Product Liability 2009 - Arnold & Porter LLP

26
Update on U.S. Product Liability Law Sidley Austin LLP
plaintiffs based their claims on a foreseeability argument that
proceeded as follows: (1) federal laws require generic drugs to be
biologically equivalent to the name-brand counterpart and require
generic manufacturers to use the same labeling as previously
approved for the name-brand drug; (2) pharmacists are authorised
by statute to fill prescriptions for name-brand drugs with the generic
equivalent, unless the prescribing physician expressly forbids a
substitution; (3) therefore, it is foreseeable that either a prescription
for a name-brand drug, written in reliance on the name-brand
product information, would be filled with a generic, or that a
prescription for the generic would be written in reliance on the
name-brand labeling. [See Endnote 27.]
Although the courts in Foster and Colacicco stated their holdings
differently, both focused on the fact that plaintiffs cannot
circumvent product liability laws by using the theory of negligent
misrepresentation. Because the basis of plaintiffs’ claims was
injury due to a product, the courts reasoned that plaintiffs must
show that the defendant manufactured the product. The courts held
that there was no foreseeability, and therefore no duty to warn,
because the name-brand defendant did not manufacture the product.
While the plaintiff in Conte proceeded on essentially the same legal
argument as the plaintiffs in Foster and Colacicco, the Conte court
drew a line between product liability law and negligent
misrepresentation law. The court reasoned that liability depends not
on whether the defendant manufactured the product, but whether
the defendant, in disseminating product warnings, should foresee
that patients might take a generic version of a drug pursuant to a
prescription written in reliance on the name-brand maker’s
information. [See Endnote 28.]
The Conte court based its foreseeability analysis on the general rule
in California that “all persons have a duty to use ordinary care to
prevent others from being injured as a result of their conduct”. 168
Cal. App. 4th at 103. The court also looked to Sections 310 [see
Endnote 29] and 311 [see Endnote 30] of the Restatement (Second)
of Torts involving misrepresentation, as well as two non-product
liability related negligent misrepresentation cases in which the
courts also looked to foreseeability. [See Endnote 31.] Based on
these rules and on the record, the court found “the conclusion
inescapable that Wyeth knows or should know that a significant
number of patients whose doctors rely on its product information
for Reglan are likely to have generic metoclopramide prescribed or
dispensed to them”. Id. at 107. The court held that “Wyeth owes a
duty of due care to those people it should reasonably foresee are
likely to ingest metoclopramide in either the name-brand or generic
version when it is prescribed by their physicians in reliance on
Wyeth’s representations”. Id.
Although the Conte court opened a new avenue for liability against
name-brand manufacturers, the court may have ventured out on a
legal limb by itself. At least two subsequent cases addressing the
issue have found brand-name manufacturers not liable under these
facts. [See Endnote 32.] Indeed, the court in Moretti v. Wyeth, No.
2:08-CV-00396-JCMGWF, 2009 WL 749532 (D. Nev. Mar. 20,
2009) squarely rejected the Conte decision, noting that “every other
court that has considered this issue has rejected” liability. [See
Endnote 33.] Despite this, plaintiffs are likely to argue that the
Conte court got it right and other courts should follow its lead in the
future. Therefore, branded drug manufacturers may face an
increasing number of claims by users of generic counterparts,
particularly in California and other states that have not rejected the
theory of liability recognised in Conte.
Removal of State Court Actions to Federal
Court/CAFA
In the U.S. legal system, the plaintiff chooses whether to file a
complaint in state or federal court. In certain instances, defendants
can force plaintiffs to litigate their claims in federal court by filing
a notice of removal. The notice of removal, in effect, removes
jurisdiction over the action from the state court and places it in the
federal court. In a product liability case, it can be beneficial for
defendants to remove state court actions to federal court,
particularly where a state court forum has a reputation for being
“plaintiff-friendly” or where an MDL proceeding has been
established in federal court to coordinate pretrial proceedings for all
cases relating to a particular product so that defendants can avoid
duplicating pretrial efforts in multiple courts.
Removal is governed by statute, 28 U.S.C. § 1441 et seq., and
requires a defendant to establish that a federal court would have had
subject matter jurisdiction over the action if it had been originally
filed in federal court. Generally, subject matter jurisdiction is
conferred on federal courts where the action (a) raises an issue of
federal law, or (b) there is diversity of citizenship among the parties.
See 28 U.S.C. §§ 1331, 1332. In product liability cases, the most
common basis for removal is diversity of citizenship among the
parties, which requires the defendant to show (a) that the plaintiff
(or plaintiffs) is a citizen of a different jurisdiction than each of the
defendants, (b) that none of the defendants properly joined and
served in the action is a citizen of the state in which the action was
filed, and (c) that at least $75,000 is at stake for an individual action
(referred to as “the amount in controversy”). See 28 U.S.C. §§
1332, 1441. Inventive plaintiffs who prefer to litigate in state court
have developed tactics to avoid the removal of their cases to federal
court, e.g., by naming a non-diverse defendant such as a doctor or
local distributor.
In 2005, the U.S. Congress passed legislation that broadened the
subject matter jurisdiction of federal courts in certain class and
mass actions. The Class Action Fairness Act of 2005 (CAFA),
Public Law 109-2, 119 Stat. 4 (2005), conferred jurisdiction on
federal courts over class actions and mass actions with over 100
class members or plaintiffs where (a) any class member or plaintiff
is diverse from any defendant, and (b) the aggregate amount in
controversy exceeds $5 million.
Given the relative youth of CAFA, much of the law construing its
provisions is unsettled. As in the context of a traditional removal,
the plaintiffs’ bar has begun to develop strategies to avoid removal
based on the broadened jurisdiction conferred by CAFA. For
example, instead of filing a lawsuit on behalf of several hundred
plaintiffs, counsel have filed substantively identical lawsuits, each
naming less than 100 plaintiffs, to avoid qualifying as a mass
action. In Tanoh v. Dow Chemical Co., No. 09-55138, 2009 WL
826404 (9th Cir. Mar. 27, 2009), plaintiffs filed seven lawsuits, with
99 named plaintiffs each, alleging identical claims seeking recovery
for injuries purportedly resulting from exposure to the defendant’s
pesticide product. The defendant removed the seven cases,
contending that the division of claims was an improper gaming of
the system contrary to the intent of CAFA. The Ninth Circuit
rejected this argument.
In addition to manipulating the number of plaintiffs named in a suit,
plaintiffs have avoided removal under CAFA by expressly
disclaiming recovery for amounts at or above the $5 million
minimum amount in controversy. [See Endnote 34.] However,
where several cases are consolidated (for example, because they
assert identical or substantially similar facts and causes of action),
each of which disclaims recovery of $5 million or more, courts have
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