The Federation of Defense and Corporate Counsel
 
 

Locomotive Inspection Act Pre-empts State Tort Law Claims

In Kurns v. R.R. Friction Prods. Corp., 132 S. Ct. 1261 (2012), the Supreme Court considered whether Federal railroad safety laws pre-empted a rail worker from suing a railroad parts manufacturer under a more protective state regulation for his asbestos-related injuries.  From 1947 to 1994, the decedent worked as a welder, machinist, and supervisor for a rail company, and much of his job involved removing insulation from locomotive boilers and installing brake shoes on the locomotives.  Plaintiffs claimed that during this time period the decedent was repeatedly exposed to asbestos from asbestos insulation and asbestos-containing brake shoes.  After decedent’s retirement, he was diagnosed with malignant mesothelioma, the only known cause of which is exposure to asbestos. 

 

Plaintiffs sued the railroad parts’ manufacturers and distributors of the locomotives and locomotive parts.  Plaintiffs alleged that the decedent contracted mesothelioma as a result of exposure to asbestos in the defendants’ products, and that the products did not carry warnings about the dangers of asbestos.  The Defendants admitted to manufacturing asbestos-containing products and failing to provide specific product warnings under state law. 

 

The United States District Court for the Eastern District of Pennsylvania rejected Plaintiffs’ claims, contending that they were barred by the Locomotive Inspection Act (“LIA”), which provided that a railroad carrier may only use a locomotive that is in proper condition and safe to operate without unnecessary danger of personal injury.  The United States Court of Appeals for the Third Circuit affirmed.  The Supreme Court was asked to decide whether Congress intended the Federal railroad safety acts to pre-empt the state law-based tort claims of failure to warn and design defect.

 

Federal railroad regulations were silent as to warnings for asbestos-containing products.  The Defendants moved for summary judgment, arguing that the claimants were pre-empted by the LIA which, they argued, occupied the entire field of such claims pursuant to Napier, which held that pre-emption “extends to the design, the construction, and the material of every part of the locomotive being tendered and of all appurtenances.”  The Supreme Court was persuaded by the Defendants’ argument that the LIA controlled the entire field of regulation of railroad parts manufacture and use, and therefore, found the state tort claims were pre-empted.  The Court relied mainly upon Napier.

 

Judge Thomas’ opinion for the majority made it clear that failure-to-warn claims fall fully within the field of claims governed solely by federal regulation, not state-based tort law.  The opinion concluded, “a failure-to-warn claim alleges that the product itself is unlawfully dangerous unless occupied by sufficient warnings or instructions. . . .  Because Petitioners’ [Plaintiffs’] failure-to-warn claims are therefore directed at the equipment of locomotives, they fall within the pre-empted field defined by Napier.”  Thus, the Supreme Court held that the LIA pre-empted the state law design defect claims and the state law failure-to-warn claims.  The Court emphasized that state law must yield to a Congressional act, to the extent of any conflict with a Federal statute, even if there is no express pre-emption.  The Court further determined that the Federal Railroad Safety Act did not change the scope of the LIA.

Submitted by Marisa A. Trasatti and Kevin M. Cox of Semmes, Bowen & Semmes

Locomotive Inspection Act

Locomotive Inspection Act Pre-empts State Tort Law Claims For Design Defects And Failure-To-Warn in Asbestos Exposure Case

InKurns v. R.R. Friction Prods. Corp., 132 S. Ct. 1261 (2012), the Supreme Court considered whether Federal railroad safety laws pre-empted a rail worker from suing a railroad parts manufacturer under a more protective state regulation for his asbestos-related injuries.  From 1947 to 1994, the decedent worked as a welder, machinist, and supervisor for a rail company, and much of his job involved removing insulation from locomotive boilers and installing brake shoes on the locomotives.  Plaintiffs claimed that during this time period the decedent was repeatedly exposed to asbestos from asbestos insulation and asbestos-containing brake shoes.  After decedent’s retirement, he was diagnosed with malignant mesothelioma, the only known cause of which is exposure to asbestos.

Plaintiffs sued the railroad parts’ manufacturers and distributors of the locomotives and locomotive parts.  Plaintiffs alleged that the decedent contracted mesothelioma as a result of exposure to asbestos in the defendants’ products, and that the products did not carry warnings about the dangers of asbestos.  The Defendants admitted to manufacturing asbestos-containing products and failing to provide specific product warnings under state law.

The United States District Court for the Eastern District of Pennsylvania rejected Plaintiffs’ claims, contending that they were barred by the Locomotive Inspection Act (“LIA”), which provided that a railroad carrier may only use a locomotive that is in proper condition and safe to operate without unnecessary danger of personal injury.  The United States Court of Appeals for the Third Circuit affirmed.  The Supreme Court was asked to decide whether Congress intended the Federal railroad safety acts to pre-empt the state law-based tort claims of failure to warn and design defect.

Federal railroad regulations were silent as to warnings for asbestos-containing products.  The Defendants moved for summary judgment, arguing that the claimants were pre-empted by the LIA which, they argued, occupied the entire field of such claims pursuant to Napier, which held that pre-emption “extends to the design, the construction, and the material of every part of the locomotive being tendered and of all appurtenances.”  The Supreme Court was persuaded by the Defendants’ argument that the LIA controlled the entire field of regulation of railroad parts manufacture and use, and therefore, found the state tort claims were pre-empted.  The Court relied mainly upon Napier.

Judge Thomas’ opinion for the majority made it clear that failure-to-warn claims fall fully within the field of claims governed solely by federal regulation, not state-based tort law.  The opinion concluded, “a failure-to-warn claim alleges that the product itself is unlawfully dangerous unless occupied by sufficient warnings or instructions. . . .  Because Petitioners’ [Plaintiffs’] failure-to-warn claims are therefore directed at the equipment of locomotives, they fall within the pre-empted field defined by Napier.”  Thus, the Supreme Court held that the LIA pre-empted the state law design defect claims and the state law failure-to-warn claims.  The Court emphasized that state law must yield to a Congressional act, to the extent of any conflict with a Federal statute, even if there is no express pre-emption.  The Court further determined that the Federal Railroad Safety Act did not change the scope of the LIA.

Submitted by Marisa A. Trasatti and Kevin M. Cox of Semmes, Bowen & Semmes

No Personal Jurisdiction

No Personal Jurisdiction Over Out-of-State Defendant Who Hosted Website and Accepted Dues from Forum State Residents

In Allcarrier Worldwide Servs. v. United Network Equipment Dealer Ass’n, No. AW-11-cv-01714 (U.S. District Court for D. Md., September 22, 2011), the seminal issue was whether the Court had personal jurisdiction over the Defendant, a non-profit organization, that hosted a website and accepted dues from members worldwide, including Plaintiff and thirteen others residing in the forum state.  In holding that there was no personal jurisdiction, the Court granted the Defendants’ Motion to Dismiss.

The Court found that Defendant merely provided its members access to a website in which the members, not Defendant, engaged in business transactions related to buying and selling computer equipment. Although it granted access to members internationally, including in Maryland, its role was only “passive.” The Court declined to hold that because Defendant accepted membership dues from Plaintiff and thirteen (13) other residents of the forum state that it was subject to personal jurisdiction there. To find personal jurisdiction in the forum state would require a finding of personal jurisdiction in all states in which members resided and would eviscerate the personal jurisdiction requirements of the long arm statute and the due process clause. Defendant’s ties with the forum state, i.e., the fact that it had a handful of members from the forum state, who signed membership agreements and paid annual dues, was insufficient to support a finding of either specific or general jurisdiction. Consequently, the case was dismissed.

This case is helpful for Defendants who may do business in a state only by virtue of the web, as it limits the practical effect of such conduct on the issue of personal jurisdiction. 

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

Preventing Admission of Product Recall

With medical device recalls on the rise in recent years, defense attorneys are well-advised to anticipate plaintiffs’ attempting to introduce product recall evidence at trial.  Preparation, i.e., knowing the rules of evidence, is the only antidote.  The following are key evidentiary objections to consider when attempting to exclude evidence of recall in your case:

 

Hearsay: The hearsay objection can be successfully implemented to exclude evidence of a recall against a product distributor, as opposed to a manufacturer.  Distributor defendants should argue that the recall letters are out-of-court, written statements by the product manufacturers, and are thus, inadmissible hearsay.  When the recall letter issued by the manufacturer is introduced by plaintiffs against a manufacturer defendant, however, several exceptions may thwart the application of the hearsay rule.  First, the recall notices issued by your manufacturer client is a statement by a party-opponent.  Second, Plaintiff may argue, under Federal Rule of Evidence 804(b)(3), that the recall letters are “statements against interest” and as admission by the manufacturer that the product was defective.  Third, opposing counsel may argue that records relating to the recall fall under the business records exception, provided by Rule 803(8), allowing the court to admit evidence of the product recall.

 

Relevance: Relevance may be a successful objection when the recall is: 1) not of the same product; 2) not the same defect; 3) there is no evidence that the product at issue was defective; or 4) the reason for the recall was not the proximate cause of the accident.

 

Subsequent Remedial Measures: The Subsequent Remedial Measures Rule may exclude the recall evidence, however, the application of this rule will depend on whether the recall was voluntary or involuntary.  Fed. R. Evid. 407, which covers subsequent remedial measures, only precludes evidence of voluntary product recalls.  If the product recall was involuntary, then it will be admissible.  Even if the product recall was voluntary, it still may come in.  For instance, the recall evidence may come in if the recall evidence is needed to show control; to show the feasibility of a precautionary measure/alternative design; or to impeach. 

 

There is no silver bullet, unfortunately, when it comes to excluding product recall evidence.  In fact, some medical device defendants may be best-served by embracing the evidence of the recall as a demonstration to the jury of their corporate accountability and responsibility.  Under this strategy, defense attorneys can then emphasize self-corrective behavior.  The more common strategy, however, is to keep the product recall evidence away from the jury because overcoming juror prejudice associated with headline product recalls is a feat.  In these cases, the goal is to use the evidentiary tools discussed in this article to keep the evidence out and convince the jury that they are smarter than the Plaintiff.

Defending Products Liability Suits

The False Claims Act (FCA), which prohibits any person from knowingly causing the submission of false claims to the federal government for payment or approval, includes a qui tam provision that allows people who are not affiliated with the government to file actions on behalf of the government.  Several states have also created FCA statutes with qui tam provisions.  Recently, these acts have been used to bring claims against pharmaceutical companies for marketing drugs and medical devices for off-label uses—uses other than those specified on the product labels approved by the Food and Drug Administration (FDA).  As a result, many pharmaceutical companies have paid staggering claims to settle these cases.  For instance, Pfizer paid $430 million in 2004 to settle a claim that it encouraged physicians to prescribe the drug Neurontin, to treat bipolar disorder rather than epilepsy (its FDA approved use).  As a result, Plaintiffs are increasingly alleging injury from off-label use of medical products in product liability suits against physicians and manufacturers.  In the past, the learned intermediary doctrine has served as a powerful defense for manufacturers, but the application of this doctrine in off-label cases has been inconsistent among the states.     

 

By way of background, the learned intermediary doctrine serves as a shield for manufacturers against consumer claims arising from allegations of failure to warn of a product’s risks.  Essentially, the doctrine protects manufacturers from liability if they warn physicians of the risks associated with a drug or device.  However, physicians commonly engage in off-label use, and it is impossible for manufacturers to warn physicians of every risk associated with all uses of a medical product. 

 

The law regarding the learned intermediary doctrine and off-label use is conflicting.  This creates difficulty in determining the best way to defend drug manufacturers in cases involving off-label use.  In some jurisdictions, whether the learned intermediary doctrine applies depends on the manufacturer’s knowledge or the foreseeability of the off-label use.  In other jurisdictions, the learned intermediary doctrine’s application depends on the manufacturer’s promotion of an off-label use.  Still, in other jurisdictions, courts have assumed that manufacturers always have a duty to warn and have not applied the doctrine in the absence of warnings.  Finally, some jurisdictions find that the learned intermediary doctrine applies in all cases because physicians use their entire knowledge base and training to determine what is best for the patient. 

 

Given these varied approaches, litigators must look to their state law on the learned intermediary doctrine, specifically involving off-label use, in order to determine the relevant evidence and the likelihood that the learned intermediary doctrine will protect manufacturers sued in that particular jurisdiction.

Citizens United, Western Tradition,and the Pratfalls of Corporate Election Contributions

We are officially in a presidential election year now, even though it feels like the candidates have been campaigning since the last election. And with the election season upon us, corporations have a new twist on campaign-finance law to consider.

            In 2010, the United States Supreme Court held that corporations have essentially the same free-speech guarantees as do individuals under the First Amendment. Citizens United v. Federal Election Comm’n, 130 S.Ct. 876 (2010). Specifically, the Court struck down a federal statutory provision prohibiting corporations from using their general-treasury funds for electioneering communications. An electioneering communication is made via broadcast, cable or satellite within 30 days of a primary or 60 days of a general election, and which refers to a candidate for federal office. 2 U.S.C. §434(f)(3)(A).

            Citizens United is a nonprofit corporation that released a feature-length documentary titled Hillary: The Movie, which aimed to persuade its viewers that Hillary Clinton was unfit to serve as President. The corporation sought declaratory and injunctive relief against the Federal Election Commission. In its opinion, the Court held that corporations enjoy the same free-speech rights as do individuals, and that restrictions on their political-speech rights were subject to strict scrutiny. As the Court did not find that the government had a compelling interest in restricting corporate speech in this manner, it held unconstitutional the federal law prohibiting expenditure of general-treasury funds on electioneering communications. However, it upheld the federal disclaimer and disclosure requirements. These provisions require a disclaimer indicating who is responsible for the content of the communication, and the filing of a disclosure statement with the F.E.C. if the entity spends more than $10,000 on electioneering communications in a calendar year.

            If not for the United States’ organization as a federalist system, then Citizens United may have been the final word on all domestic elections. But the Montana Supreme Court seized on Citizens United’s focus on federal elections and decided the precedent did not apply to state and local elections. Western Tradition Partnership, Inc. v. Attorney Gen’l, 2011 MT 328 (Mont. 2011).

            If for no other reason than its recitation of Montana’s colorful political past, Western Tradition is worth a read. But for politically inclined corporations and their counsel, it is worth examination as a caution that the state of corporate electioneering communications law is far from settled in this country. The Montana Supreme Court held that Citizens United governed only federal elections, and thus was not controlling. Unlike the United States Supreme Court, Chief Justice Mike McGrath and the Western Tradition majority believed Montana had a compelling interest in limiting corporate expenditures on political speech. These compelling concerns tie back to extensive corruption and outside influence in Montana in the late 1800s and early 1900s, and the fear of its return.

            It is possible Western Tradition will be appealed and summarily reversed by the United States Supreme Court. But unless and until it is, corporations and the counsel who advise them are well advised to consider carefully the campaign-finance laws specifically applicable to themin state and local elections. 

Supreme Court nixes class arbitration in AT&T Mobility v. Concepcion

The idea that arbitration agreements are enforceable in consumer contracts is nothing new; Congress passed the Federal Arbitration Act in 1925. But the debate over mandatory arbitration agreements is gaining momentum, fueled by popular media and a recent Supreme Court decision.

Hot Coffee, an HBO documentary released in 2011 and directed by former plaintiff’s attorney Susan Saladoff, examines perceived unfairness to consumers in mandatory arbitration clauses. The film rekindled the debate over several issues in tort reform, including mandatory arbitration clauses. The debate will surely go on, but counsel should focus on the current law surrounding mandatory arbitration agreements and newer issues surrounding them, including class arbitration.

This past year, the Supreme Court issued its opinion in AT&T Mobility LLC v. Concepcion. In this case, the Concepcions bought cell phones and service from AT&T. Through a promotion, the Concepcions received free phones from AT&T, but later discovered they were charged $30.22 in sales tax for the phones. The service agreement between the Concepcions and AT&T provided for arbitration of any dispute between the customers and AT&T. It also required that the disputes be resolved in the customers’ individual capacities, and not as part of a class proceeding.

The Concepcions brought an action against AT&T, which was consolidated with a putative class action. AT&T sought to compel arbitration, but the District Court denied its motion. The District Court found the mandatory arbitration clause unenforceable under California law that prohibits unconscionable and unlawfully exculpatory arbitration provisions. On appeal, the Ninth Circuit affirmed the District Court.

Justice Scalia delivered the opinion of a sharply divided Supreme Court, reversing the Ninth Circuit and holding the mandatory arbitration clause enforceable. Scalia and the majority held that the FAA prohibited individual States from invalidating mandatory arbitration clauses that included a prohibition on class arbitration.

The FAA’s policy objectives supported the majority’s holding. Scalia noted that class arbitration would be slower and less efficient than bilateral arbitration, defeating the FAA’s goal of informality and efficient resolution of disputes. Class arbitration under the American Arbitration Association’s rules requires a level of formality similar to the Federal Rules of Civil Procedure. And because arbitration awards are not subject to multilayered review, they present unacceptable risks to defendants.

Defense & Corporate Counsel should be aware of the AT&T Mobility case. The Supreme Court’s holding that the FAA preempts state-law prohibitions on the enforceability of mandatory arbitration clauses requiring bilateral arbitration has broad implications for companies in the United States.  Bilateral arbitration is less costly and less risky than class arbitration and remains a viable option for corporations involved in consumer transactions. 

30th Anniversary of Absence of Malice

Even though Wilford Brimley’s portrayal of James J.Wells, U.S. Assistant Attorney General, in Absence of Maliceis not a courtroom scene, it remains one of the truly great legal scenes in movie history. Brimley’s character appears late in the movie and steals the show from superstars Paul Newman and Sally Field. This Sunday marks the thirtieth anniversary of the film’s release and prompts reflection on the ongoing morality play occurring within the story

Anyone who has seen Absence of Malicecould not forget Wells’ gravely southern drawl and down home demeanor when he says:

“Tell you what we’re gonna do. We’re gonna sit right here and talk about it. Now if you get tired of talking here, Mr. Marshal Elving Patrick there will hand you one of them subpoenas he’s got stuck down in his pocket and we’ll go downstairs and talk in front of the grand jury. Elliot? Jim? Fine. All right, Elving, hand whichever one of these fellas you like a subpoena and we’ll go on downstairs and talk in front of the grand jury.”

It is not just his suspenders that give Wells instant credibility, it is also his laser like focus and targeted approach to get to the bottom of a botched government investigation that has been compounded by press leaks. We are immediately drawn to Wells’ dedication to the truth; his character appeals to our natural morality and sense of fair play. This scene comes at the end of a twisting plot that takes protagonist, Michael Gallagher, played by Paul Newman, on a journey of manipulation by third parties who have destroyed his life.

Gallagher’s odyssey begins when over-zealous federal prosecutor Elliot Rosen leaks false information about Gallagher to Megan Carter, a young, naive and impetuous reporter played by Sally Field. Rosen hopes that the news story, albeit false, alleging that Gallagher is the target of an investigation into the murder of a local union official will lead him to a real suspect. Megan seems to have no compunction about printing a story that has not been verified. Megan, like many people, does not learn from her mistakes. She continues putting out unverified stories and heaping more and more misery upon Gallagher, who quickly learns that absent actual malice, there is no legal recourse.

Realizing that he must do something, Gallagher takes Mark Twain’s advice not to start a war with the newspaper, which he knows “buys ink by the barrel.” Instead, he decides to get even; and with his own clever deceptions, orchestrates the events that culminate in the meeting with Assistant Attorney General Wells.

Near the end of the movie, Megan admits that there are no rules to direct when she should or should not print a story. When pressed by Wells to reveal the source for one of her stories she finally defaults to her own sense of right and wrong. Ultimately, she refuses to reveal additional sources in order to avoid further harm coming to others. Conversely, there are a myriad of rules relating to products liability law. We have statutes, case law, rules of civil procedure, local Federal Rules, product safety rules and regulations, and, most importantly for lawyers, the Rules of Professional Conduct.

So what has this to do with products liability and what the heck is Abnormal Malice? The gist of Abnormal Malice was best expressed by Assistant Attorney General Wells when he said to the assembled cast of guilty parties:

“Now we’ll talk all day if you want to. But, come sundown, there’s gonna be two things true that ain’t true now. One is that the United States Department of Justice is goin’ to know what in the good Christ – e’scuse me, Angie – is goin’ on around here. And the other’s I’m gonna have somebody’s ass in muh briefcase.”

This is a seminal moment for any lawyer; it is the instant when you know that you are getting the truth, and when you know “somebody’s ass” is in your briefcase. In today’s litigious society, lawyers often have to guard against abusive tactics aimed at putting our clients in precarious positions for the purpose of leveraging unreasonable settlements. We think of underhanded tactics as Abnormal Malice: attempts to direct the court and fact finders away from the truth through discovery abuses, frivolous motions, sanctions, and biased press coverage.

The current economic and political environments have created a high level of distrust for Corporate America. Americans are very unsettled due to the Great Recession, TARP Bailouts, high unemployment and Congressional gridlock. Occupy Wall Street is just one example of the level of frustration and distrust. Nevertheless, it is incumbent upon us as attorneys to represent our clients to the best of our ability in the relentless pursuit of truth. We do this through zealous but fair advocacy to achieve a just result for our clients. Knowing the rules of the road is essential to the advocate seeking judicial decisions based upon the law and the facts on the record. Most cases do not go to trial, but fair and reasonable settlements are based on a good understanding of where the truth lies and the chips will fall.

Wells sums up the procedural essence of the search for truth: “Wonderful thing, a subpoena.”

In the last 30 years, the information age has all but killed newspapers. Instead, we are deluged 24/7 by information and misinformation. Even beyond the news channels and talk radio, we are just now seeing the potential for adverse impact on juries by social media outlets such as Google, Facebook and Twitter. As lawyers we must be ever vigilant against the omnipresent threat that Abnormal Malice may improperly influence the jury. At the end of the day, our juries are the factor that most distinguishes our civil justice system as the best in the world. In fact, our civil justice system is the best tool we have for seeking the truth, and it is all that protects us from the mayhem of no rule of law.

As lawyers we have a duty to make sure that our system of civil justice is fair and accessible to all. The citizens of our country and our potential jurors must have faith that our system works. They must believe that our courts are level playing fields and that all the players are abiding by the rules and being held accountable for any Abnormal Malice. Our courts must be seen as the place where things are made right in the eyes of the law. Assistant Attorney General Wells clarifies our expectations quite nicely:

“We can’t have people go around leaking stuff for their own reasons. It ain’t legal. And worse than that, by God, it ain’t right.”

Plaintiffs Are Given Another Bite

In Windsorv. Spinner Industry Co., Ltd., No. JKB-10-114 (U.S. District Court for D. Md., October 19, 2011), the issue was the extent to which a state could exercise personal jurisdiction over a nonresident manufacturer whose only connection with the state was its products were sold there by third-party distributors.  

Plaintiffs brought a product liability suit against sports company defendants for injuries in connection with a bicycle accident.  Defendant Joy Industrial Co. (“Joy”) moved to dismiss all claims against it for lack of personal jurisdiction.  Joy was a Taiwanese corporation that designed and manufactured a component part of the bicycle known as a “quick release skewer,” which Plaintiffs alleged contributed to the cause of the accident.  The parties agreed that Joy sold its products to distributors, manufacturers, and trading companies, who then marketed them in every state in the U.S., but that Joy had no direct contacts with the forum state.  

The Court noted that the factual record failed to sustain a prima facie case of personal jurisdiction over Joy, as Plaintiffs devoted nearly their entire brief to describing the conduct of third-party distributors and manufacturers, who had “no connection whatever” to the case, apparently believing that those parties’ contacts with the forum state could be attributed, vicariously, to Joy.  However, the Court gave the Plaintiffs another bite of the apple, issuing an order holding in abeyance Defendant’s Motion to Dismiss and scheduled an evidentiary hearing on the issue of Joy’s contacts with the forum.  The Court steered the Plaintiffs toward producing evidence of the chain of distribution that brought the allegedly defective skewer to the bicycle manufacturer, and then to the retailer, and “additional conduct” that would evince an intent to serve the Maryland bicycle market in particular, to sustain its claim of personal jurisdiction as to Joy.  

This case comes on the heels of J. McIntyre Machinery, Ltd. v. Nicastro, 131 S.Ct. 2780, 2793 (2011) (plurality opinion), where the Supreme Court failed to issue a clear standard vis-à-vis personal jurisdiction over foreign defendants.
Submitted by: Marisa A. Trasatti and Colleen K. O’Brien of Semmes, Bowen & Semmes