarone litigation discussed on the blog.  Not surprisingly, because it is a generic drug, they almost exclusively focus on Mensing preemption – or we should say on plaintiffs’ attempts to bypass Mensing.  But there are cases involving exposure to the branded product as well.  And earlier this month, the brand name manufacturer got about the best ruling it could hope to get – defendant’s warnings were adequate as a matter of law.  Generic defendant also got dismissed after plaintiff tried to argue around Mensing by claiming the generic manufacturer was also a distributor.

Plaintiff in Marroquin v. Pfizer, Inc., 2019 WL 636845, *1 (E.D. Cal. Feb. 14, 2019), brought claims for strict liability, negligence, breach of warranty, and various fraud/misrepresentation claims.  Plaintiff’s wife suffered from fatal pulmonary disease caused by the administration of amiodarone.  Id. at *2.  While the complaint does not state why plaintiff’s wife was prescribed the drug, the decision walks through the Indications and Usage and Warnings section of the drug’s label, of which it took judicial notice.  The labeling states that the drug is to be used only to treat two very serious heart conditions and only when other treatments have failed “because of the life-threatening side effects and the substantial difficulties associated with its use.”  Id. at *5.  The label further states that the drug has “several potentially fatal toxicities, the most important of which is pulmonary toxicity,” which is fatal about 10% of the time.  Id.  The court noted that label discussed pulmonary toxicity at least 15 times.  Id. at *2.

While plaintiff argued that the adequacy of a warning is “generally” a jury question, generally doesn’t mean alwaysId. at *6.  In this case, the warnings were clear, conspicuous, and warned of the exact risk plaintiff’s wife suffered – they were adequate.  Id.  Moreover, plaintiff’s complaint contained no allegations that explain why the warning provided was inadequate.  Certainly a difficult task given the breadth and depth of the warning provided, but an essential element that can’t be overlooked.  Nor could the court overlook plaintiff’s lack of allegations that the alleged inadequate warning was a substantial factor in plaintiff’s wife’s death.  Id. at *5.  Plaintiff also tried to argue that the risks as set forth in the label would not have been understood by the “ordinary consumer.”  But that’s not the standard.  The manufacturer’s duty to warn runs to the physician, not the patient.  Id.  Whether the warning was sufficient to inform plaintiff’s wife’s physician is the appropriate question.  One the court answered in the affirmative.

Finally, on failure to warn, plaintiff tried to argue that the physician may not have read the label defendant relied on.  But failure to read does not equal failure to warn.  “The Court is unaware of any authority that holds a warning is inadequate simply because a person or physician failed to read the warning.”  Id. at *6.  Aside from the implication that physicians aren’t people, we agree with this statement completely.

On his breach of warranty claim, the court again had to remind plaintiff that the learned intermediary doctrine applied.  A core element of breach of warranty of fitness for a particular purpose is the buyer’s reliance on the skill or judgment of the seller.

[I]n a context of prescription drugs, a patient’s expectations regarding the effects of a prescription drug are those related to him by his physician, to whom the manufacturer directs the warnings regarding the drug’s properties.  For breach of warranty claims, ordinarily it is the prescribing doctor who in reality stands in the shoes of the ordinary consumer.  [B]reach of express or implied warranty claims … may not be maintained against a manufacturer of prescription drugs who has properly prepared the product and marketed it with warnings of known or knowable dangers.

Id. at *7 (citations omitted).  In this case, plaintiff did not allege what information his wife’s physician considered when deciding to prescribe the drug.  What the evidence does show is that risk of pulmonary toxicity was adequately warned about.  Id.  And, the only inference that the court could draw was that plaintiff’s wife was relying on the skill and judgment of her physician, not defendant.  Id. at *8.

That left only plaintiff’s fraud and misrepresentation claims which were all based on representations that the drug was “safe, fit, and effective for human use.”  Id. at *9.  Plaintiff conceded that he failed to plead his intentional misrepresentation claim with sufficient particularity to satisfy Rule 9(b).  Id.  Which the court informed him applied equally to negligent misrepresentation and concealment.  The defendants were lumped together and the complaint lacked any allegations of who, where, when, and how the alleged misrepresentations were made.  Id.  As to the “what” was misrepresented – safety and effectiveness – the court expressed “serious concerns over the plausibility of this allegation,” given the FDA approval of the drug as a drug of last resort for two serious heart conditions and the fact that it has been used to treat these conditions for over 30 years.  Id.  And, plaintiff’s lack of reliance on defendant, as opposed to her physician, is another obstacle to the fraud/misrepresentation claims.  Id. at *10.

The generic defendant had all of the brand warning and reliance arguments but of course also had a Mensing preemption argument.  Because plaintiff had no allegation that the generic defendant’s label differed from the brand label, plaintiff instead tried to argue that Mensing preemption does not extend to distributors which the generic defendant also was.  However, the cases plaintiff relied on to draw the distinction between distributors and manufacturers were in the context of motions to remand based on fraudulent joinder.  In those cases, where all doubts are to be resolved in favor of remand and no binding authority had extended Mensing to distributors, the courts were required to find proper joinder and remand the cases to state court.  Id. at *11.  “However, context is key.”  Id.  Outside the removal/remand situation, courts have applied Mensing to distributors.  “[A] mere distributor sits in the same shoes as a generic manufacturer, neither has the ability to alter or change an approved FDA warning label.”  Id. at *12.  The Supreme Court’s concern about misleading or confusion caused by competing, different labels applies equally, and perhaps even more so, to distributors.  Id.  Mensing requires dismissal of all of plaintiff’s claims against the generic manufacturer that are based on some duty to convey information about the drug – failure to warn, breach of warranty, fraud/misrepresentation.  It would not apply to a manufacturing defect claim if plaintiff was bringing one.  Id.

Despite the court’s “serious concerns” with the plausibility of plaintiff’s claims, it did grant leave to amend based on the allegations being so conclusory that it could not definitively decide that amendment would be futile.  But the court certainly has made it clear that plaintiff has substantial work to do if the amendment is going to overcome the vast shortcomings of plaintiff’s case.

Earlier this month we explained that a “wrinkle removal,” was one that capitalized on a “wrinkle” in the language of 28 U.S.C. § 1441(b)(2), which provides that a case cannot be removed on the basis of diversity if any “properly joined and served” defendant is a citizen of the forum state.  But if the forum defendant has not yet been served, that “wrinkle” doesn’t apply.  Defendants, in our never-ending quest to get cases into federal court, argue that such pre-service removal is consistent with the plain language of the statute.  Plaintiffs counter that this interpretation leads to an “absurd result” that refutes the plain language rule.  Just last year, the Third Circuit held that in this battle of “plain meaning” versus “absurd result” – plain meaning wins.  Encompass Ins. Co. v. Stone Mansion Rest. Inc., 902 F.3d 147 (3d Cir. 2018).

That was in important decision because since remand is unappealable (28 U.S.C. §1447(d)), appellate review is rare in remand situations.  It also meant that it was a foregone conclusion that Encompass Ins. would be applied in the District of New Jersey cases we discussed a few weeks ago.  When we see it cited and relied upon in the Central District of California, we think that’s important enough to warrant another pre-service removal post this month.

The case is Dechow v. Gilead Sciences, Inc., 2019 WL 517624 (C.D. Cal. Feb. 8, 2019).  Plaintiffs from four different states sued defendant, a resident of California and Delaware, in state court.  Two weeks after the complaint was filed, but before it was served, defendant removed the case to federal court.  Id. at *1.  As the court noted, the issue is “primarily an exercise in statutory interpretation.”  Id. at *2.  And in this instance, the statutory text is “unambiguous. Its plain meaning precludes removal on the basis of in-state citizenship only when the defendant has been properly joined and served.”  Id. at *3.  With no Ninth Circuit decision on point, the court looked to Encompass Ins.

Plaintiffs did try to argue that this literal interpretation of the statute should be rejected because it would lead to absurd results.  For this, they relied on a single case – Vallejo v. Amgen, Inc., 2013 WL 12147584 (C.D. Cal. Aug. 30, 2013).  But Vallejo involved a situation where defendants removed the case before the state court issued the summons to plaintiff.  In other words, removal occurred before it was possible for plaintiff to effectuate service.  Allowing removal in that situation, “would effectively circumvent Congress’s entire statutory scheme and render § 1441(b)(2) superfluous. Such an application could not have been intended by Congress.”  Id. That was not the situation in Dechow where service could have been made but was not.

The district court found additional support in the Ninth Circuit’s interpretation of 28 U.S.C. § 1446(b)(2)(A) which provides that “all defendants who have been properly joined and served must join in or consent to the removal of the action.”  Another removal provision with the same “properly served and joined” language.  To this provision the Ninth Circuit has applied the plain meaning interpretation.  Id. at *4.  What’s good for one, is good for the other.  And plain meaning interpretation is good for the defendants.

A complaint gets filed in California naming hundreds of plaintiffs, only 20 of whom reside in California, against out-of-state manufacturers.  Sound familiar?  Sound like something the Supreme Court rejected in Bristol-Myers Squibb Co. v. Superior Court, 137 S. Ct. 1773 (2017).  It should.  So, why are we here again?  I guess you can credit plaintiffs’ counsel with persistence.  But you what they say about the definition of insanity?  Well, it’s getting close to that point.

In BMS, the Supreme Court held that California’s courts could not exercise specific personal jurisdiction over an out-of-state defendant unless 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. at 1781 (2017).  That means there must be a causal link between the defendant’s forum contacts and the alleged injury to the plaintiff.  Contacts with other people do not count.  And while BMS primarily focused on the contacts of resident versus non-resident plaintiffs, it also says that the presence of a California distributor – equally uninvolved with the plaintiffs who brought the suit – does not change the result one iota.  “The bare fact that BMS contracted with a California distributor is not enough to establish personal jurisdiction in the State.”  Id. at 1783.

But plaintiffs in In re Amiodarone Cases, No. JCCP 4956, slip op. (Cal. Super. Jan. 10, 2019) may not have been paying close enough attention to that portion of the decision.  When defendant manufacturers challenged the lack of personal jurisdiction over the claims of non-residents, plaintiffs relied exclusively on the manufacturers’ relationship with an in-state distributor.  BMS wasn’t decided that long ago as to have been forgotten already?  No, the court remembered it quite accurately.

Plaintiffs, whose claims were premised on allegations of off-label use and failure to provide the Medication Guide, argued that the supply agreements entered into by the drug manufacturers and the California-based distributor conferred specific personal jurisdiction because they contained provisions agreeing the contracts were governed by California law.  But that didn’t amount to a contact related to plaintiffs’ lawsuit that would give rise to personal jurisdiction.  The choice of law provision applied to disputes over the contract, not plaintiffs’ products liability claims.  Id. at 7.  Additional provisions of the supply agreements provided that California law applied and California was the appropriate venue for disputes regarding the indemnification requirements of the agreements.  Those provisions even said that for such disputes, the parties agreed to waive personal jurisdiction and inconvenient forum arguments.  Id. at 7-8.  Despite the plain language of the agreements, plaintiffs tried to argue that those provisions should equally apply to the underlying claims that may trigger the indemnification provisions.  And once again the court reiterated that the contractual obligations between the manufacturers and distributor was “not evidence of a contact for jurisdictional purposes.”  Id. at 8.

But plaintiffs pressed on.  They also argued that they were third-party beneficiaries under the supply agreements and therefore could enforce the personal jurisdiction waiver.  Id.  But just because the supply agreements set up the chain of distribution that may have ultimately led to plaintiffs ingesting the drug did not make plaintiffs third-party beneficiaries.  Moreover, the waiver was “expressly limited” to indemnification disputes and so wouldn’t apply to products liability actions anyway.  Id.

Choice of law didn’t work.  Third-party beneficiary didn’t work.  What about compliance clauses?  The supply agreements contained compliance clauses that stated that the drugs shall comply with all governing laws and regulations, will not be adulterated or misbranded, and will comply with the Prescription Drug Marketing Act.  Id. at 8-9.  But again, the court found those clauses don’t run to plaintiffs or their claims and so can’t be used to establish specific personal jurisdiction.

If not the supply agreements, what about compliance with regulations?  Plaintiffs argued that manufacturers were required to provide the California distributor with the Medication Guide which it in turn was required to distribute to physicians and pharmacies.  This, they claimed, evidenced a sufficient connection between California and the non-resident plaintiffs’ claims.  Id. at 9.  But, going back to BMS, that a manufacturer has business transactions with third-parties isn’t sufficient.  To satisfy due process, a defendant must be “haled into court in a forum state based on its own affiliations with the State, not based on the ‘random, fortuitous, or attenuated’ contacts he makes by interacting with other persons affiliated with the State”  Id.  Here, plaintiffs have more than enough evidence to establish a relationship between the manufacturers and their supplier, but they’ve offered no evidence to take the leap of a connection to the non-resident plaintiffs.  There is no evidence that any non-resident plaintiff took Amiodarone distributed by any California-based distributor.  Id.

What about derivative liability?  Plaintiffs argued, but offered no authority to support, that the indemnification provisions in the supply agreement create derivative liability by manufacturers for conduct of McKesson.  Id. at 10.  The best plaintiffs could come up with here was to rely on California’s old sliding scale approach to personal jurisdiction.  But that was expressly rejected by BMS.

Finally, what about the fact that the manufacturers sold the drug to the distributor in California?  It’s irrelevant because it’s completely unconnected to the plaintiffs.

Call it persistence.  Call it “E” for effort.  Call it insanity.  If the question of personal jurisdiction via third-party contacts wasn’t sufficiently answered in BMS (by the way, it was), In re Amiodarone should be viewed as shutting the door for good in California.

We did a search of the DDL Blog for “continuing violation” and found only one other reference and that was simply to note that the court rejected the theory without explanation.  So, it’s not the first time a plaintiff has tried to argue the continuing violation theory to avoid the statute of limitations in a pharmaceutical case, but this time the Eighth Circuit gave it just a little more attention and fortunately found it equally unpersuasive.

The continuing violations doctrine is an exception to the statute of limitations that allows a plaintiff to recover for acts which if treated individually would be time-barred by treating them as either a pattern of violations or a single violation.  At its core, the doctrine is fairly simple, where a defendant’s conduct is deemed to be continuing in nature, the court can toll the statute of limitations.  For instance, in the case of an environmental tort, the continuing violations doctrine considers each day an illegal dump site remains a new and separate act.  And as long as one of those related acts falls within the limitations period, plaintiff’s claim is not time barred.  The doctrine is also often used in employment discrimination cases where the discriminatory or harassing conduct occurs over a significant period of time.

But in a pharmaceutical products liability case?  That is what plaintiff argued in a case dismissed as barred by the statute of limitations in In re Mirapex Products Liability Litigation, 2019 U.S. App. LEXIS 849 (8th Cir. Jan. 10, 2019).  Mirapex is a drug used to treat Parkinson’s disease.  Plaintiff alleged that he suffered gambling and other financial losses as a result of developing obsessive compulsive disorder from taking the drug.  Id. at *1.  Plaintiff started taking Mirapex in January 2006 and started reporting compulsive behaviors to his prescriber in January and April 2008.  At which time, his prescriber discussed the association between Mirapex and such behaviors and recommended cutting back on plaintiff’s dosage, which plaintiff resisted.  Plaintiff continued taking the drug until July 2010.  Plaintiff filed suit in December 2010.  Id. at *2-3.

Plaintiff’s claims were governed by California’s two-year statute of limitations.  It was undisputed that plaintiff’s claims initially accrued no later than April 2008.  Id. at *4.  So, without a tolling or other exception, the claims would be time barred.  Plaintiff made two arguments to overcome the limitations period.  His first argument was that the limitations period was tolled due to insanity.  The argument is very fact sensitive and tied to the allegations that the drug caused behavior that caused plaintiff to be financially irresponsible and unable to understand the nature of his actions.  We aren’t going to go through the details of this argument, but suffice it to say that since at the time his claims accrued plaintiff was a full-time college professor and chair of his department who earned extra income from numerous speaking engagements, owned and operated two rental properties, and who had never been treated for mental illness or any psychological disorder – the court found he was not insane under California law.  Id. at *7-10.

That brings us to plaintiff’s continuing violation theory.  Plaintiff alleged that each ingestion of the drug was a separate and distinct claim.  In fact, 5,000 separate and distinct claims from January 2006 to July 2010.  Id. at *10.  Under plaintiff’s theory, he would be able to sue for damages caused by each ingestion within 2 years of December 2010 regardless of when his claim first accrued.  The court noted that under federal law, the “critical question” in determining whether there has been a continuing violation “is whether a present violation exists.”  Id. at *11 (citation omitted).  And there’s the rub.  Plaintiff’s claims are based on an alleged failure to adequately warn him of the side effects of Mirapex.  That failure to warn is a “single wrongdoing” that accrued when his prescriber advised him of the relationship between compulsive behavior and the medication.  Id. at *11-12.  A new failure to warn cause of action did not arise with every pill plaintiff took.  As the court noted, because the drug was FDA-approved for the treatment of Parkinson’s disease and prescribed for that purpose, “the wrongdoing isn’t taking the pill.”  Id. at *12.  While his alleged injuries continued as a result of his voluntarily continuing to take the drug, his earlier gambling losses were “appreciable and actual harm” that triggered the running of the statute of limitations.

If each ingestion was considered a separate act triggering a new limitations period, the continuing violations doctrine could essentially swallow the statute of limitations in prescription drug litigation.  And since we can’t conceive of any other outcome for this argument, we hope this is the second and last time we need to address this issue.

We may not know much about skin care, but we know a thing or two about labeling claims.  Whether for a drug, a device, a food, a cosmetic, or some other product, it is necessary to apply some common sense in determining what is or is not in a product’s labeling should give rise to liability.  The court in Browning v. Unilever U.S., Inc., No. SACV 16-02210, 2018 WL 6615064 (C.D. Cal. Dec. 17, 2018), applied a healthy dose of common sense in granting summary judgment for the defendant against consumer fraud and warranty claims by a purported of deceived purchasers.  The product at issue was St. Ives Apricot Scrub and allegations centered on the presence in the product of a powder from the crushed shells of walnut to lend exfoliating power to the scrub.  We will try to keep the nuttiness to a minimum as we discuss the decision.

The court’s introduction gets to the kernel of the dispute:

This “Scrub” is an exfoliant and like all such products is necessarily abrasive. Plaintiffs claim that the Scrub causes “micro-tears” and speeds up the aging process. Plaintiffs allege Unilever failed to disclose the scrub’s negative side effects before selling it to the public and misled consumers into believing it was dermatologist recommended.

Id. at *1.  Before we crack into the analysis, we have a little detour into some things not really spelled out in the decision.  This is probably obvious, but the scrub is used by gently rubbing it into the skin on your wet face and then washing it off.  Under the directions section on the tube of scrub are the ingredients section, which lists “Juglans Regia (Walnut) Shell Powder” right after water.  For those who are curious, these shells come from one of twenty-one species of walnuts.  If a reader or potential consumer were curious enough to look at the website for the product, then it would not be hard to see that Walnut Shell Powder is identified as the second “key ingredient” of the product (after apricot extract) and that the “exfoliation factor” of the product is characterized as “deep.”  With that extra-judicial context, we get back to the meat of the decision. (OK, we will stop with the gratuitous nut references.)

We will start with the second of plaintiffs’ basic claims, that the label was misleading in saying it was “Dermatologist Tested.”  Plaintiffs claimed that statement somehow suggested the product was “recommended” or “approved” by dermatologists, but they acknowledged that the product was tested by dermatologists and the court could read.  Id. at *4.  So, plaintiffs went to a back-up argument that references to testing were misleading without disclosing an alleged risk of the product.  That brings us to the first argument.

The first argument was that the walnut shell powder made the product too abrasive and caused indiscernible micro-tears in the skin that increase the incidence of acne, infection, and wrinkles, which in turn make the skin of users look older faster.  Because this was in the posture of summary judgment, plaintiffs actually offered up evidence like expert declarations, deposition testimony, and even published articles and a study done for litigation by their retained expert.  Viewed in a light favorable to plaintiffs, this evidence “at best show[s] that St. Ives Scrub could, in theory, alter the skin’s surface.”  Id. at *3 (emphasis in original).  However, under California law, “the alleged unreasonable safety hazard must describe more than merely conjectural and hypothetical injuries.”  Id. (internal citation and quotation omitted).  Plaintiffs did not show “that the alleged microtears are a safety hazard” and their experts did not contend the product was “dangerous.”  Id.  So, no injury.

They also did not prove causation:  “Evidence is lacking that St. Ives, and not other products or lifestyle or sun damage or any other factor, produced acne, wrinkles, inflammation, or loss of moisture (even if these were actionable safety hazards).”  Id.  The court considered the consumer complaints offered by plaintiffs to say nothing about causation, especially because they occurred at a low frequency.  Id.  The court also was not impressed by the plaintiffs’ for-litigation study:  “Plaintiff’s short-term clinical study does little to advance Plaintiff’s causation theory or prove their allegations of longer-term skin conditions.”  Id.  Bringing the evidence back to the context of alleged omissions of unreasonable safety hazards of the product from labeling, the court stated:

Again, Plaintiffs haven’t shown that micro-tears themselves (as distinct from potential resulting symptoms, such as wrinkles or acne) are counter to the product’s central function. Indeed, the Scrub was marketed as an exfoliant (Mot. at 25), which implies some intended resurfacing or abrasion. Plaintiffs do not address this issue or offer a description of the central function of a facial exfoliant. There is far too little for a reasonable jury to conclude that the presence of walnut shells neuters that undefined function.

Id.  Contraction notwithstanding, we think this is fine analysis.  As noted above, a little broader look would indicate that this product was not just marketed as an exfoliant, but one for deep exfoliation with the ground up walnut shells as a key ingredient.  People who might want to use a scrub—any scrub, pre-packaged or homemade—might consider in advance whether scrubbing the skin on their face with something with sufficient grittiness to accomplish a scrubbing is what they want.  That is not really a labeling issue.

To cap it off, the purported class reps did not have any injuries.  They just “assume[d] they suffered from micro-tears which they could neither see nor feel.”  Id. at *4.  We have seen uninjured class reps before and the need for a cognizable present injury clearly applies in a range of contexts, including medical monitoring and consumer fraud.  There is nothing nutty about that requirement.

 

We’ve discussed personal jurisdiction a lot on the Blog lately, and not so lately, and for good reason. The Supreme Court’s reining in of both general and specific jurisdiction provides additional ways for defendants to win cases – particularly where the other side isn’t paying enough attention to the now more difficult legal environment.  The recent decision in Wagner v. Terumo Medical Corp., 2018 WL 6075951 (S.D. Cal. Nov. 21, 2018), is an example of what we mean.

The factual key to Wagner was that the plaintiff sued the wrong entity.  The named defendant didn’t start making the medical device in question until after the plaintiff’s implantation surgery.  Plaintiff’s failure to research the ownership history of the product at issue proved fatal in the current, less forgiving personal jurisdiction environment.

First, the plaintiff tried general jurisdiction, relying on the largely discredited theory that registering to do business/designating an agent for service of process constituted “consent” to general jurisdiction. That doesn’t work in California:

Plaintiff’s reliance on California Corporations Code Section 2100 to support general personal jurisdiction is misplaced. Although [defendant’s] status as a registered foreign corporation in California is relevant to the personal jurisdiction inquiry, . . .  California does not require corporations to consent to general personal jurisdiction in that state when they designate an agent for service of process or register to do business. . . .  The designation of an agent for service of process and qualification to do business in California alone are insufficient to permit general jurisdiction.  As such, Section 2100 does not provide a basis for general personal jurisdiction.

Wagner, 2018 WL 6075951, at *5 (citations and quotation marks omitted).

The general jurisdiction argument was pretty poor, but since the plaintiff in Wagner was a California resident, one would expect plaintiff to have a better time of it with specific personal jurisdiction.  Not this time, though.  The specific jurisdiction test is one part “purposeful direction” of activities to the forum and one part that the case “arises out of or is related to” those aforesaid activities.  Wagner assumed the first prong.  In California (at least when its supreme court wasn’t trying to expand the mass tort industry), the second half of that test requires “but for” causation:

The second prong requires Plaintiff’s claim to be one which arises out of or relates to the defendant’s forum-related activities. . . .  [T]he second prong of the specific jurisdiction test [i]s a “but for” test.  Under the “but for” test, a lawsuit arises out of a defendant’s contacts with the forum state if a direct nexus exists between those contacts and the cause of action.

Id. at *6 (citations and quotation marks omitted). On this test, plaintiff’s failure to do the necessary homework lost the case. “Given that, at the point of plaintiff’s alleged injury, it had not yet acquired the rights to that [relevant] line of products, Plaintiff fails to show a causal nexus between [defendant’s] activities in the forum and her injury.” Id. (footnote omitted).

Thus, unless plaintiff is able to find some jurisdictional basis in “successor liability,” she is out of court.  Id. at *6 n.9.  Maybe plaintiff can.  California’s “product line exception” is a notoriously lax form of successor liability (Pennsylvania has a version of that, too).  But our general point remains the same.  Personal jurisdiction is no longer a “gimme” for plaintiffs, and defendants need to be familiar with all its ins and outs, because we can win cases that way.  Conversely, plaintiffs need to exercise considerably more care in where they file cases.  Thus, here on the Blog, we are devoting ourselves to exploring those ins and outs.

It would seem to go without saying that for a defendant to be liable for the purported “common-law” claim of failure to report adverse events to the FDA, there must actually be some adverse events that needed to be reported.  One would think so, but certain California breast implant plaintiffs (yes, some still exist) would beg to differ – at least they did before the recent decision in Mize v. Mentor Worldwide LLC, No. BC649083, slip op. (Cal. Super. Oct. 1, 2018).

One problem that that current breast implant litigants face that their more numerous predecessors did not is preemption.  All that earlier litigation caused the FDA to upclassify breast implants to Class III, pre-market approved devices, and PMA means preemption.

In California, that also means the filing of half-baked, failure-to-report claims that no self-respecting plaintiff would otherwise bring, as a way to allege something that gets around preemption.  Trouble is, these breast implant plaintiffs can’t even allege that the defendant didn’t report any adverse incidents.  Even what plaintiff did allege was notably speculative:

Plaintiff now has alleged, however, that if [defendant] had reported additional adverse incidents subsequent to 2000, and if the FDA had made such incidents public, and if Plaintiff’s doctors had been aware of such reports, Plaintiff’s doctors might have provided an earlier diagnosis leading to earlier surgery to remove the implants and Plaintiff’s damages . . . might have been lessened.

Slip op. at 5. That’s a lot of “what ifs” piled on top of “what ifs,” but this plaintiff couldn’t even get to that.

There weren’t any unreported adverse events.

So the plaintiff tried to make them up.

The entire questionable “causal chain” wasn’t based on any known, but unreported, events at all, but rather on allegations about how studies were conducted:

[I]t is premised on [defendant’s] failure to report adverse incidents that were not detected because of how [defendant] conducted the studies rather than on a failure to report adverse incidents that actually occurred.

Id.  Even for a liberal jurisdiction, that was just too much.  There must be something that actually wasn’t reported.

Because Plaintiff has failed to allege facts showing that [defendant] failed to report actual adverse events that in fact occurred, the failure to warn (failure to report adverse events) claim is preempted because plaintiff has failed to allege how [defendant’s] actions in conducting these studies violated federal law.

Id.

While the Mize court “adopted the reasoning” of Ebrahimi v. Mentor Worldwide LLC, 2017 WL 4128976 (C.D. Cal. Sept. 15, 2017) – a case we discussed hereMize was really a step into fantasy beyond even Ebrahimi.  As pleaded, Ebrahimi at least involved allegations that (vaguely) alleged that events weren’t reported.  Mize didn’t.  She seems to have been alleging that the defendant was obligated to conduct studies in a way that maximized the number of reportable adverse events.  That “duty” is, of course, contrary to tort policy and medical ethics, both of which seek to reduce, not increase, product injuries.

The plaintiff in Mize also tried to allege a “manufacturing defect,” but that didn’t fare any better.  Lacking any direct evidence, plaintiff tried to rely on “allegations that supported . . . [a] 1998 Consent Decree.” Slip op. at 3.  But plaintiff’s implant wasn’t manufactured until at least two years after that decree, and the decree itself was “evidence of a promised change in practices,” so the decree could not be evidence of any defect in the device implanted in the plaintiff.  Id.  Again, simple logic seems beyond the plaintiff in Mize.

Finally, the Blog wishes to express its appreciation to Dustin Rawlin, of Tucker Ellis, and his team of, Peter Choate, Monee Hanna and Allison Burke, who not only won the case, but were thoughtful enough to send it along to us.  Keep up the good work.

One of our primary goals is to bring you the latest and greatest news in the drug and device litigation world. But sometimes we don’t learn of a case at the time it’s decided. So, then we need to move on to another of our guiding principles – if it’s good for the defense, we talk about it. So, while today we happen to have come upon a case that was decided in 2017, it dovetails with our recent post Taking Out the Laundry With TwIqbal where we talked about plaintiffs’ attempts to bluff their way to a valid parallel violation claim. And that’s exactly what the plaintiff in Rand v. Smith & Nephew, Inc., 2017 WL 8229320 (C.D. Cal. Apr. 5, 2017) tried to do. Plaintiff put together a “laundry list” of allegations that the defendant’s device violated with no hint of what exactly the defendant did that was in violation. In our prior post we commented that “most courts are willing to use TwIqbal to call bull$%@&! on these types of allegations.” Fortunately, Rand can be added to that list.

The device at issue in Rand is a hip resurfacing prosthesis that underwent pre-market approval from the FDA. That’s why we are talking about parallel violation claims. Following a nice Riegel analysis, the court looked at plaintiff’s allegations for each cause of action.

Strict liability: Under California law, this is a claim for a design, manufacturing and warning defect. Because the FDA reviews “device design, manufacturing processes, and device labeling” as part of the PMA, “the MDA preempts state-law claims against these three aspects of PMA-compliant devices.” Id. at *4. So, plaintiff made 2 laundry lists – one of “various federal regulations” and another of defendant’s alleged misconducts. Double the nonsense.

First, plaintiff included regulations that go to the adequacy of defendant’s PMA application. “But FDA’s approval demonstrates the agency’s reasonable assurance of [the device’s] safety and effectiveness based on the application.” Id. So any claim premised on those regulations is preempted. Second, the court moved on to TwIqbal finding some allegations so poorly pleaded that it is “impossible to determine whether they add to federal requirements and hare hence preempted.” Id. Finally, some allegations were completely conclusory.

Plaintiff’s second list wasn’t much better. Not only did it include conclusory allegations – basically just speculation – but plaintiff also included alleged misconduct that was irrelevant. For example, plaintiff alleged wrongdoing regarding device components used in off-label combinations but plaintiff was implanted with such a combination. In other words, plaintiff was tossing pasta at the wall and just hoping something stuck. That’s not good enough under TwIqbal.

The only allegation that made the cut was failure to report adverse events. Id. This is California, so it’s to be expected.

Negligence: This largely mirrors plaintiff’s strict liability claim and suffers the same fate. The only new “misconduct” included in the negligence count was about defendant’s withdrawal of the device for “demographics groups” to which plaintiff didn’t belong. Irrelevant. Id. at *5. And, plaintiff surmised that defendant’s breach proximately caused his injury but provided no support for that allegation. Id. The entire negligence claim was dismissed.

Breach of express warranty: Again, most of plaintiff’s allegations are insufficient:

Without more details, the statements that [defendant’s] devices are of merchantable quality, safe, effective, and fit and proper for its intended use are no more than an affirmation merely of the value of the goods or a statement purporting to be merely the seller’s opinion or commendation of the goods. Such unspecific statements do not create a warranty.

Id. (citation and quotation marks omitted). The court did find that a press release cited by plaintiff created an express warranty but plaintiff failed to allege how the press release violated any PMA requirement. Without that, the claim was dismissed without prejudice.

Breach of implied warranty: This claim was preempted:

Both types of implied warranties involve an assertion that the goods are fit for then intended purpose. Implied warranty of merchantability further imposes labeling requirement and requires that the goods conform to the statements on the label. But these conditions are precisely what a PMA entails. Thus, unless the defendant violates these conditions under the PMA, § 360k(a) expressly preempts this claim.

Id. at *6 (citation omitted). Since plaintiff used the device for the purpose the FDA approved – no breach of implied warranty claim.

Fraudulent concealment: Here again plaintiff attempts to rely on a failure to report adverse events to state his claim. But essential to a fraud claim is that defendant had a duty to disclose the concealed fact to plaintiff. Id. We think this negates failure to report as a basis for strict liability as well and we’ve made our views on that clear many times. Here, plaintiff didn’t allege that federal regulations require defendant to report adverse events to plaintiff – nor can he because that’s not the law. That means that this would be an “additional requirement” which is preempted. Id..

The claim also failed for no allegation of intentional concealment by defendant and for not satisfying Rule 9(b)’s heightened pleading requirement for fraud. Id.

It may not be the latest and greatest, but it adds to the wealth of decisions tossing plaintiffs’ multi-paragraph list of violations which are a lot more bark than bite.

A myth that has regrettably gained some traction lately is that the FDA’s clearance of a medical device under the 510(k) substantial equivalence process is unrelated to safety and efficacy. One notably unfair manifestation of this myth is the entry of orders in limine in a number of recent medical device cases excluding evidence of the devices’ 510(k) regulatory pathway.  Most or all of these orders rely on the Supreme Court’s 1996 opinion in Medtronic, Inc. v. Lohr, where the Court held that federal law did not preempt certain medical device warnings claims involving 510(k) devices.  In so holding, the Court distinguished the pre-1990 510(k) clearance process from the more involved and “rigorous” premarket approval (“PMA”) process and observed that the old 510(k) process was “focused on equivalence, not safety.”  518 U.S. 470, 493 (1996).

The Supreme Court did not hold that 510(k) clearance has no bearing on safety and efficacy, but the language quoted above provides a foothold for those inclined to marginalize the FDA’s role.  Indeed, we believe the Supreme Court’s view of the 510(k) process was already outdated in 1996.  As we have explained multiple times (including here), the 510(k) clearance process is keyed directly to safety and efficacy, and the Supreme Court has been retreating from Medtronic v. Lohr almost since the day the opinion was filed.

A district judge in Los Angeles recently provided what we think is the correct perspective. The case is Otero v. Zeltiq Aesthetics, Inc., No. CV 17-3994, 2018 WL 3012942 (C.D. Cal. June 11, 2018), and it is not a preemption case, or even a product liability case.  Instead, patients sued the manufacturer of a non-invasive fat-reducing system under California’s permissive consumer fraud statutes, claiming that the company made partial statements that were misleading and failed to disclose material information about the product. Id. at **1-2.

What were the misleading partial statements and omitted facts? The plaintiffs alleged that the manufacturer stated (truthfully) that the product was “FDA-cleared” and “FDA-cleared as safe and effective.” Id. at *1.  And the manufacturer failed to explain the difference between “FDA clearance” on the one hand and “FDA approval” on the other.  That’s the omission.

We have unending sympathy for individuals who fight weight gain and for whom the condescending admonition to exercise more and eat less is not helpful. Be that as it may, these claims have no arguable merit, and the district court correctly dismissed them.  With regard to the alleged “partial” representation that the device was “FDA cleared,” the district court ruled that “Plaintiffs fail to explain how that true representation—on its own—could cause reasonable consumers to erroneously believe that the system received FDA approval.” Id. at *2.  The court continued:

Plaintiffs simply point out that under California law, true statements may mislead reasonable consumers if other relevant information is omitted. Although that is an accurate legal proposition, it does not establish that “FDA-Cleared” gives rise to viable [California statutory] claims, especially because the “mere possibility” that some consumers acting unreasonably will conflate FDA-clearance and FDA-approval is insufficient.

Id. So can a true statement ever support a claim?  Under some circumstances not presented here, it appears that one could, although that would be truly exceptional case.  Can a true statement support a claim where it is merely possible that a consumer will unreasonably misconstrue it?  This court ruled that it cannot.

There is more. The plaintiffs also argued that adding the words “safe and effective” to “FDA-cleared” was misleading because that claim can only be made in connection with FDA approval, citing Medtronic v. Lohr.  (See, we were going to get back to Medtronic v. Lohr eventually, and here we are).  In the part of the order that we like the most, the district court convincingly debunked the myth that “safe and effective” is unique to the PMA process:

It appears that this argument relies on Medtronic, Inc. v. Lohr, 518 U.S. 470 (1996), which allegedly establishes that “‘[t]he § 510(k) notification process is by no means comparable to the PMA process’ and in no way warrants that the device is safe and effective.”  [quoting Plaintiffs’ brief.]  Although Medtronic observed that obtaining Section 510(k) clearance is not as onerous as the “rigorous” PMA process, the Supreme Court did not find that the former has no bearing on a device’s safety and effectiveness. In fact, Medtronic acknowledged that “the FDA may well examine § 510(k) applications . . . with a concern for the safety and effectiveness of the device . . .”  The Supreme Court later clarified “the FDA simultaneously maintains the exhaustive MPA and the more limited § 510(k) process in order to ensure . . . that the medical devices are reasonably safe and effective.

Id. at *3 (first emphasis added, second in original).  In other words, the plaintiffs (and others before them) were relying on a snippet to misread Medtronic and overstate its holding.  The district court went on to state that the FDA’s regulations connect 510(k) clearance to safety and effectiveness, too:

Indeed, the FDA regulations provide that if the agency has found that a device is substantially equivalent to—but has “technological characteristics” that are different from—a predicate device, then that means the agency has concluded that “[t]he data submitted . . . contains information, including clinical data if deemed necessary by the Commissioner, that demonstrates that the device is as safe and as effective as a legally marketed device.”

Id. (emphasis in original).  Finally, the district court noted that compliance with general and special controls, which Class II medical devices must do, further provides “reasonable assurance of the safety and effectiveness of the device.” Id. There was no deceptive, no misleading statement.  Only true representations of a medical device’s regulatory pathway.  That is not the basis for a consumer fraud claim.

Nor is it consumer fraud when a manufacturer does not explain the difference between FDA clearance and FDA approval. The district court ruled that a manufacturer’s duty to consumers is limited to warranty obligations, absent an affirmative misrepresentation or a “safety issue.” Id. at *4.  We are not sure this is an accurate statement of a medical device manufacturer’s duty to consumers, especially considering the presence of prescribing physicians (i.e., the learned intermediaries) for many devices.  We also can’t imagine a situation where a medical device manufacturer would be under a legal obligation to explain FDA regulations to consumers.  But even taking the rule at face value, the plaintiffs alleged no safety risk. Id. at *5.  Maybe they were unsatisfied with the results (i.e., effectiveness) and wanted their money back.  Whatever their beef was, it was not about safety.

The plaintiffs walked away with their core claims dismissed without leave to amend. The district court gave them another chance to plead that they actually observed other statements that they claimed were misleading, based on counsel’s representations at argument that their clients might have seen them. Id. at **5-6.  We don’t know.  It seems to us that if those facts existed, the plaintiffs would already have pleaded them.  The takeaway for us is the reality that the 510(k) process does tie into safety and efficacy.  Don’t let anyone tell you otherwise.