Product Liability Cases of Interest from 2011 and 2012

By Robert J. McGuirl, Esq. and James C. Suozzo, Esq.

New Jersey federal and state courts and the U.S. Supreme Court, in addition to a federal court in New York, have issued a number of opinions regarding products liability and related issues since the beginning of 2011. Below is a synopsis of some of the more interesting and important of those decisions.

PERSONAL JURISDICTION OVER FOREIGN MANUFACTURER

J. McIntyre Machinery, Ltd. v. Nicastro

___ U.S. ___, 131 S.Ct. 2780 (2011)

In Nicastro v. McIntyre Machinery America, Ltd., 201 N.J. 48, 987 A.2d 575 (2010), by

a 5-2 vote, the New Jersey Supreme Court extended the stream-of-commerce theory for providing jurisdiction over a manufacturer who knew or reasonably should have known of the distribution system through which its products were being sold in the forum state, as articulated over twenty years ago in Charles Gendler & Co. v. Telecom Equipment Corp., 102 N.J. 460 (1986).

Last year the United States Supreme Court reversed the New Jersey Supreme Court.

In 2001 Plaintiff Nicastro severed four fingers when his hand was caught in the blades of a metal recycling machine. The machine was made by J. McIntyre Machinery Ltd. of the United Kingdom, and sold through McIntyre Machinery America Ltd. of Ohio, an independent company which filed for bankruptcy in 2001. The foreign manufacturer J. McIntyre argued it did not have sufficient minimum contacts with New Jersey to justify the state’s exercise of personal jurisdiction. It did not place the machine into the stream of commerce directed towards New Jersey, denied marketing the machine in this state, and did not have any contacts or relationships here. (It had attended various trade shows and conventions in cities throughout the U.S. but never in New Jersey.) J. McIntyre denied knowledge of the distribution of its machinery by McIntyre America. Plaintiff argued that New Jersey could exercise jurisdiction because J. McIntyre placed an allegedly defective machine into the stream of commerce in such a way that its geographical market was the entire United States.

The New Jersey Supreme Court agreed that this was enough for jurisdiction, despite acknowledging that J. McIntyre did not have a presence or minimum contacts in New Jersey. The facts demonstrated Defendant’s “calculated efforts to penetrate the overall American market” and “clearly knew or should have known that the products were intended for sale and distribution to customers located anywhere in the United States.” The Court analyzed the development of the law of personal jurisdiction, including Gendler and Asahi Metal Industry Co. v. Superior Court of Calif., 480 U.S. 102 (1987) and noted: “The power of a state to subject a person or business to the jurisdiction of its courts has evolved with the changing nature of the American economy.” The marketplace was now global and transnational, and it was fair to subject a foreign manufacturer to in personam jurisdiction in New Jersey in a products liability suit if the product was sold via a distribution scheme that targeted an American market. Such a wide geographic market obviously includes New Jersey, and so long as the foreign manufacturer knows the distribution scheme by which it receives economic benefits, even if it does not control that distribution, it will be subject to jurisdiction here. The majority felt that its ruling did not offend “traditional notions of fair play and substantial justice” and noted that a state has a strong interest in protecting its citizens from defective products as well as a paramount interest in insuring a forum for its injured citizens who have suffered catastrophic injuries.

There was a vociferous dissent. Justice Hoens concluded that the majority had “replaced a carefully balanced test … with an unbounded one that presumes that participation in the global economy, without more, bespeaks purposeful availment of the benefits of this jurisdiction.” In a separate dissent, Justice Rivera Soto believed that this decision was “ripe for review and correction by the Supreme Court of the United States.”

The dissenters were correct. The United States Supreme Court reversed, noting that it would violate due process if New Jersey exercised jurisdiction when J. McIntyre never engaged in any activities in this state that revealed intent to invoke or benefit from the protection of New Jersey laws. The sovereign’s exercise of power requires some act by which the defendant purposefully avails itself of the privilege of conducting activities within the forum state, thus invoking the benefits and protections of its laws. It is the defendant’s purposeful availment that makes jurisdiction consistent with “fair play and substantial justice” noted in International Shoe. No stream of commerce doctrine can displace that general rule for products liability cases, the plurality ruled. (The majority consisted of Justices Kennedy, Roberts, Scalia and Thomas; Justices Breyer and Alito concurred in the judgment; Justices Ginsburg, Sotomayor and Kagan dissented.)

The majority noted that the standards for determining state jurisdiction over an absent party have been unclear since Asahi, which mentioned a relation between jurisdiction and stream of commerce. Justice Brennan’s concurrence in that case, joined by three other justices, “discarded the central concept of sovereign authority in favor of considerations of fairness and foreseeability.” The premise was that “the defendant’s ability to anticipate suit renders the assertion of jurisdiction fair.” Foreseeability was the touchstone of jurisdiction under Justice Brennan’s concurrence in Asahi, but that view was rejected by Justice O’Connor writing for an equal number of justices. She wrote: “The placement of a product into the stream of commerce, without more, is not an act of the defendant purposefully directed toward the forum state.” Courts after Asahi have sought to reconcile the competing opinions. The majority ruled: “The Court’s precedents make clear that it is the defendant’s actions, not his expectations that empower a State’s courts to subject him to judgment.”

Nicastro did not establish that J. McIntyre engaged in conduct purposefully directed at New Jersey. “The British manufacturer had no office in New Jersey; it neither paid taxes nor owned property there; and it neither advertised in, nor sent any employees to, the State.” The manufacturer attended trade shows in this country and agreed to sell products in the U.S. Those facts “reveal an intent to serve the U.S. market, but they do not show that J. McIntyre purposefully availed itself of the New Jersey market.” The majority ended its decision by noting that “the stream-of-commerce metaphor cannot supersede either the mandate of the Due Process Clause or the limits on judicial authority that Clause ensures.”

FEDERAL DRUG REGULATIONS APPLICABLE TO GENERICS

PREEMPT STATE LAW FAILURE TO WARN CLAIMS

Pliva, Inc. v. Mensing

___ U.S. ___, 131 S.Ct. 2567 (2011)

In Wyeth v. Levine, 129 S.Ct. 1187 (2009), the Supreme Court held that federal law did not preempt state tort claims against brand-name drug manufacturers for failure to warn. The question in Pliva was whether the same applies to generic drug manufacturers, and the Supreme Court said no, ruling that plaintiffs’ claims were barred due to conflict preemption. The federal statutes and regulations applying to brand-name versus generic manufacturers differed, allowing for the differing decisions.

The FDA had approved metoclopramide, a drug used to treat digestive tract problems, under the brand name Reglan. Years later, generic manufacturers began producing the drug. Information developed that long-term use of metoclopramide can cause tardive dyskinesia, a severe neurological disorder. Warning labels for the drug have been strengthened several times over the years, most recently in 2009.

Plaintiffs were prescribed Reglan in 2001 and 2002, but both received the generic drug from their pharmacies. Both plaintiffs developed tardive dyskinesia after taking the generic drug for several years. Both sued the generic drug manufacturers that produced the metoclopramide, claiming the manufacturers were liable under state tort law for failing to provide adequate warning labels. The manufacturers argued that federal statutes and FDA regulations preempted the state tort claims by requiring the same safety labeling for generic metoclopramide as was mandated at the time for Reglan. The Court of Appeals in the Fifth and Eighth Circuits rejected those arguments and held that plaintiffs’ claims were not preempted. The Supreme Court reversed, concluding that federal drug regulations applicable to generic drug manufacturers directly conflict with, and therefore preempt, the state law claims.

Where state and federal law directly conflict, state law must give way. Such a conflict exists where it is impossible for a private party to comply with both state and federal requirements. If the manufacturers had independently changed their labels to satisfy their state-law duty to attach a safer label to their generic metoclopramide, as plaintiffs argued they should have, the manufacturers would have violated the federal requirement that generic drug labels be the same as the corresponding brand-name drug labels. Therefore it was impossible for them to comply with both state and federal law. And even if the generic manufacturers had fulfilled their federal duty to ask for FDA help in strengthening the corresponding brand-name label, assuming such a duty exists, they would not have satisfied their state tort law duty. State law demanded a safer label; it did not require communications with the FDA about the possibility of a safer label.

Plaintiffs argued that the defendants failed to ask the FDA for help in changing the corresponding brand-name label, and that precluded a preemption defense. The Supreme Court rejected that argument, noting that it would render conflict preemption meaningless by making most conflicts between state and federal law illusory. The Supremacy Clause would have no force outside of express preemption. The Supreme Court held that when a party cannot satisfy its stated duties without the federal government’s special permission and assistance, which is dependent on the exercise of judgment by a federal agency, that party cannot independently satisfy those state duties for preemption purposes.

The Supreme Court’s decision in Wyeth was distinguished because a brand-name drug manufacturer can, without pre-approval, add to or strengthen a warning label under the FDA’s changes-being-effected (“CBE”) process. A generic drug manufacturer cannot utilize the CBE process to unilaterally strengthen its label, according to the FDA. The Supreme Court noted that federal statutes and regulations that apply to brand-name drug manufacturers differ, by Congress’ design, from those applicable to generic drug manufacturers, and different laws can lead to different preemption results.

Post script: This decision last year resulted in the dismissal of a host of cases against generic drug manufacturers. The ruling in Pliva affects potentially millions of people since nearly 80% of prescriptions in this country are filled with a generic, sometimes without notice to the patient. As Justice Thomas wrote for the five person majority in Pliva, “Congress and the FDA retain the authority to change the law and regulations if they so desire.” Neither has shown such desire since the decision was announced last summer.

WORKERS’ COMPENSATION BAR TO SUING ONE’S EMPLOYER

Van Dunk v. Reckson Assoc. Realty Corp.

____ N.J. ___ (2012); 2012 WL 2377854, Decided June 26, 2012

An employee injured in the course and scope of his employment cannot sue his employer in tort, unless the employer committed an intentional wrong. That “intentional wrong” exception to the workers’ compensation bar has been narrow. However, the Appellate Division’s 2010 opinion in this case opened the door a bit further by allowing suit against an employer even when there were no prior accidents, close calls or deception of OSHA. The New Jersey Supreme Court has narrowed the opening with its decision earlier this summer.

Plaintiff Van Dunk was employed as a laborer by Defendant James Construction Company, an excavator contractor hired to construct a retention pond. The employer’s superintendent for the project, Key, had received formal OSHA safety training and knew that OSHA required employees in an excavation to be protected from cave-ins. However, Key did not utilize any type of protective system to make the trench more stable. He did not utilize sloping to make the trench more stable because it was a confined area, and the space considerations also led Key not to construct a trench box.

The trench was constructed without any type of protective system. Employees had difficulty lining the trench with fabric, and Plaintiff volunteered to go into the trench to fix it. However, Key stopped him because he was concerned for Plaintiff’s safety in case the trench failed, which was a possibility. The crew continued to line the trench with the fabric which bunched up. In his frustration, the superintendent directed Plaintiff to enter the excavation to correct the problem. Within minutes the trench collapsed, injuring Plaintiff.

OSHA investigated the accident site and issued a citation to Plaintiff’s employer for a “willful” violation of its regulations in failing to utilize an adequate protection system.

Plaintiff sued several defendants including his employer, claiming that no immunity under the Workers’ Compensation Act was appropriate under the totality of the circumstances. The employer argued that Key’s actions did not amount to an “intentional wrong” as interpreted by case law, and that the mere possibility of injury did not equate with “substantial certainty.”

The Supreme Court reviewed N.J.S.A. 34:15-8 and the case law interpreting it, starting with Millison v. E.I. Du Pont de Nemours & Co., 101, N.J. 161 (1975) through Laidlow v. Hariton Mach. Co., Inc., 170 N.J. 602 (2002) and its progeny. The two-prong test enunciated in Millison was refined in Laidlow, where the Supreme Court held that no one fact was dispositive in assessing the employer’s actions. The analysis had to be based on the totality of the circumstances. The Supreme Court in Laidlow then found that where such conduct involving the intentional, and deceptively timed, engaging and disengaging of safety equipment led to the machine’s crushing of an employee’s hand, Millison’s conduct and context prongs both were satisfied. However, the Supreme Court declined to issue a per se rule that removal of safety devices or OSHA violations equate to intentional wrongs. Laidlow and its progeny, three cases decided by the Supreme Court on the same day in 2003, noted that other factors to be considered included employees’ statements to employers regarding safety issues, the seriousness of any potential injury that could occur, and any systematic deception of OSHA, such as when an employer fails to abate prior OSHA citations or only puts guards on machines when OSHA is inspecting the premises.

The Supreme Court in Van Dunk felt that these leading cases on the proof essential to finding an intentional wrong were as important to the case at bar as understanding the federal statutory scheme governing workplace safety on construction sites. Congress passed the Occupational Safety and Health Act of 1970 to assure safe and healthful working conditions. Administrative regulations were put forth setting employment safety standards. Through OSHA, the Secretary of Labor is authorized to make inspections of employer workplaces and to issue citations where violations are noted. OSHA also investigates after some accidents, and did so in this case after Mr. Van Dunk was injured. OSHA issued a “willful violation” citation to his employer for failing to protect its employees from cave-ins. Noting that Key, the employer’s on-site competent person, admitted that he knew the requirements of the standard, and the condition of the ground (water had seeped in, and an excavator was being used, which he knew could unsettle the ground), the OSHA report concluded that the employer intended the “result, i.e. noncompliance was not an accident or negligence.”

However, the Supreme Court found that OSHA’s finding the employer’s regulatory noncompliance was “not an accident or negligence” was a far cry from satisfying the requirement of proofs demonstrating substantial certainty of injury or death. A willful violation could encompass an intentional disregard or plain indifference, and therefore such a violation was not dispositive of whether the employer committed an intentional wrong. Consistent with its decision in Laidlow, the Supreme Court considered the finding of an OSHA violation just one factor among the totality of circumstances to be considered.

It turned its attention to the conduct and context prongs of the analysis, noting that the analyses for each are related and overlap to some degree. An intentional wrong must amount to a virtual certainty of injury. “A probability, , or knowledge that such injury or death ‘could’ result, is insufficient.” The Supreme Court, under the facts in Van Dunk, could not reach the conclusion that the employer, by violating the OSHA safety requirements pertaining to trenches deeper than five feet, knew there was a substantial certainty of injury. In contrast with the Appellate Division, the Supreme Court seemed unwilling to put the employer on the hook for one mistake without a history of violations. Looking back at Laidlow and its progeny, the Court was mindful of the durational aspect of the employer’s intentional noncompliance with OSHA requirements or other demonstrations of a longer-term decision to forego required safety devices or practices.” In contrast, “The events that transpired at this construction site do not equate to the more egregious circumstances involving intentional and persistent OSHA safety violations that, in the past, we found defeated an employer’s motion for summary judgment on the conduct prong analysis.”

Key “made a quick but extremely poor decision,” but even considering what he knew about safety and the condition of the ground at the work site, “none singly or in combination provide an objectively reasonable basis for expecting that a cave-in almost certainly would occur during the brief time plaintiff was sent into the trench.” The plaintiff had to be satisfied with the relief provided under the Workers’ Compensation Act. An employer’s reckless act, or gross negligence, will not overcome the workers’ comp bar to tort suits.

In concluding its similar analysis of the context prong, which involves a determination as a matter of law whether the circumstances of the worker’s injury are plainly beyond anything the legislature could have contemplated as entitling the employee to recover only under the Workers’ Compensation Act, the Court left open the door for a single act to one day satisfy both prongs and permit an employer to be sued in tort. A “single egregiously wrong act by an employer might, in the proper circumstances, satisfy the intentional wrong standard.” However, this case did not provide those circumstances. The Appellate Division’s decision was reversed.

DISCOVERY RULE ALLOWS CASE TO GO FORWARD DESPITE PLA’S PRESUMPTION OF ADEQUACY OF FDA-APPROVED WARNINGS

Kendall v. Hoffman-LaRoche, Inc.

209 N.J. 173 (2012)

The Supreme Court considered whether plaintiff’s lawsuit against the marketers of Accutane was barred by the two-year statute of limitations. Suit was filed about nine years after plaintiff was first prescribed the acne drug as a twelve-year-old. The prescribing doctor did not mention the risk of inflammatory bowel disease (IBD) because he was not aware of it. When the FDA approved Accutane years before, it did not require a warning of possible gastrointestinal side effects such as IBD. Although the brochure plaintiff was provided warned to be on the alert for stomach pain, diarrhea and rectal bleeding, plaintiff did not experience any gastrointestinal side effects during the initial or subsequent times she used the drug. However, about seven months after she completed her fourth course on Accutane, plaintiff was hospitalized in 1999 for bloody diarrhea and abdominal pain and was diagnosed with ulcerative colitis. Still, plaintiff was prescribed Accutane again in 2000 after her dermatologist consulted with her gastroenterologist, who had no objection. Plaintiff had no gastrointestinal side effects during or after this fifth course of Accutane. In September 2003 plaintiff was prescribed her sixth course of the drug, which she took until January 2004. Plaintiff suffered side effects and some increased diarrhea. In December 2005 plaintiff filed suit.

Defendant moved to dismiss the suit as untimely. After a hearing, the judge denied the motion, ruling that plaintiff’s delay was reasonable under the circumstances. The jury awarded damages to plaintiff. Defendant appealed and the Appellate Division affirmed. The Supreme Court granted certification on the issue of the timeliness of plaintiff’s Complaint, and affirmed because a reasonable person in plaintiff’s situation would not have known by December 2003 of the relationship between Accutane and ulcertative colitis.

The discovery rule balances the need to protect injured persons against the injustice of compelling a defendant to defend against a stale claim. It postpones the accrual date of a cause of action if the plaintiff is unaware either that she has been injured or that the injury is due to the fault of an identifiable individual or entity. Where the relationship between injury and the knowledge of fault is not evident, a plaintiff can invoke the discovery rule if he establishes that a reasonable person in those circumstances would not have been aware within the statutory period that she was injured through the fault of another.

In enacting the Product Liability Act (PLA), New Jersey’s legislature intended to reduce the lawsuit-related burden on manufacturers of FDA-approved products. The PLA provides that if a warning has been approved by the FDA, a presumption arises that the warning was adequate. This has been denominated as a super-presumption in that compliance with FDA standards should be virtually dispositive of such claims. The Supreme Court noted that “nothing in the language of the PLA or its legislative history suggests, even obliquely, an intention on the part of the drafters to alter our long-standing discovery rule jurisprudence.” The question at the heart of the appeal was what, if any, role the PLA’s presumption of adequacy plays in the judicial analysis of whether plaintiff acted reasonably in delaying the filing of her suit. The Supreme Court favored the “middle-of-the-road” approach suggested by the Appellate Division. A judge at a Lopez hearing may consider the presumption of adequacy, but at that stage should not view it as a virtually dispositive super-presumption. Rather it should be treated like any presumption, capable of being overcome by evidence which tends to disprove the presumed fact. “If, in the face of the evidence, reasonable people would differ regarding the presumed fact, the presumption will be overcome.” The burden remains on the plaintiff to show that a reasonable person in her circumstances would not have been aware, within the prescribed statutory period, that she had been injured by a defendant’s product.

The Supreme Court held that plaintiff’s suit may proceed because the evidence not only overcame the presumption, but established under all the circumstances, plaintiff reasonably was unaware that defendant caused her injury until after December 2003. The Court noted how the initial doctor did not warn of the risk of IBD; how plaintiff took four courses of the drug without experiencing any GI issues; how plaintiff’s gastroenterologist did not know of a connection between Accutane and ulcerative colitis at the time she developed that disease, which waxes and wanes; and did not experience any GI effects while on her fifth course of the drug. Further, the 2003 warning did not mention IBD or colitis, nor did any other consent form that plaintiff received. Her doctors never said anything to lead plaintiff to believe there was any connection.

Post script: Roche removed Accutane from the market in 2009, citing litigation costs and competition from generics.

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