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Applying the Kapiloff factor test

Upon Applying the Kapiloff factor test, the District Court Abstained for Exercising Jurisdiction in a Declaratory Judgment Action and Granted Defendant’s Motion to Dismiss

In First Mercury Insurance Co. v. The Earleigh Heights Volunteer Fire Co. of Anne Arundel County, the United States District Court for the District of Maryland granted Defendant’s Motion to Dismiss Plaintiff’s filing seeking a declaratory judgment.  The Plaintiff, First Mercury Insurance Co. (“Mercury” or “Insurer”), initiated this action against Defendant Earleigh Heights Volunteer Fire Company of Anne Arundel County (“Fire Company”) to settle a question of insurance coverage that related to a tort action pending in the Circuit Court for Anne Arundel County.

The underlying tort litigation arose from a tragic accident that occurred during a carnival sponsored by the Fire Company and operated by Frank Joseph & Sons, Inc. d/b/a Jolly Shows, (“Jolly”).  A pedestrian was crossing Ritchie Highway to attend the carnival when a car fatally struck her.  Her surviving family filed a wrongful death action against the Fire Company and Jolly alleging both parties were negligent in failing to secure a safe crossing at a roadway adjacent to the carnival.  Mercury, Jolly’s insurer, defended Jolly, as an insured, and the Fire Company as a named “additional insured.”

The Plaintiffs in the tort action, however, voluntarily dismissed their claims against Jolly. As a result, Mercury stopped defending Jolly and the Fire Company, although the latter was still a Defendant in the tort action.  Mercury communicated to the Fire Company that it ceased its defense because the remaining claims were solely against the Fire Company and did not arise out of the insured’s operations. Mercury claimed it did not have a duty to defend the Fire Company.

When the Fire Company disputed Mercury’s removal, Mercury filed a declaratory judgment action in this court asserting that it had no duty to defend and/or indemnify the Fire Company regardless of the dismissal of Jolly.  In response, the Fire Company filed a Motion to Dismiss arguing that the declaratory action should be litigated in state court where the Fire Company had previously (three months prior) filed a request for declaratory judgment on the same issue and the request is still pending.

With regard to the state action, the Fire Company filed a motion in the state declaratory action to consolidate the case with the tort action and, further, it requested a stay of the state declaratory action pending resolution of the tort action.[1]

For guidance, the court looked to the rules, case law and other statutes governing federal jurisdiction.  The court reiterated that federal courts may not exercise jurisdiction absent a statutory basis, but, when they have a basis, they must usually exercise it.  In other words, federals courts have a “virtually unflagging obligation . . . to exercise the jurisdiction given them” absent “exceptional circumstances” yet, the court explained that a different set of guidelines exist in the declaratory judgment context.  Colorado River Water Conservation Dist. v. United States, 424 U.S. 800, 817 (1976). 

The Supreme Court reaffirmed this framework by stating that district courts have “greater discretion” to abstain from exercising jurisdiction “in declaratory judgment actions than that permitted under the ‘exceptional circumstances’” test that district courts must otherwise satisfy to abstain.  Wilton v. Seven Falls. Co., 515 U.S. 277, 286 (1995).  In other words, the “normal principle that federal courts should adjudicate claims within their discretion yields to considerations of practicality and wise judicial administration” in the declaratory judgment context. Wilton, 515 U.S. at 288.

In declaratory judgment actions, federal courts’ jurisdiction springs from the Declaratory Judgment Act, 28 U.S.C. § 2201 (a) that, in its statutory language, reflects a “textual commitment to discretion.”  Wilton, 515 U.S. at 286.  The Act provides that where a federal action that seeks only discretionary declaratory relief is before a federal court, and there is a parallel proceeding pending in a state court, the district court may either stay the suit in favor of state court action or abstain from exercising jurisdiction by dismissing the federal suit.  Myles Lumber Co. v. CNA Fin. Corp., 233 F.3d 821, 823 (4th Cir. 2000). 

The Fourth Circuit has instructed district courts that such an abstention, referred to as a Wilton/Brillhart abstention, is appropriate when it will settle legal issues and afford relief.  Specifically, the Fourth Circuit noted that when there is a related state court proceeding pending, courts should also bear in mind considerations of “federalism, efficiency, and comity.”  Penn-America Ins. Co. v. Coffey, 368 F.3d 409, 412 (4th Cir. 2004).

The Fourth Circuit set forth a balancing test that included several factors, referred to as the “Kapiloff factors,” to assist district courts in evaluating whether to exercise their discretion as to declaratory judgment actions.  The factors include: (1) whether the state has a strong interest in having the issues decided in its courts; (2) whether the state court could resolve the issues more efficiently than the federal courts; (3) whether the presence of the “overlapping issues of fact or law” might create unnecessary “entanglement” between state and federal courts; and (4) whether the federal action is mere “procedural fencing,” in the sense that the action is merely the product of forum shopping.  United Capitol Ins. Co. v. Kapiloff, 155 F.3d 488, 493-94 (4th Cir. 1998).

In the case at bar, the court found that the facts weighed in favor of granting Defendant’s motion to dismiss the Federal action in light of the pending state court action.  In reaching this conclusion, the court applied each of the above factors.

With regard to the first factor, the court found that although Maryland had an interest in having the matter of insurance coverage decided in state court, that the state interest was not strong enough to weigh against the exercise of federal jurisdiction.  While many factors of the case connected it to the state, including that the coverage involved conduct occurring in Maryland that allegedly caused damages to Maryland residents, the court honed in on the legal issues.  The Fire Company failed to frame the legal issues present, i.e., contract interpretation and agency, as complicated or non-standard legal matters.  The court noted that in order for this factor to weigh in favor of the state, the question of law must involve more than a routine application of “settled principles of law.”

The next factor, however, the court found weighed heavily in favor of dismissing the action so that it could be resolved in state court.  The court found that the matters overlapped and, further, that a federal declaration that an insurer had no duty to indemnify could be rendered moot by a later state verdict for the insured.  Additionally, the Fire Company’s assertion that it will only seek indemnification after resolution of the tort action if there was a judgment against it gave the court reason to conclude that allowing the litigation to continue in state court would be the more efficient avenue of resolution.

Similarly, the next factor weighed in favor of dismissing the action, as there were several overlapping issues of fact and law that would create unnecessary entanglement between federal and state courts.  The court found that the federal and state courts would consider the same issues, albeit perhaps under different standards, rendering state and federal entanglement impossible to avoid.

Last, the fourth factor weighed in favor of dismissing the Federal declaratory action as well.  The court found evidence to support that the Insurer filed the action in order to avoid being summoned to state court as the Insurer brought the action after a state action had been pending for months.

The court abstained from exercising jurisdiction and granted the Defendant’s motion to dismiss Plaintiff’s declaratory judgment action so as to allow the tort and coverage claims litigation to continue to state court.

First Mercury Insurance Co. v. The Earleigh Heights Volunteer Fire Co. of Anne Arundel County, No. ELH—14—3156 (D. Md. December 22, 2014), Available at: http://cases.justia.com/federal/district-courts/maryland/mddce/1:2014cv03156/293086/13/0.pdf?ts=1419083808

Submitted by Marisa A. Trasatti and Sarah M. Grago, Semmes, Bowen & Semmes

Defendants Removal is Frustrated by Plaintiff's Multiple Amendments to Complaint

Defendant’s Removal Is Frustrated by Plaintiff’s Multiple Amendments to Complaint and an Action that Was Proceeding in Three (3) Courts Simultaneously

In Johnson v. Citibank, N.A., No. PWG-14-3024 (U.S. District Court of Maryland, December 5, 2014), the Court examined a complicated case of unsuccessful federal removal.  After initially filing a case pro se in Maryland State District Court setting forth, inter alia, violation of the Fair Credit Billing Act (“FCBA”), Plaintiff prayed a jury trial and amended his claimed damages, and so the case was transferred to the Maryland State Circuit Court, where the complaint was thereafter amended several additional times. 

Defendant sought to remove the case to the Maryland Federal Court on the basis of federal question jurisdiction based on the FCBA.  Defendant filed a notice of removal and provided notice to Plaintiff and the State District Court—but not to the State Circuit Court.  While the docket reflected that the case had been transferred from the State District Court to the State Circuit Court after the jury demand was prayed, the Defendant’s attorney was advised by the State Court Clerk that the case file remained with the State District Court, and therefore, the Defendant filed the notice of removal with the State District Court instead of the State Circuit Court.  After the notice of removal was filed, Plaintiff again amended the Complaint and stripped the Complaint of its federal claims.  Plaintiff moved to remand the case back to State Court on the grounds that there was no case pending in the State District Court to remove after the jury demand was filed. 

In ruling on the motion to remand, the Court disagreed with the Plaintiff’s argument, and found that although jurisdiction transferred from State District Court to State Circuit Court with the filing of the jury demand, the case remained pending and was removable to this court.  However, because Defendant did not provide notice to the State Circuit Court (in which the case was pending) until after Plaintiff amended his complaint to remove all of his federal claims, there was no basis for federal jurisdiction at the time that the removal was effected. 

Specifically, the Federal Court held that jurisdiction of the case was immediately transferred from the State District Court to the State Circuit Court upon the filing of the jury demand, and so the Notice of Removal ought to have been filed in the State Circuit Court.  The Court sympathized with Defendant who was left in a “state of limbo” in which the State Circuit Court had jurisdiction over the case but the State District Court retained custody of the physical case file.  Although Defendant timely filed its Notice of Removal in the Maryland Federal Court within thirty (30) days of being served with process, and immediately served a copy of the Notice of Removal on Plaintiff, the removal was not effective unless and until Defendant “[p]romptly . . . file[d] a copy of the notice with the clerk of such State court” as required by 28 U.S.C. § 1446(d).  Defendant did not strictly comply with 28 U.S.C. § 1446(d), but the Court noted that failure of notice to the state court is a procedural defect that does not defeat federal jurisdiction, and that several courts have found substantial compliance with 28 U.S.C. § 1446(d) where a state court has actual notice of the removal notwithstanding a defendant’s failure properly to file a notice of removal.

Although Defendant promptly provided notice of removal to the State District Court, it did so after jurisdiction transferred to the State Circuit Court.  The State Circuit Court was not made aware of the removal until Defendant filed its Motion to Stay State Proceedings over a month after the Notice of Removal was filed in this Court and over two (2) weeks after Plaintiff filed his Fifth Amended Complaint which eliminated his federal law claims.  Removal was effected on the date that the Motion to Stay State Proceedings was filed in State Circuit Court, and not before.

The delay between filing the Notice of Removal in the Federal Court and providing notice to the State Circuit Court was crucial because the validity of a removal must “be determined according to the plaintiffs’ pleading at the time of the petition for removal.”  Were removal complete on the day the Notice of Removal was filed in Federal Court, there is no question that Plaintiff’s FCBA claim would provide a basis for federal jurisdiction.  But, Plaintiff filed three amended complaints in State Circuit Court since that date, which eliminated the federal claims.  The Court did recognize that Plaintiff likely manipulated the Complaint to avoid federal jurisdiction, however, such liberal amendments are permitted in State Court, and so in this case, the amendments removing the federal claims were able to defeat removal based on the procedural irregularity with the filing of the Notice of Removal in the wrong Maryland State Court.  Accordingly, the case was remanded back to State Court.

Johnson v. Citibank, N.A., No. PWG-14-3024 (U.S. District Court for Maryland, December 5, 2014), Available athttp://www.mdd.uscourts.gov/Opinions/Opinions/Johnson%20v%20Citibank%20Mem%20Op%20on%20Remand.pdf

Submitted by Marisa A. Trasatti and Colleen K. O’Brien, Semmes, Bowen & Semmes

Short-Term Disability Claim Administrator Abuses Discretion

Short-Term Disability Claim Administrator Abuses Discretion in ERISA Case When It Fails to Access Readily Available Information That May Confirm Plaintiff’s Theory of Disability

In Harrison v. Wells Fargo Bank, N.A., No. 13-2379 (U.S. Court of Appeals for the Fourth Circuit, December 5, 2014), the Court determined that Defendant abused its discretion by terminating the Plaintiff’s short term disability benefits.  Specifically, the Court held that Defendant did not give the Plaintiff’s claim a full and fair review pursuant to the Employee Retirement Income Security Act (“ERISA”).

Factually, Plaintiff worked for Defendant Wells Fargo as an Online Customer Service Representative.  In 2011, she was diagnosed with an enlarged thyroid and large mass that extended into her chest causing chest pain and tracheal compression.  She had a thyroidectomy surgery first, and a second chest surgery was scheduled for approximately two (2) months later to address the chest mass.  Wells Fargo paid Plaintiff short-term disability benefits for three (3) weeks after the first surgery, but terminated benefits prior to the second surgery, since it determined that three (3) weeks was the typical recovery period for this type of operation.  Additionally, while Plaintiff was facing her surgeries, her husband died unexpectedly, triggering a recurrence of depression and post-traumatic stress disorder (PTSD) related to the death of her mother and her children in a house fire in 2004.  Her primary care physician doubled her dosage of antidepressants and referred her to a psychologist for additional treatment.  Between those two (2) surgeries, Plaintiff sought continued short-term disability benefits on the basis of both physical and psychiatric complaints.

Defendant denied Plaintiff’s continued receipt of short-term disability benefits between the surgeries.  Plaintiff filed an internal appeal of the adverse claims decision.  She noted that she continued to have chest pain from the recent thyroid surgery and suffered emotional trauma from the death of her husband.  Her primary care physician and thoracic surgeon provided additional documentation to this effect.  Plaintiff also provided Wells Fargo with the contact information for her psychologist.  Additionally, Plaintiff also provided a detailed letter from her sister, who was her primary caretaker, outlining Plaintiff’s continuing pain, disability, and severe panic attacks.

During the appeal process, Defendant sought an independent psychological peer review of Plaintiff.  The psychological reviewer did not contact Plaintiff’s psychologist; he determined that the evidence in the record suggested that the recent events could have triggered PTSD; and he overall concluded that in the absence of psychiatric/psychological records or a telephone conference with Plaintiff’s psychologist, no opinion could be provided on whether Plaintiff’s psychiatric status limited Plaintiff’s functional capacity.  Wells Fargo upheld its previous decision to deny benefits.

Plaintiff filed an ERISA lawsuit claiming that Defendant abused its discretion in denying her short term disability benefits.  Defendant moved for summary judgment.  The trial court found there was insufficient evidence of disability under the plan and granted summary judgment in favor of the Defendant.  Plaintiff appealed to the Fourth Circuit.

The Fourth Circuit held that Defendant abused its discretion because it failed to contact Plaintiff’s psychologist when it was on notice that Plaintiff was seeking treatment for mental health conditions and when it had the psychologist’s contact information, as well as properly signed release forms from Plaintiff.  Here, the Defendant “chose to remain willfully blind to readily available information that may well have confirmed [Plaintiff’s] theory of disability.”  The Court recognized that “the primary responsibility for providing medical proof of disability undoubtedly rests with the claimant,” but also observed that the plan administrator cannot ignore medical information that may confirm the Plaintiff’s theory of disability where “there is no evidence in the record to refute that theory.”  Claim administrators should “notify a claimant of specific information that they were aware was missing and that was material to the success of the claim.”

Under past precedent, claim administrators are not under a duty to secure evidence supporting a claim for disability benefits when there is reliable evidence that a claimant is not, in fact, disabled.  In such cases, however, there is typically sufficient evidence in the record to refute the claimant’s theory of disability.  The present case, however, was distinguishable, as even the Defendant’s peer reviewer stated that the record was incomplete and his opinion as to whether the Plaintiff’s psychiatric status limited her functional capacity could not be provided.  The Defendant was “repeatedly” put on notice that Plaintiff was seeking psychiatric treatment, and even though the Defendant commissioned a psychiatric peer review, the psychiatric peer reviewer never contacted Plaintiff’s treating psychologist for further information that he determined was needed to render an opinion.  Unlike in prior cases, the record in this case did not refute Plaintiff’s claim of disability.

Even though Defendant was on notice that Plaintiff was receiving treatment for potential debilitating psychological trauma, it never made clear to Plaintiff that records from her psychologist were missing and needed.  Defendant noted “vaguely” and “deep into a long letter” that Plaintiff should provided relevant medical information “without ever once mentioning” the Plaintiff’s psychologist by name.  Instead, Defendant “should have made clear that records from [the psychologist] were absent from the record and necessary to perfect [Plaintiff’s] claim.”  Here, the Defendant breached its fiduciary duty to Plaintiff because it “neither sought readily available records” that “might have confirmed her theory of disability” nor “informed her in clear terms that those records were necessary.”  Accordingly, the judgment of the trial court was reversed and the claim was returned to Defendant for proceedings consistent with this decision.

Harrison v. Wells Fargo Bank, N.A., No. 13-2379 (U.S. Court of Appeals for the Fourth Circuit, December 5, 2014), Available athttp://www.ca4.uscourts.gov/Opinions/Published/132379.P.pdf

Submitted by Marisa A. Trasatti and Colleen K. O’Brien, Semmes, Bowen & Semmes

Bad Law from the Eleventh Circuit

Yesterday, the Eleventh Circuit decided St. Paul Mercury Ins. Co. v. FDIC.  While the case is disappointing to industry-side lawyers who handle D&O coverage disputes involving failed banks, the court’s ambiguity analysis should be of greater concern.. 

 

According to the Eleventh Circuit, the fact that other courts disagree regarding the correct interpretation of policy language means it’s ambiguous.  That is a gross oversimplification.  But, it’s part of a disturbing trend as other courts reach similar conclusions.  See e.g., St. Paul Mercury  v. Hahn, 2014 WL 5369400 (C.D. Cal. 2014); Annotation, 4 A.L.R.4th 1253 (collecting cases).  The superficial “courts disagree, so it must be ambiguous” mode of analysis is wrong because each case involves the application of specific policy language to a specific factual pattern.  For example, in the failed bank D&O litigation context, many of the cases cited to show judicial disagreement regarding the Insured vs. Insured exclusion involve materially different policy language, because there is little uniformity in policy terms.  When courts simply tally conflicting decisions without considering whether they are on point, they err. 

 

Ambiguity doesn’t exist in the abstract.  It exists when there are multiple reasonable interpretations of contractual language in the context of the particular case.  As one California decision explained:

 

The [courts disagree] argument is unpersuasive. Different jurisdictions apply different rules governing the issue of textual ambiguity, and so may reach different results which are not necessarily logically inconsistent. The mere fact that judges of diverse jurisdictions disagree does not establish ambiguity under the particular principles which govern the interpretation of insurance contracts in California (see typed opn. at pp. 212–213).

 

ACL Technologies, Inc. v. Northbrook Prop. & Cas. Co., 17 Cal.App.4th 1773, 1787, n. 39 (1993). 

 

One flaw in the analysis by the 11th Circuit here, by the Central District of California in Hahn and by other courts is they did not analyze the following factors:  (a)was the policy language the same; (b)was the context of the court’s analysis similar; and (c)is the law being applied the same?  Without at least that level of congruence, the fact that courts hearing different cases reach different results does not mean the language at issue in a particular case is susceptible to multiple reasonable interpretations in that particular case.  Judicial disagreement does not compel a finding of ambiguity.  Just as juries are instructed not to make a decision based on the number of witnesses who testify on one side or the other, courts should not substitute counting conflicting decisions by other courts in place of analysis of the particular language at issue in the context of the particular case.  

A Sensible Class Action Decision

Too often the plaintiff-side class action bar focuses on the number of potential plaintiffs and ignores the fact that their identities may not be readily ascertainable, and that common issues may not predominate.  A recent decision from the California Court of Appeal is a breath of fresh air on that issue. 

 

It’s a truism, not always grounded in fact, that “Nobody pays retail” when it comes to health care.  Dagmar Hale, who was uninsured when she visited the Emergency Room at Sharp Grossmont Hospital in San Diego, didn’t see things the same way. 

 

Ms. Hale, despite being granted a discount off of retail pricing by Sharp Healthcare, filed a class action against Sharp on behalf of everyone who visited the ER without insurance.  She contended the “regular” rates at Sharp were unreasonable, unconscionable and illegal.  Following a previous appeal and prior certification of the class, Sharp moved to decertify the class.  The trial court agreed to decertify and the appellate court affirmed.  Hale v. Sharp Healthcare.

 

What’s interesting from a defense perspective, is how Sharp was able to defeat class certification.  From a review of its records, Sharp was able to identify roughly 120,000 patients who arrived in the ER claiming they were uninsured.  But, because California law prohibits hospitals from discussing financial issues with patients until after the patient is admitted and treated, Sharp explained that some of the “uninsured” really were not uninsured.  And for many others, Sharp gave or agreed to significant discounts from its retail rates, often resulting in payments less than those made on behalf of insured patients.  But, Sharp explained to the court that it could not ascertain which ostensibly uninsured patients really were uninsured, and not granted discounts, without individual review of the records of each of the 120,000 patients.  The court accepted that explanation, found the class was not ascertainable, and that individual issues, not class issues predominated. 

 

From a defense perspective, it’s refreshing to see that the court did not hold Sharp to an unreasonable standard of recordkeeping and instead accepted the inherent limitations of Sharp’s computerized records.  Too often, plaintiffs and courts expect a degree of IT sophistication and omniscience from corporate defendants which simply isn’t present in computer systems designed to meet the needs of regulators, auditors, and others, not the needs of plaintiff’s lawyers.  In Hale v. Sharp Healthcare, the court recognized that the parties can only work with the records as they exist, and if the manual review of the records of 120,000 patients was necessary to determine both class membership and damages, the class was not ascertainable, nor did common issues predominate. 

Trial Court Properly Granted Summary Judgment

Trial Court Properly Granted Summary Judgment for Nightclub Defendants Where Plaintiffs Injured in Bar Fight Failed to Prove Applicable Standard of Care by Expert  

In Night and Day Management LLC v. Butler, No. 13-CV-944(District of Columbia Court of Appeals, October 23, 2014), the District of Columbia high court affirmed summary judgment in favor of the Defendants in a case alleging inadequate nightclub security due to the Plaintiffs' lack of expert witness testimony.  The case arose out of a fight at a nightclub.  Plaintiffs sued the nightclub, its management company, and one of its principals (collectively, “Defendants”), claiming that the lack of proper security caused their alleged injuries.  The trial court entered summary judgment for Defendants because Plaintiffs had not proffered the expert testimony regarding the appropriate standard of care that they would need to prevail.  The appellate court affirmed.

According to the underlying facts, the Plaintiffs were in the VIP section of the nightclub.  One of the Plaintiffs slipped and fell, knocking over another patrons’ drink, which prompted a fight between the Plaintiffs and a second group of patrons.  The fight lasted ten to fifteen minutes.  There were no security personnel in the VIP room when the fight began, and the security cameras in the room were not working.  Club security personnel arrived after the fight was over, but they did not attempt to determine who started the fight.  The assaulting patrons left without being identified or questioned.  Security personnel escorted Plaintiffs out of the club, but did not offer any medical assistance although Plaintiffs were visibly bleeding.  Plaintiffs went to Washington Hospital Center to have their injuries treated.

Plaintiffs filed a Complaint alleging, inter alia, that the nightclub was negligent because it had not provided adequate security.  On July 16, 2013, the trial court granted Defendants’ motion for summary judgment.  The trial court did not base its decision on any argument raised by the parties, but sua sponte, granted summary judgment for the Defendants on the ground that Plaintiffs could not establish the standard of care for nightclub security without presenting expert testimony.  Plaintiffs appealed.

Because Plaintiffs’ Complaint sounded in negligence, the appellate court evaluated whether the applicable standard of care required expert testimony because it was something that was distinctly related to some science, profession, or occupation beyond the ken of the average juror.  The Court had previously affirmed trial court rulings that expert testimony was required to establish the standard of care in negligence cases that involve “issues of safety, security, and crime prevention.”

Here, Plaintiffs claimed that the nightclub was negligent because security personnel did not intervene in the fight.  But Plaintiffs took no discovery and provided no evidence regarding how many guards were on duty the night of the fight, how they were deployed, or why they did not intervene.  This is the type of information an expert would need to formulate an informed opinion on the appropriate standard of care and whether it was breached.  Even assuming that there were no security guards or working security cameras in the VIP room when the fight occurred, those facts cannot establish, by themselves, what the nightclub security arrangements should have been.  “Such issues are generally beyond the common knowledge of the average juror.”  Without expert testimony or some other evidence of the standard of care, a jury could resolve Plaintiffs’ negligence claim “only through pure speculation.”

The Court rejected Plaintiffs’ argument that the standard of care could be inferred from a statute, rather than expert testimony, under the doctrine of negligence per se.  The relevant statute, D.C. Code § 25-402, which requires nightclubs to submit a security plan with a liquor license application, which is subject to review by the Alcohol Beverage Control Board.  Even though the statute describes in great detail what topics the plan must address, the specifics are left to the discretion of the applicant and the review board, see D.C. Code § 25-403(g), and so a standard of care could not be imported from the statutory requirement that nightclubs submit a security plan with their license applications.  Additionally, even if the nightclub’s security plan could provide the standard of care, Plaintiffs did not submit it to the trial court.

The Court also rejected Plaintiffs’ argument that the standard of care could be inferred from the nightclub’s agreement with its neighborhood commission.  This agreement also contained a security plan, however, to the Court, it lacked specificity on how the security of the nightclub was to be arranged.  The agreement used terms such as “sufficient” and “adequate” which left much of the security specifics to the discretion of the nightclub.  Additionally, even if the agreement did contain specific instructions, guidelines such as internal policy manuals cannot provide the standard of care under the doctrine of negligence per se.

Therefore, because Plaintiffs failed to provide evidence of the applicable standard of care, the appellate court determined that the trial court had properly granted summary judgment in favor of the Defendants.

Night and Day Management LLC v. Butler, No. 13-CV-944, District of Columbia Court of Appeals, October 23, 2014, Available athttp://www.dccourts.gov/internet/documents/13-CV-944plus.pdf

Submitted by Marisa A. Trasatti and Colleen K. O’Brien, Semmes, Bowen & Semmes

Desecration of unmarked graves

Desecration of unmarked graves is not prima facie negligence for desecration of marked graves

In 2004, Equitable Production Company, (“Equitable”) an oil and natural gas prospector, retained the services of General Pipeline Construction, Inc. (“GP”) to construct a pipeline across a land tract of a former coal mining town known as Crystal Block Hollow, WV.  Within that tract of land is Crystal Block Cemetery. While preparing the entrance and egress for the pipeline construction, GP’s bulldozer operator bulldozed a road through the cemetery, despite being informed by residents that the cemetery was in his path and contained the graves of the African American coal mine workers.  As the operator created the road access, he pushed aside, uprooted, and damaged the headstones and markers of numerous graves.  While other GP employees attempted to repair the graves, Equitable representatives did not visit the site for months after learning of the operator’s actions.   When the descendants of seven (7) of the grave occupants learned of the desecration, they filed suit against GP and Equitable in West Virginia.

In 2009, after the close of discovery, the circuit court certified a question to the Supreme Court of West Virginia on what elements were required to prove a cause of action for the desecration of a grave.  See Hairston v. General Pipeline, Inc., 226 W.Va. 663, 704 S.E.2d 663 (2010)(“Hairston I”). The Supreme Court issued guidance on that issue, but also advised that the  West Virginia legislature had preempted common law in limited circumstances, namely where there were “unmarked grave(s) … of historical significance” by codifying W.Va. Code § 29-1-8a (1993).

The matter then went to trial, during which the Plaintiff’s requested that, in addition to a jury instruction on the common law cause of action, an instruction be given that if Defendants were in violation of W.Va. Code § 29-1-8a, it was prima facie evidence of negligence.  The circuit court granted the request and permitted Plaintiffs to present expert testimony as to the legal meaning and application of the statute.  The Court also permitted the Plaintiffs to argue to the jury that the Defendants had spoliated, or illegally destroyed, evidence by attempting to repair the damage at the cemetery. The jury found in Plaintiffs’ favor and against GP and Equitable, including compensatory damages against both Defendants and punitive damages against Equitable.   The Court denied the Defendants’ motion for a new trial, and the Defendants appealed.

The West Virginia Supreme Court addressed three matters in the appeal: 1) whether W.Va. Code § 29-1-8a was applicable in this matter; 2) whether it was proper to permit expert testimony on the meaning of the statute; and 3) whether the arguments on spoliation were proper. The Plaintiffs argued that because there were unmarked graves that were also desecrated, along with their ancestors’ graves, the statute was properly considered by the jury.  The Court reviewed the language of the statute and held that it did not apply to the Plaintiffs’ marked graves, and further, there was no private cause of action created by the statute.  The right to enforce the statute, through civil or criminal prosecution, lay solely with the Director of the Historic Preservation Section.  In coming to this conclusion, the Court  noted that in determining if a statute created a private cause of action, a four factor test must be applied.

(1)       the plaintiff must be a member of the class for whose benefit the statute was enacted;

(2)       consideration must be given to legislative intent, express or implied, to determine whether a private cause of action was intended;

(3)       an analysis must be made of whether a private cause of action is consistent with the underlying purposes of the legislative scheme; and

(4)       such private cause of action must not intrude into an area delegated exclusively to the federal government.

Hairston II, at ___, citing Hurley v. Allied Chemical Corporation, 164 W.Va. 268, 262 S.E.2d 757 (1980)

In this matter, the Court held that W.Va. Code § 29-1-8a was not intended to protect Plaintiffs, but the unmarked graves, and further, the legislative intent did not create a private cause of action.  As such, instructing the jury on W.Va. Code § 29-1-8a was error, and the Court could not say it was harmless. 

The Court held that Plaintiffs’ use of an expert archaeologist and land surveyor to provide expert testimony on the legal meaning of the statute and whether Defendants were in violation of the statute was “clearly wrong.”  The interpretation and application of statutory language was the sole province of the judge.

Finally, the Court addressed the spoliation of evidence.  The Court first established the standard to be applied:

Before a trial court may give an adverse inference jury instruction or impose other sanctions against a party for spoliation of evidence, the following factors must be considered:  (1) the party’s degree of control, ownership, possession or authority over the destroyed evidence; (2) the amount of prejudice suffered by the opposing party as a result of the missing or destroyed evidence and whether such prejudice was substantial; (3) the reasonableness of anticipating that the evidence would be needed for litigation; and (4) if the party controlled, owned, possessed or had authority over the evidence, the party’s degree of fault in causing the destruction of the evidence.  The party requesting the adverse inference jury instruction based upon spoliation of evidence has the burden of proof on each element of the four-factor spoliation test.  If, however, the trial court finds that the party charged with spoliation of evidence did not control, own, possess, or have authority over the destroyed evidence, the requisite analysis ends, and no adverse inference instruction may be given or other sanction imposed.

Hairston II,at ___, citing Tracy v. Cottrell ex rel. Cottrell, 206 W.Va. 363, 524 S.E.2d 879 (1999).  The Court acknowledged that the record did not demonstrate that the spoliation instruction was in error, but noted that it was error for the Court to cede the determination of the application of the instruction to the jury.  Instead of performing an in camera review of Plaintiffs’ evidence to determine if a spoliation instruction was proper, the Court had simply permitted the jury to conduct the analysis.  The Court held this was improper, but did not address if it was harmless as it was already reversing judgment based on the errant statute jury instruction.

The Court reversed the judgments and remanded the matter to the circuit court for a new trial.

General Pipeline Construction, Inc. v. Hairston,___S.E.2d___ (W. Va. 2014) (“Hairston II”), Available athttp://www.courtswv.gov/supreme-court/docs/fall2014/13-0933and13-0934.pdf

Submitted by Marisa A. Trasatti and Gregory S. Emrick, Semmes, Bowen & Semmes

District's EMTs acting in an emergency

District’s EMTs acting in an emergency during firefighter physical ability test protected by public duty doctrine

The decedent, Eric Allen, was a participant in the physical ability test (PAT) as part of his application to become a District of Columbia (“District”) firefighter.  As part of the PAT, the participants’ vitals were taken before and after the PAT by on-scene emergency medical personnel (“EMTs”), retained by the District of Columbia Fire and EMS Department (“FEMS”) for that purpose.  Prior to the PAT, Allen had his vitals taken, which were normal.  At the conclusion of the PAT run, however, Allen began to exhibit signs of illness.  The FEMS personnel called for the EMTs, who had set up their equipment in a nearby schoolroom, who indicated that they needed to get their equipment, including oxygen tank, from their ambulance.  When they arrived, Allen’s vitals were taken and he was given an EKG.  At that point, he was designated a “Priority 3,” the lowest priority, but the EMTs indicated that Allen needed to go to the hospital.  As there was an ambulance on the scene, a basic life support vehicle arrived and transported him to Greater Southeast Community Hospital.  While enroute, his priority level was not changed and, as a result, Allen waited in the emergency waiting room for over an hour.  His conditioned worsened and he was flown by helicopter to Washington Hospital Center, where he died of acute exertional rhabdomyolysis.

Allen’s parents brought a survival and wrongful death suit based on negligence against the District, Greater Southeast Community Hospital and the doctors who attended Allen at the hospital.  While the other defendants settled the claims against them, the District filed a motion to dismiss, which the court treated as a motion for summary judgment as discovery had been completed.  The court concluded there was no “special relationship” that would exempt the case from the “public duty doctrine,” which rendered the District immune.  The Plaintiffs appealed.

First, the District of Columbia Court of Appeals reviewed whether the public duty doctrine applied.  The Court initially noted “that this court has never addressed whether the public duty doctrine is applicable with respect to conduct by EMT personnel who are assigned to provide on-site vital-signs monitoring of firefighter candidates during administration of a PAT.” Allen, ___ A.3d at 3.  “The public duty doctrine ‘operates to shield the District and its employees from liability arising out of their actions in the course of providing public services.’”  Allen, ___ A.3d at 2.  The existence of a “special relationship” between the emergency personnel and the citizen renders of the doctrine inapplicable.  In holding that the public duty applied to the case, the Court noted that the EMTs stepped into their role as emergency responders when they were called to attend to Allen, and went to their ambulance to get the necessary equipment.  These actions were outside the intended roll requested for the PAT, which was limited to taking vitals before and after the test.  This roll as emergency responders was the type contemplated by the “public duty doctrine,” and therefore the District was immune.

The Court then determined that there was no special relationship between the District and Allen.  In order to establish a special relationship, or “special duty,” “a plaintiff must allege and prove two things: (1) a direct or continuing contact between the injured party and a governmental agency or official, and (2) a justifiable reliance on the part of the injured party.”  Allen, __ A.3d at 4, citing Klahr v. District of Columbia, 576 A.2d 718, 720 (D.C.1990).  The Court held that Allen, as a volunteer to the firefighter examinations, was similar to a 911 caller who emerges from the general public with whom emergency personnel had no special relationship.  The Court dismissed the relationship between FEMS and Allen as ongoing and continuous, as it would result in holding that FEMS had a “special” relationship with all 100 recruits.  The Court also held that the Plaintiffs had failed to show that Allen justifiably relied upon the EMTs in acting or failing to act in any way because of the presence of the EMTs.  As such, the special relationship exception to the public duty doctrine did not apply and the claim against the District was barred.  The Court affirmed the trial court’s grant of summary judgment in the District’s favor.

Judge Easterly filed a dissent chastising the Court for applying the public duty doctrine, and for determining issues of fact in a summary judgment motion.  Judge Easterly noted that the application of the public duty doctrine, as implemented by the majority opinion, conflicted with the jurisprudence on the District’s sovereign immunity and greatly expanded the application of the public duty doctrine without justification.  Judge Easterly requested that the opinion be revisited by the Court of Appeals en banc, to clarify the scope of the public duty doctrine, and evaluate if the doctrine should continue to be recognized in the District.

Allen v. District of Columbia,___ A.3d___ (2014), Available at: http://www.dccourts.gov/internet/documents/10-CV-1425.pdf

Submitted by Marisa A. Trasatti and Gregory S. Emrick, Semmes, Bowen & Semmes

Parallel Claims and the Preemption Pendulum

The Preemption Pendulum: The Supreme Court Punts Stengel v. Medtronic Drug and Medical Device Manufacturers Beware; State-law Parallel Claims Threaten

As failure-to-warn claims, the decades-old staple of medical products liability, are relegated to the trash bin of tort jurisprudence, a new and more potent approach--parallel claims--has emerged. What are parallel claims, where did they come from, why did they emerge, and when will the Supreme Court clear up the issue?

With the advent of mass tort litigation for claims involving Food and Drug Administration (FDA) approved products in the 1980's, the defensive doctrine of federal preemption emerged in fits and starts and, since the mid 1990's, has gradually swung the pendulum toward dismissal of claims, relegating claimants to those few venues where jurists, flummoxed by the lack of a remedy, forged a tenuous path forward. Whether Congress has intentionally refused, or simply neglected to provide a private remedy for tort claimants is unclear. What is increasingly clear is that trial courts are finding room in Supreme Court rulings to permit state-law tort claims to proceed. Claimants are also finding a willing advocate in the FDA itself, which has flip-flopped from its prior view favoring preemption to its position that now assists private litigants in pursuing private tort and Lanham Act "labeling" claims under the Food Drug and Cosmetic Act (FDCA).

Parallel Claims: What Are They And Where Did They Come From?

A triumvirate of Supreme Court cases forms the foundation for federal preemption and parallel claims for medical devices under the FDCA (See Medtronic, Inc. v. Lohr,518 U.S.470 (1996), Buckman v. Plaintiffs' Legal Comm.,531 U.S. 341 (2001)and Reigel v. Medtronic, Inc.,552 U.S. 312 (2008). These opinions gave birth to another trio of Supreme Court cases addressing preemption in the context of approved drugs (See Wyeth v. Levine, 555 U.S. 555 (2009), Pliva v. Mensing, 131 S. Ct. 2567 (2011)and Mut. Pharm. Co. v. Bartlett, 133 S. Ct. 2466 (2013).

In Lohr, the Supreme Court stated that the FDCA does not preempt "a traditional damages remedy for violations of common-law duties when those duties parallel federal requirements." Lohr, 518 U.S. at 495. Buckman purports to allow tort claims where the plaintiff is "relying on traditional state tort law" but not where the FDCA "is a critical element in their case." Buckman, 531 U.S. at 353. In Riegel, the Court established a two-prong test for determining if a state-law tort claim could proceed: 1) has the FDA established applicable "requirements"; and 2) does state law create a requirement related to safety or effectiveness that is "different from or in addition to the federal requirement." Reigel, 552 U.S. at 322. While the precise contour of purported "parallel claims" is uncertain, no court allows claims that seek to impose liability despite compliance with the applicable FDCA.

Something Odd in the (5th, 7th and 9th) Circuits: Out of the shadows of these Supreme Court opinions, a trilogy of Circuit Court opinions have arisen that threaten to up-end medical products liability. See Bausch v. Stryker Corp., 630 F.2d 546 (7th Cir. 2010), Hughes v. Boston Scientific, 631 F.3d 762 (5th Cir. 2011), and Stengel v. Medtronic, Inc., 704 F.3d 1224 (9th Cir. en banc 2013), cert. denied (U.S. June 23, 2014) (No. 12-1351). In Bausch v. Stryker Corp., the Seventh Circuit noted:

The idea that Congress would have granted civil immunity to medical device manufacturers for their violations of federal law that hurt patients is, to say the least, counter-intuitive. That protection does not apply where the patient can prove that she was hurt by the manufacturer's violation of federal law. Bausch, 630 F.2d at 549.

This claim's permissive sentiment is echoed in Hughes v. Boston Scientific Corp., where the Fifth Circuit stated that Riegel and Lohr "make clear" that a manufacturer is not protected from state tort liability when the claim is based on the manufacturer's violation of applicable federal requirements. Hughes, 631 F.3d at 765. The court in Hughes further observed: "[w]e are persuaded that any additional 'formal' finding or enforcement action by the FDA is not an 'implicit precondition' to suit under the facts of this case.") Id. at 762.

With Stengel v. Medtronic, a significant stepchild was poised to join the triumvirate of Supreme Court cases that gave birth to parallel claims. In Stengel, the Ninth Circuit reinstated purported state-law failure-to-warn claims, stating that the "[Medical Device] Amendments do not preempt a state-law claim for violating a state-law duty that parallels a federal-law duty." Citing Lohr the Court stated:

Given the ambiguities in the statute and the scope of the preclusion that would occur otherwise, we cannot accept [the manufacturer's] argument that by using the term 'requirement,' Congress clearly signaled its intent to deprive the States of any role in protecting consumers from the dangers inherent in many medical devices. Lohr, 518 U.S. at 489.

The government filed an amicus brief in the Supreme Court asserting that all the Circuit Courts are wrong concerning parallel claims yet arguing for denial of certiorari. The government's newly minted view is:

Section 360k(a) does not preempt respondents' straightforward claim that petitioner should have brought new safety information to physicians' attention through a CBE revision to the device's labeling, because such a claim implicates no preemptive device-specific federal requirement.

On June 23, 2014 the Supreme Court denied certiorari in Stengel leaving intact the Ninth Circuit's reversal of the District Court decision denying plaintiffs' motion to assert a parallel state-law failure-to-warn claim. With the denial of cert by the Supreme Court, the case is remanded to the district court to determine whether the plaintiffs should be permitted to further amend their complaint in light of the Ninth Circuit's opinion.

Further feeding the fire of private claims under the FDCA, private tort claimants have a peculiar bedfellow in three curious Lanham Act cases brought by manufacturers asserting claims that parallel the FDCA. See Allergan et al. v Athena, No. 2013-1286, 2013 U.S. App. LEXIS 25746 (Fed. Cir. Dec. 30, 2013); POM v. Coca Cola, 2014 U.S. Lexis 4165 (2014), and GlaxoSmithKline LLC v. Teva Pharmaceuticals USA, Inc., 2:13-CV-00726 (ED PA Mar. 2014).

In a curious juxtaposition, the government's newly minted support of private litigation under the FDCA allows ample room for state law to meddle, yet the same government retains a possessive hand on its own power to regulate. With the Supreme Court tied in knots over if, why, when and how to reign in the ever expansive Fourth Branch of government (See generally Chevron v. Natural Resources Defense Council, 467 U.S. 837 (1987), Decker v. Northwest Envtl. Def. Ctr., 2013 LEXIS 2373 (2013), Christopher v. SKB2012 U.S. LEXIS 4657 (2012) and Util. Air Regulatory Group v. EPA, 2014 U.S. LEXIS 4377 (2014), perhaps the only issue more confounding than preemption is the deference to be given governmental agencies in the first instance.

Manufacturers of FDA regulated products have enjoyed a decade of generally favorable rulings on the issue of federal preemption and deference to the primacy of FDA jurisdiction limiting or dismissing claims, but the political climate, the courts' emerging approaches and the government are reshaping the litigation landscape. While it is unclear if or when the Supreme Court will rule on the diverging views in the Circuits on state-law parallel claims, it is evident that tort claimants will look to the Ninth Circuit opinion in Stengel as the talisman for their medical products liability claims.

FDA Correcting Third-Party Content and Using Twitter

Vague Rules Limiting Speech (i.e. Due Process and the First Amendment)

On September 29, 2014, the FDA reopened the comment period for two of its Social Media Guidance documents for FDA-regulated industry.  Since the advent of the internet, the FDA has been plagued by its reliance on undefined terms while enforcing vaguely circumscribed regulations that criminalize First Amendment protected speech.  During that time, the US has endured (at least) two wars, three two- term presidents and an entire generation has been born and raised, but no clear rules on how FDA regulated industry may use the internet have emerged.  There is a now glimmer of hope as the Comment period has been reopened for the follow two draft Guidance documents:

 

Correcting Third-Party Content: Internet/Social Media Platforms: Correcting Independent Third-Party Misinformation About Prescription Drugs and Medical Devices; Reopening of the Comment Period; and

Twitter Guidance: Draft Guidance for Industry on Internet/Social Media Platforms With Character Space Limitations: Presenting Risk and Benefit Information for Prescription Drugs and Medical Devices.

The Internet/Social Media Scorecard:

There are eight (8) relevant guidance documents that touch on the issues of industry use of the internet:

  1. Correcting Third-Party Content and User Generated Content (see above);
  2. Twitter Guidance (see above);
  3. Interactive Promotional Media (Fulfilling Regulatory Requirements for Post marketing Submissions of Interactive Promotional Media for Prescription Human and Animal Drugs and Biologics) January 2014;
  4. Presenting Risk Information (Draft Guidance: Presenting Risk Information in Prescription Drug and Medical Device Promotion) May 2009;
  5. Advertising and Promotional Labeling Guidance for Industry: Product Name Placement, Size, and Prominence in Advertising and Promotional Labeling. Revised November 2013;
  6. Unsolicited Requests: Draft Guidance for Industry Responding to Unsolicited Requests for Off-Label Information About Prescription Drugs and Medical Devices. December 2011;
  7. Scientific Exchange  Notice was published in the Federal Register in December 2011 entitled Communications and Activities: Off-Label Uses of Marketed Products and Use of Products Not Yet Legally Marketed). A draft Guidance was issued on March 3, 2014 revising FDA’s Good Reprint Practice Guidance and that guidance was renamed and issued as a draft Guidance entitled “Distributing Scientific and Medical Publications on Unapproved New Uses – Recommended Practices”; and
  8. .com DisclosuresFederal Trade Commission "Dot Com Disclosures" Guidance Updated to Address Current Online and Mobile Advertising Environment.  The 2000 .com Disclosures were updated in March 2013.

In addition, there are two (2) relevant Citizen’s Petitions filed by the Medical Information Working Group that relate to these issues:  

1.       Request a Review, Response and Modify in a Constitutionally Permissible Manner Statutory Limitations and Specific Requests Set Forth in the July 2011 Citizen Petition (FDA-2013-P-1079).  This petition relates to a long pending July 2011 Citizens Petition; and  

2.       Establish Comprehensive, Clear and Binding Regulations to Guide The Industry Relating to New Uses of Marketed Drugs and Medical Devices (FDA-2011-P-0512).

Third-Party Content and Space Limitations:

On September 16, 2014, a number of stakeholders filed responses to both draft guidance documents (Third-Party Content and Twitter). Permeating the responses to these proposed Draft Guidance documents is the concern that the emerging regime for on-line manufacturer content implicates Fifth Amendment due process concerns and infringes First Amendment speech rights.  Despite decades of intransigence, there are encouraging signs as FDA has announced making “some ‘mid-course corrections’ in recognition of emerging case law, in particular the case law involving the First and Fifth Amendments of the United States Constitution.”  This is no small concession for an agency that, reminiscent of the Black Knight in Monty Python’s Holy Grail, ignored the Supreme Court’s admonitions in Thompson v. Western States and Sorrell v. IMS, and shrugged off its 2012 First Amendment shellacking in the Second Circuit in US v. Caronia, touting all as a “mere flesh wounds.”  In what portends to be the final limb of FDA’s rejection of Due Process and First Amendment challenges to how the FDA limits manufacturer content, the Constitutionality of FDA’s enforcement is once again working its way through the courts in Solis v Millennium, 2:09-cv-3013 (E.D. Cal.).

What “Speech” is at Issue?

There are five forms of manufacturer content for FDA regulated industry: FDA approved labeling; advertisements; “Promotional Labeling”; Scientific Exchange; and none of the above.  Despite categories of content entitled to different levels of constitutional protection, the current enforcement regime renders all manufacturer online content as regulated labeling subject to the lowest level of court scrutiny.  While there are pseudo safe harbors for certain content (for example, reprints and unsolicited requests), whether manufacturer’s affiliation, collaboration, or by-stander status concerning content is subject to FDA enforcement and the government’s overwhelming police power is largely left to the ipse dixit  of the FDA itself.

What is emerging is recognition by the FDA that Due Process demands a clear set of rules and the First Amendment demands more, not less, information be disseminated by manufacturers who possess valuable information concerning their products.  As FDA’s decades of analysis of manufacturer and consumer use of the internet has demonstrated, consumers and health care providers overwhelmingly search the internet for information about products.  There is a health imperative where consumer education and reliable scientific and medical information are the cornerstone, and manufacturer participation needs to be encouraged not suppressed. 

No regulation or guidance will prevent bad actors from circumventing the law for personal gain.  While the federal government has proven itself highly successful and profitable in netting bad actors, too often it ensnares questionably culpable manufacturers.  Due Process and Free Speech rights remain as vital and misunderstood as they were when ratified in 1791.  Despite the controversy, applying the principles that flow from these rights to providing health information on the internet may ultimately prove to be among both the greatest challenges and accomplishments in advancing the public health for this generation.  

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