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

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

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

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

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

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

Id. at 893.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 

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.

We’ll be hitting all the Presidents’ Day sales today, but something tells me we’ll be disappointed because we won’t be able to buy, beg, borrow, or steal a new one.  So we keep trying.

With plaintiffs desperate to find some way to continue pursuing aggravated, aggregated product liability litigation in their favorite venues after Daimler AG v. Bauman, 134 S. Ct. 746 (2014) (“Bauman”), and Bristol-Myers Squibb Co. v. Superior Court, 137 S. Ct. 1773 (2017) (“BMS”), we thought we’d look at one likely target that we haven’t spent much time on before.  At the tail end of the BMS decision, the Court left open a caveat:

[W]e leave open the question whether the Fifth Amendment imposes the same restrictions on the exercise of personal jurisdiction by a federal court.  See Omni Capital International, Ltd. v. Rudolf Wolff & Co., 484 U.S. 97, 102, n.5 (1987).

BMS, 137 S. Ct. at 1784.  We have offered our opinion that we don’t think there will turn out to be a dime’s worth of practical difference between the two, due to the extent that BMS, a Fourteenth Amendment case relied on Walden v. Fiore, 134 S. Ct. 1115 (2014), which was as federal a cause of action as they come, being a constitutional Bivens action filed in federal court.  We still believe that’s right, but it’s a bit more complicated than we thought at first, a later on in this post.

Let’s start with what “federal court” means.  While we’ve always thought that cases in federal court based on diversity jurisdiction were on the Fourteenth Amendment side of the personal jurisdiction line, we’d never researched it.  It wasn’t hard.  Looking for cases with “diversity,” “Fourteenth Amendment,” and “personal jurisdiction” in the same paragraph was enough.  Too much, actually – since that search produced over two thousand cases – but it didn’t take long to get the answer.  From the first case:

The United States District Court for the Southern District of Florida, sitting in diversity, relied on [a state longarm statute] in exercising personal jurisdiction over a [non-]resident. . . .  The question presented is whether this exercise of long-arm jurisdiction offended “traditional conception[s] of fair play and substantial justice” embodied in the Due Process Clause of the Fourteenth Amendment.

Burger King Corp. v. Rudzewicz, 471 U.S. 462, 464 (1985).  Lots of other appellate cases stand for the proposition that cases in federal court on diversity jurisdiction are governed directly by the Fourteenth Amendment.  E.g., Cossart v. United Excel Corp., 804 F.3d 13, 18 (1st Cir. 2015); Philos Technologies, Inc. v. Philos & D, Inc., 802 F.3d 905, 912 (7th Cir. 2015); Creative Calling Solutions, Inc. v. LF Beauty Ltd., 799 F.3d 975, 979 (8th Cir. 2015); Carmouche v. Tamborlee Management, Inc., 789 F.3d 1201, 1203 (11th Cir. 2015); SFS Check, LLC v. First Bank, 774 F.3d 351, 355-56 (6th Cir. 2014); ClearOne Communications, Inc. v. Bowers, 643 F.3d 735, 763 (10th Cir. 2011); Metcalfe v. Renaissance Marine, Inc., 566 F.3d 324, 330 (3d Cir. 2009); Mullins v. TestAmerica, Inc., 564 F.3d 386, 398 (5th Cir. 2009); Bank Brussels Lambert v. Fiddler Gonzalez & Rodriguez, 305 F.3d 120, 124 (2d Cir. 2002); Chung v. NANA Development Corp., 783 F.2d 1124, 1125 (4th Cir. 1986); Steinberg v. International Criminal Police Org., 672 F.2d 927, 930 (D.C. Cir. 1981).

Thus, we think it’s a lock that for the types of cases we typically discuss on this blog, which sound in diversity if they’re in federal court, that Bauman/BMS applies to all personal jurisdiction issues.  Indeed, some of the cases we read indicate (like we think) that there is no difference between the Fifth and Fourteenth Amendments’ Due Process clauses when it comes to personal jurisdiction. See Republic of Panama v. BCCI Holdings (Luxembourg) S.A., 119 F.3d 935, 943 n.12 (11th Cir. 1997); Akro Corp. v. Luker, 45 F.3d 1541, 1545 (Fed. Cir. 1995).

This means that, to get around Bauman/BMS, and to assert personal jurisdiction against non-resident defendants, litigation-tourist plaintiffs would have to do the opposite of what they have normally done for decades and instead plead some sort of federal claim if they have any hope of arguing that some hypothetical lesser standard of Due Process applies under the Fifth Amendment.  Even assuming plaintiffs desperate enough to jettison decades of prior practice, there aren’t many of these statutes around.  The False Claims Act is a federal statute that authorizes nationwide service of process, see 31 U.S.C. §3732(a), but by no stretch of the imagination could it apply to the sorts of product liability/consumer fraud claims that are our opponent’s stock in trade.

RICO also provides for nationwide service of process. 18 U.S.C. §1965(d).  RICO has a major limitation – from the standpoint of a product liability plaintiff – in that the statute does not allow recovery of personal injury damages.  Reiter v. Sonotone Corp., 442 U.S. 330, 339 (1979); see, e.g., Safe Streets Alliance v. Hickenlooper, 859 F.3d 865, 886 (10th Cir. 2017); Blevins v. Aksut, 849 F.3d 1016, 1021 (11th Cir. 2017); Williams v. BASF Catalysts LLC, 765 F.3d 306, 323 (3d Cir. 2014); Fiala v. B & B Enterprises, 738 F.3d 847, 853 (7th Cir. 2013); Jackson v. Sedgwick Claims Management Services, Inc., 731 F.3d 556, 565 (6th Cir. 2013) (en banc); Ironworkers Local Union 68 v. AstraZeneca Pharmaceuticals, LP, 634 F.3d 1352, 1364 (11th Cir. 2011); Upper Deck Co., LLC v. Federal Insurance Co., 358 F.3d 608 (9th Cir. 2004); Hughes v. Tobacco Institute, Inc., 278 F.3d 417, 422 (5th Cir. 2001); Hamm v. Rhone-Poulenc Rorer Pharmaceuticals, Inc., 187 F.3d 941, 954 (8th Cir. 1999); Bast v. Cohen, Dunn & Sinclair, PC, 59 F.3d 492, 495 (4th Cir. 1995); Laborers Local 17 Health & Benefit Fund v. Philip Morris, Inc., 191 F.3d 229, 241 (2d Cir. 1999).  Even more of a drawback for purveyors of nationwide class actions, is the statute’s causation requirements almost always having precluded reliance on classwide statistical evidence, as we discussed here.

Another possibility would be the Magnuson-Moss Warranty Act, although MMWA also has a number of substantive drawbacks for plaintiffs, not the least of which is prescription medical products not being “consumer” goods.  Kanter v. Warner-Lambert Co., 122 Cal. Rptr.2d 72, 86 (Cal. App. 2002); MHA, LLC v. Siemens Healthcare Diagnostics, Inc., 2017 WL 838797, at *2 (D.N.J. March 2, 2017); In re Minnesota Breast Implant Litigation, 36 F. Supp.2d 863, 876 (D. Minn. 1998); Goldsmith v. Mentor Corp., 913 F. Supp. 56, 63 (D.N.H. 1995); Kemp v. Pfizer, Inc., 835 F. Supp. 1015, 1024 (E.D. Mich. 1993).

In this regard, however, the citation BMS gives to the Omni Capital case is particularly ominous for MMWA plaintiffs.  Omni Capital was a federal question case, alleging violations of several federal securities statutes.  498 U.S. at 99.  The Court held that, even if the Fifth Amendment Due Process Clause did allow Congress to expand personal jurisdiction with a statute providing for nationwide service of process (the footnote cited in BMS was itself a caveat that the Court had “no occasion to consider the constitutional issues raised by this theory”), no jurisdiction existed because Congress had not in fact done so.  “[U]nder Rule 4(e), a federal court normally looks either to a federal statute or to the long-arm statute of the State in which it sits” to determine personal jurisdiction.  Id. at 105.  An “implied” cause of action did not include implied nationwide service of process.  “[W]e would not automatically graft nationwide service onto the implied private right of action.”  484 U.S. at 107.  Nor would the Court in Omni Capital go beyond the limits to service of process expressly provided in Rule 4:

We would consider it unwise for a court to make its own rule authorizing service of summons.  It seems likely that Congress has been acting on the assumption that federal courts cannot add to the scope of service of summons Congress has authorized.  This Court in the past repeatedly has stated that a legislative grant of authority is necessary. . . .

The strength of this longstanding assumption, and the network of statutory enactments and judicial decisions tied to it, argue strongly against devising common-law service of process provisions at this late date for at least two reasons.  First, since Congress concededly has the power to limit service of process, circumspection is called for in going beyond what Congress has authorized.  Second, as statutes and rules have always provided the measures for service, courts are inappropriate forums for deciding whether to extend them.  Legislative rulemaking better ensures proper consideration of a service rule’s ramifications within the pre-existing structure and is more likely to lead to consistent application.

Id. at 109-10 (citations and footnotes omitted).

Thus, unlike the FCA or RICO, MMWA falls into the same category as the securities statutes in Omni Capital – it contains no provision for expanded service of process of any sort.  Alisoglu v. Central States Thermo King of Oklahoma, Inc., 2012 WL 1666426, at *3-4 (E.D. Mich. May 11, 2012); Bluewater Trading LLC v. Fountaine Pajot, S.A., 2008 WL 2705432, at *2-3 (S.D. Fla. July 9, 2008), aff’d, 335 F. Appx. 905, (11th Cir. 2009); Weinstein v. Todd Marine Enterprises, Inc., 115 F. Supp. 2d 668, 671 (E.D. Va. 2000); see Walsh v. Ford Motor Co., 807 F.2d 1000, 1012, 1018-19 (D.C. Cir. 1986) (reversing decision that “veered off course” by “regard[ing] Magnuson-Moss as an Act intended to facilitate nationwide class actions”).  What that means for Magnuson-Moss plaintiffs is:

The end result of Omni is to require a court to apply in federal question cases such as this case where there is no provision authorizing nationwide service of process a personal jurisdiction test very similar to that used in diversity cases:  Where a federal court’s subject matter jurisdiction over a case stems from the existence of a federal question, personal jurisdiction over a defendant exists if the defendant is amenable to service of process under the forum state’s long-arm statute and if the exercise of personal jurisdiction would not deny the defendant due process.

Alisoglu, 2012 WL 1666426, at *4 (citations and quotation marks omitted) (emphasis added).

While the current version of Rule 4 was amended to address the specific situation presented in Omni Capital – an overseas defendant ostensibly not amenable to service of process in any state (see Rule 4(k)(2)) – plaintiffs who sue defendants (like our clients) that are amenable to suit in some states are subject to state-law limitations on service of process unless a federal statute expressly allows otherwise:

(k) Territorial Limits of Effective Service.

(1) In General. Serving a summons or filing a waiver of service establishes personal jurisdiction over a defendant:

(A) who is subject to the jurisdiction of a court of general jurisdiction in the state where the district court is located;

(B) [special rules for third party practice − not relevant to personal injury plaintiffs – and indispensable parties – ditto]; or

(C) when authorized by a federal statute.

(Emphasis added).

Thus, under both controlling precedent and the language of Rule 4, our opponents should not be able to utilize federal causes of action to evade Bauman/BMS – unless they can plead into some statute (like the FCA or RICO) that provides nationwide service of process – and those other statutes have attributes that preclude their use in product liability.  Getting back to Walden v. Fiore, this interplay between personal jurisdiction and Rule 4 is what ultimately led to the application of Fourteenth Amendment personal jurisdiction principles in what was a federal question case.  Bivens is an implied right of action (similar to Omni Capital in that respect), thus no statutory expansion of personal jurisdiction was available, and a state long-arm statute subject to the Fourteenth Amendment was the only other option for the plaintiff, even with a federal cause of action involved:

Federal courts ordinarily follow state law in determining the bounds of their jurisdiction over persons.  This is because a federal district court’s authority to assert personal jurisdiction in most cases is linked to service of process on a defendant “who is subject to the jurisdiction of a court of general jurisdiction in the state where the district court is located.”  Fed. Rule of Civ. Proc. 4(k)(1)(A).  Here, Nevada has authorized its courts to exercise jurisdiction over persons “on any basis not inconsistent with … the Constitution of the United States.”  Thus, in order to determine whether the Federal District Court in this case was authorized to exercise jurisdiction over petitioner, we ask whether the exercise of jurisdiction comports with the limits imposed by federal due process on the State of Nevada.

Walden, 134 S. Ct. at 1121 (citations and quotation marks to Bauman omitted).  Walden is Supreme Court precedent demonstrating that Rule 4(k)(1)(A) imports the Fourteenth Amendment’s – and thus Bauman/BMS – Due Process analysis into federal causes of action unless a federal statute expressly provides otherwise.  Thus, plaintiffs can’t get away from Bauman/BMS even by raising federal statutory causes of action like MMWA that don’t authorize nationwide service of process.

Finally, even if plaintiffs somehow grab the BMS-caveat brass ring, and find some federal statute that provides for expanded service (and thus expanded personal jurisdiction), they would run squarely into the principle discussed in Dick Dean’s prescient guest post of a few weeks back – “[j]ust because there is specific jurisdiction over one claim . . ., that is insufficient to find specific jurisdiction over all claims.”  This guest post cites the relevant cases holding that personal jurisdiction must be determined on a claim-by-claim basis, so we won’t repeat them here.

We’ll add only that this claim-by-claim precedent is incompatible with any novel expansion of “pendent jurisdiction” (which has been a subject matter jurisdiction concept) to allow courts to hear otherwise Bauman/BMS-barred claims because one claim somehow squeaks through.  Recent cases rejecting “pendent jurisdiction” as an end run around Bauman/BMS include:  Lexington Insurance Co. v. Zurich Insurance (Taiwan) Ltd., ___ F. Supp.3d ___, 2017 WL 6550480, at *3 (W.D. Wis. Dec. 21, 2017); Greene v. Mizuho Bank, Ltd., ___ F. Supp.3d ___, 2017 WL 7410565, at *4-5 (N.D. Ill. Dec. 11, 2017); Spratley v. FCA US LLC, 2017 WL 4023348, at *7 (N.D.N.Y. Sept. 12, 2017); Famular v. Whirlpool Corp., 2017 WL 2470844, at *6 (S.D.N.Y. June 7, 2017); MG Design Associates, Corp. v. Costar Realty Information, Inc., 224 F. Supp.3d 621, 629 (N.D. Ill. 2016), partially reconsidered on other grounds, 267 F. Supp.3d 1000 (N.D. Ill. 2017); In re Testosterone Replacement Therapy Products Liability Litigation, 164 F. Supp.3d 1040, 1048-49 (N.D. Ill. 2016); In re: Bard IVC, 2016 WL 6393596, at *4 n.4 (D. Ariz. Oct. 28, 2016); In re: Zofran (Ondansetron) Products Liability Litigation, 2016 WL 2349105, at *5 n.5 (D. Mass. May 4, 2016); Demaria v. Nissan, Inc., 2016 WL 374145, at *7-8 (N.D. Ill. Feb. 1, 2016); Tulsa Cancer Institute, PLLC v. Genentech Inc., 2016 WL 141859, at *4 (N.D. Okla. Jan. 12, 2016); Hill v. Eli Lilly & Co., 2015 WL 5714647, at *7 (S.D. Ind. Sept. 29, 2015); In re Plavix Related Cases, 2014 WL 3928240, at *9 (Ill. Cir. Aug. 11, 2014).

Notably, most of these rejections of pendent jurisdiction come in the context of unsuccessful attempts to maintain nationwide class actions after Bauman/BMS.  The jurisdictional noose is tightening around litigation tourists.  It is important that they not  be given any wiggle-room by virtue of the “federal court” caveat in BMS.

Disclaimer:  Any resemblance between the substance of this post and that of a certain recent, wrongly-decided case out of the Northern District of California is purely intentional.

This is a follow-up to our post last week on the Missouri Supreme Court’s momentous personal jurisdiction decision in State ex rel. Norfolk Southern Railway Co. v. Dolan, ___ S.W.3d ___, 2017 WL 770977 (Mo. Feb. 28, 2017) (“NSRC”).  We stated last week, and we continue to believe, that NSRC will ultimately kill litigation tourism in Missouri.

However, it won’t be easy.  Nothing ever is against the rich and entrenched litigation industry.

As we would expect, the other side is talking out both sides of its mouth about NSRC.

On one hand, in the ongoing legislative push for a statutory fix to the bizarre and unfair way that courts have interpreted Missouri’s venue and joinder rules (see our post here), those supporting the other side of the “v.” are already claiming that the venue/joinder reform bill (H.B. 460 – which will be on the House floor this week) is no longer necessary; that NSRC supposedly “fixed” everything.

On the other hand, and essentially simultaneously, in the multi-plaintiff mass tort litigation that is the main reason tort reform is so desperately needed, they’re doing the opposite –  trying to get around NSRC by claiming “pendent party” jurisdiction as a result of the very same venue/joinder problems that venue/joinder reform and H.B. 460 is intended to fix.

Talk is cheap.  Watch what they do, not what they say.

They can’t have it both ways. In fact, they can’t have it either way.  The plaintiffs’ first position is garbage, and the second is devoid of legal support.

For the reasons stated in our original post, H.B.460 remains necessary after NSRC.  NSRC established that personal jurisdiction over non-resident corporations by non-resident plaintiffs over injuries not arising in Missouri is unconstitutional under the Due Process clause.  There is no general personal jurisdiction because the defendant is not “at home.”  There is no specific personal jurisdiction because out-of-state injuries to out-of-state plaintiffs are not “related to” a defendant’s Missouri activities.  There is no “consent” merely by registering to do business.

But as good as it was, NSRC was not a mass tort case.  Rather, it was an individual litigation tourist plaintiff suing a single non-resident corporation.  NSRC thus had no occasion to address either the 99-plaintiff misjoined tort complaints that have become the bane of Missouri product liability practice or the 99-defendant complaints that are typical of asbestos (and some other) product liability litigation.  Eliminating those abuses are at the core of H.B. 460, meaning that the reforms proposed in H.B. 460 remain every bit as necessary as before.  As we discussed, the court of appeals in Barron v. Abbott Laboratories, Inc., ___ S.W.3d ___, 2016 WL 6596091, at *13 (Mo. App. Nov. 8, 2016), invited the legislature to correct the venue/joinder rules, and that is exactly what H.B. 460 will do.

Continue Reading More on Missouri – What To Expect and Not To Expect After Norfolk Southern v. Dolan

It’s been two years since the First District California Court of Appeals issued its ill-founded decision in Bristol-Myers Squibb Co. v. Superior Court, 175 Cal. Rptr. 3d 412 (Cal. App. 2014), which used specific personal jurisdiction to accomplish what the United States Supreme Court had, only six months earlier, condemned as “grasping” and “exorbitant” when attempted through general personal jurisdiction in Daimler AG v. Bauman, 134 S. Ct. 746 (2014).  We immediately blogged about that decision in our “Hotel California” post – describing the California court’s rationale in considerable detail.

Fortunately, the California Supreme Court promptly granted an appeal, which we duly noted here, of the following two questions: “(1) whether after Daimler AG v. Bauman, 571 U.S. ––––, 134 S.Ct. 746, 187 L.Ed.2d 624 (2014), general jurisdiction exists; and (2) whether specific jurisdiction exists.” Bristol-Myers Squibb Co. v. S.C., 337 P.3d 1158 (Cal. 2014).

Thereafter “prompt” dropped out of the lexicon.

But today the wait is over.  The California high court has answered the two questions “no” and “yes.”  This latter ruling – a 4-3 decision − is almost certain to be appealed to the United States Supreme Court, as it creates a form of “specific” jurisdiction in mass tort cases that is every bit as “grasping” and “exorbitant” as that rejected as a Due Process violation in Bauman.  See Bristol-Myers Squibb Co. v. Superior Court (Anderson), S221038, slip op. (Cal. Aug. 29, 2016) (hereafter Anderson). Anderson involved mass tort litigation in California against a defendant that was neither headquartered nor incorporated in California, nor had any peculiar ties to the state.  The plaintiffs in question were also nonresidents of California, so the jurisdictional questions boiled down to whether California can constitutionally provide a forum for non-resident plaintiffs to sue a non-resident defendants.

This is quite apart from the practical question of why, given the severe funding crisis everyone recognizes as facing the California judiciary, California taxpayers should be burdened by thousands (or more) of suits by non-residents against non-residents.

Continue Reading Breaking News – California High Court Expands “Specific” Personal Jurisdiction To Recreate “Exorbitant” Personal Jurisdiction Rejected by Daimler v. Bauman

It has been a little over two years since the Supreme Court issued its decision in Bauman v. AG Daimler, and, from our perspective, its impact has been significant, even earth shaking (no pun intended, and we have a San Francisco office and certainly would not make light of earthquakes).  We previously discussed Bauman’s impact on the analysis of personal jurisdiction on several occasions, in the context of notable decisions, good and bad (thank you, California), and in the hotly contested area of consent through registration to do business in a state, here.

Our breaking news is one of the biggest post-Bauman mass tort jurisdictional wins.  The Second Circuit held – in the context of asbestos mass tort litigation – that a company with “continuous and systematic” business in a state (Connecticut) can’t be sued by out-of-state litigation tourist plaintiffs over out-of-state asbestos exposure.   Brown v. Lockheed-Martin Corp., 814 F.3d 619, No. 14‐4083, slip op. (2d Cir. Feb. 18, 2016).  Having a major facility in the jurisdiction, and acquisition of a major in-state operating subsidiary, along with “significant” revenue wasn’t enough for the defendant to be “at home.”  Id. at 18-25.  Compared to the defendant’s total activities, there was nothing “exceptional.”  Id.
Continue Reading Breaking News – Bauman Trumps Jurisdiction By Consent in Second Circuit – and New Post-Bauman Cheat Sheet on General Personal Jurisdiction

We recently brought you the breaking news that the Arizona Supreme Court has adopted the learned intermediary doctrine in prescription drug cases.  The case is Watts v. Medicis Pharmaceutical Corp., No. cv-15-0065-PR, 2016 WL 237777 (Ariz. Jan. 21, 1016), and the Arizona Supreme Court’s unequivocal adoption of the doctrine allows us to check one more state off the list—the number stand at 37 states (plus D.C.) whose highest courts have adopted the LID.  (See our headcount here).

Having now had the opportunity to take a deeper dive, we can say that the Watts opinion is a solid endorsement of the learned intermediary doctrine and an artful explanation of the doctrine’s underpinnings.  But before we get there, we note that Bexis filed an amicus brief in support of adopting the doctrine.  On the other side, the lead author of an amicus brief for the trial lawyers was former Arizona Supreme Court Chief Justice Stanley G. Feldman.  Bexis versus the former Chief?  We like those odds.  We actually worked in Phoenix for a year following law school and became acquainted with Chief Justice Feldman while we clerked in the chambers next door.  This was in the mid-1990s, and while he was a polarizing figure even then because of his background as a plaintiffs’ advocate, we came to know him as a brilliant and vigorous individual.  On the learned intermediary doctrine, however, we don’t mind saying that the former Chief is wrong and that his successors (and Bexis) got it right.

Continue Reading Learned Intermediary: Arizona Supreme Court Restores Order in the Desert

The Ninth Circuit’s opinion in PhRMA v. County of Alameda, No. 13 16833, 2014 WL 4814407 (9th Cir. Sept. 30, 2014), is a triumph of petty local politics over sound public policy.  At issue is an ordinance enacted in Alameda County, California, that requires drug manufacturers worldwide to fund a local “stewardship program” under which Alameda County’s residents can dispose of their unused drugs.  See Alameda Health and Safety Code §§ 6.53.010 et seq.  We support the safe and proper disposal of pharmaceutical products, but this targeted tax on drug companies is remarkably ill conceived.

Under the ordinance, any drug manufacturer in the world whose products find their way into Alameda County—in whatever quantity and by whatever means—has to set up “disposal kiosks” throughout the county for the collection of unused drugs.  Not just its own drugs; any company’s drugs.  The kiosks must be “convenient and adequate to serve the needs of Alameda County residents,” and manufacturers have to promote the “stewardship program” to the public via “educational and outreach materials.”  After drugs are collected in the kiosks, manufacturers are responsible for disposing of the products at medical waste facilities.  Id. at *1.

There are additional strings attached, and here is where it gets interesting.  The ordinance prohibits manufacturers from implementing any fee to recoup the cost of the “stewardship program,” either at the time the drugs are sold in Alameda County or when the drugs are collected for disposal.  The ordinance also exempts local pharmacies from any responsibility for collecting and disposing of unused drugs.  This is true even though local pharmacies are most directly connected to the purchase of drugs within the county and are in the best position to spread the cost of collection and disposal among the consumers who actually purchase, use, and dispose of the products.  (It may be that county lawmakers were motivated to exempt pharmacies because more than one large pharmacy chain has a world headquarters in Alameda County, but we are speculating.)

Continue Reading Local Drug Disposal Tax Should Go Down The Drain

We like CAFA – that is the Class Action Fairness Act – because a federal forum is generally much preferred (and becoming moreso after Dukes and Comcast) for class actions involving prescription medical products, not to mention just about anything else.  Thus we cautioned some time ago that the industry could “lose by winning” to the extent that it defeated what were essentially no-injury class actions on the ground that the plaintiffs had no constitutional standing under Article III to bring such claims.

What’s the problem with that?
CAFA, that’s what.  Specifically, unless the plaintiffs in a state-court class action assert enough of an injury to confer constitutional standing, the case can’t be removed to (or, more specifically, cannot remain in) federal court.  That’s an issue because some states have statutes that permit suits based on allegations of injury that are too remote or too attenuated to support standing under Article III’s “case or controversy” requirement for suing in federal court.
Our general view is that most medical monitoring class actions (and more generally, most no-injury class actions of all sorts) are vulnerable on multiple fronts, so there’s no need to employ the Article III standing cudgel from our armamentarium to beat them.  Possible exceptions to this rule should be examined very carefully to avoid creating adverse precedent.
Sure enough, the potential for plaintiff-side mischief that we identified in our CAFA Not With Standing post have in fact cropped up.  So far, we’re doing all right.  Late last year we blogged about Bouldry v. C.R. Bard, Inc., ___ F. Supp.2d ___, 2012 WL 6599829 (S.D. Fla. Dec. 18, 2012), in which medical monitoring plaintiffs advanced their own purported lack of constitutional standing as a basis for remand of an otherwise CAFA-eligible case to state court.  Fortunately for CAFA, those plaintiffs failed.  Standing was recognized with respect to medical monitoring claimants under both federal (“an alleged increased risk of future harm satisfies Article III’s injury-in-fact requirement,” id. at *3) and state (“plaintiffs in cases such as these have yet to suffer physical injuries, [but] it is not accurate to say that no injury has arisen at all,” id.) grounds.
Fast forward to last week.  The CAFA/standing argument resurfaced in our neighborhood.  We’re pleased to report that, once again, the plaintiffs’ claim of lack of constitutional standing was rejected.  See Brown v. C.R. Bard, Inc., ___ F. Supp.2d ___, 2013 WL 1787561 (E.D. Pa. April 26, 2013).  As in Bouldry, the medical monitoring claims were based on the allegation that a particular implanted medical device, which was functioning perfectly, was nevertheless “at risk of fracturing at some point in the future.”  Id. at *1.
Understandably, plaintiffs were desperate to get Brown remanded, since there is controlling Third Circuit precedent that “might-break-in-the-future” claims are not actionable under Pennsylvania law.  See Angus v. Shiley, Inc., 989 F.2d 142 (3d Cir. 1993) (rejecting similar claim that heart valve might break in the future) (applying Pennsylvania law).
Thus, these plaintiffs made the same argument as their counterparts in Bouldry – that the need for medical monitoring was not an alleged “injury” sufficient to confer constitutional standing.  The key case in these parts is Reilly v. Ceridian Corp., 664 F.3d 38 (3d Cir. 2011), which – lo and behold – was the decision that prompted our initial CAFA Not With Standing post.  Brown relied upon the same discussion in Reilly that we highlighted in our post:

The plaintiffs in Reilly attempted to sue a payroll processing firm after a breach in the firm’s security system potentially exposed the plaintiffs’ personal information.  In holding that the plaintiffs lacked standing, the Third Circuit Court of Appeals compared them to litigants in defective-medical-device cases who require medical monitoring. See [Reilly] at 44.  The court noted that in the latter type of cases, “an injury has undoubtedly occurred.  In medical-device cases, a defective device has been implanted into the human body with a quantifiable risk of failure. . . .  Hence, the damage has been done; we just cannot yet quantify how it will manifest itself.”  Id. at 45 (emphasis supplied).

Brown, 2013 WL 1787561, at *2 (emphasis original in Brown).  Indeed, the court in Brown harkened back to one of our old Bone Screw cases – decided before CAFA was even a gleam in defense counsel’s eye – where Judge Bechtle held that “exposure to a potentially dangerous medical device whose safety has not been demonstrated” was an injury-in-fact for purposes of establishing standing.  In re Orthopedic Bone Screw Products Liability Litigation, 1999 WL 455667, at *5 (E.D. Pa. July 2, 1999).  See Brown, 2013 WL 1787561, at *2 (citing Bone Screw among other cases).
Thus the court in Brown, like the court in Bouldry before it, answered the $64,000 question in favor of constitutional standing:

[A]n injury-in-fact exists once a plaintiff has a  potentially defective medical device implanted into her body. . . .  [G]iven the facts alleged in the complaint and the law in this Circuit, there are no doubts to resolve here.  Under Reilly, “an injury has undoubtedly occurred” when a potentially defective medical device is implanted within a patient.  664 F.3d at 45.  Therefore, the complaint’s allegation that [plaintiffs] received potentially defective [implant] ensures that they suffered an injury-in-fact under Article III.

Brown, 2013 WL 1787561, at *3 (other citations omitted).
The Brown decision also rejects a couple of other standing-related arguments:  (1) It didn’t matter that the complaint expressly alleged that the action was not removable because plaintiffs were not alleging device failure or present injuries.  That “injury-in-fact” allegation was a mere conclusion of law that under TwIqbal a court could disregard.  Id. at *3.  (2) Plaintiffs claimed that standing required a “future risk of physical injury [that] exceeds a 50 percent chance of being manifest.”  The court found no such requirement in any of the standing cases and refused to invent one.  Id.
One wonders – at least we wonder – whether plaintiffs have unavailingly tried no-constitutional-standing arguments in CAFA-removed cases not involving prescription medical products, so we decided to take a look.

We didn’t find much.  The most interesting case is probably Colucci v. ZonePerfect Nutrition Co., 2012 WL 6737800 (N.D. Cal. Dec. 28, 2012).  Colucci was a California UCL case where the plaintiff’s damages were allegedly a higher price paid due to claimed mislabeling of a food product.  Plaintiff sued over 20 similar kinds of products, but had only actually bought one of them.  The court nonetheless found Article III standing as to all 20 products.  Id. at *4-5.  If there’s constitutional standing in Colucci, we have to think there would also be such standing in any case brought against a prescription medical product manufacturer.

Conversely, a remand for lack of Article III standing occurred in Robinson v. Hornell Brewing Co., 2012 WL 6213777, at *8 (D.N.J. Dec. 13, 2012), but the issue was quite different, since the plaintiff was seeking only injunctive relief.  Robinson thus did not involve lack of cognizable injury by a product user as the asserted ground for lack of standing.  All the other Article III standing cases under CAFA either involve extraneous issues, such as associational standing, or have since been resolved by statutory amendments, such as whether an individual plaintiff has standing after the class action aspects of a case have been disposed of.
So right now, we’re 2-0 on Article III standing under CAFA where the plaintiff resists removal on lack of a constitutionally cognizable injury.  Next up – the hat trick.