Title: Federal Tax Proposal Would Adversely Affect Many Law Firms
Section 212 of the U.S. House of Representative’s Ways and Means Committee’s (“Committee”) discussion draft “Tax Reform Act of 2013” will require all law firms and other personal service businesses with annual gross receipts over $10 million to use the accrual method of accounting (“accrual method”) rather than the traditional cash receipts and disbursement method of accounting (“cash method”). According to correspondence from the American Bar Association (“ABA”) President to the House Ways and Means Committee Chairman, this would result in negative unintended consequences and cause substantial cash flow hardships to, among others, many law firms and other personal service businesses by requiring them to pay taxes on income accrued, i.e. income that they have not yet received and may never receive, due to write-offs, etc. The ABA has urged the Committee to remove this provision from the overall draft legislation.
Under current law, businesses are permitted to use the simple, straightforward cash method of accounting—in which income is not recognized until cash or other payment is actually received and expenses are not taken into account until they are actually paid—if they are individuals or pass-through entities (e.g., professional corporations, partnerships or subchapter S corporations), or their average annual gross receipts for a three year period are $5 million or less. In addition, all personal service businesses—including those engaged in the fields of law, accounting, engineering, architecture, health, actuarial science, performing arts, or consulting—whether organized as sole proprietorships, partnerships, limited liability companies, or S corporations, are exempt from the revenue cap and can use the cash method of accounting irrespective of their annual revenues, unless they have inventory.
Section 212 of the draft legislation would dramatically change current law by raising the gross annual receipts cap to $10 million while eliminating the existing exemption for personal service businesses, other partnerships and S corporations, and farmers. Therefore, if this proposal is enacted into law, all law firms and other personal service businesses with annual gross receipts over $10 million would be required to use the accrual method of accounting, in which income is recognized when the right to receive the income accrues and expenses are recorded when they are fixed, determinable, and economically performed — both aspects of which present complications, given the often significant lag between billing and collections.
Although Section 212 would allow certain small business taxpayers with annual gross receipts in the $5 million to $10 million range to switch to — and thereby enjoy the benefits of—the cash method of accounting, the proposal would significantly complicate tax compliance for a far greater number of small business taxpayers, including many law firms and other personal service businesses, by forcing them to use the accrual method. Partnerships, S corporations, personal service corporations and other pass-through entities favor the cash method because it is simple and generally correlates with the manner in which these business owners operate their businesses—i.e, on a cash basis. The increased complexity associated with the accrual method will raise compliance costs for many law firms and other personal service businesses—as separate sets of records will be needed to reflect the accrual accounting—while greatly increasing the risk of noncompliance with the Code.
In addition to creating unnecessary complexity and compliance costs, Section 212 would lead to economic distortions that would adversely affect all personal service businesses that currently use the cash method of accounting and those who retain them, including many law firms and their clients, in several ways. The proposal would place a new financial burden on millions of personal service businesses throughout the country—including many law firms—by requiring them to pay tax on income not yet received and which may never be received.
The existing cash method of accounting produces a sound and fair result because it properly recognizes that the cash a business actually receives in return for the services it provides—not the business’ accounts receivable—is the proper reflection of its true income and its ability to pay taxes on that income. While accounts receivable clearly are important to determining the overall financial condition of a business and assessing its future prospects, they do not accurately reflect its current disposable income or its present cash flow ability to pay taxes on that income.
The mandatory accrual accounting provisions in Section 212 of the draft bill would create unnecessary complexity in the tax law, increased compliance costs, and impose significant and unnecessary new financial burdens and hardships for many law firms and other personal service businesses throughout the country by requiring them to pay taxes on income not yet received, and that may never be received.
To avoid these harmful unintended consequences, the ABA has urged the Committee to remove Section 212 from the draft bill or from any tax reform bill that may be approved by the Committee. The ABA has recently asked state and local bar associations to join in the opposition of the proposal. DRI, the Voice of the Defense Bar, also plans to oppose this legislation. Law firms should monitor this legislation closely.
Submitted By: Marisa A. Trasatti and Colleen K. O’Brien, Semmes, Bowen & Semmes (Baltimore, Maryland)
United States Court of Appeals for Sixth Circuit dismisses claims against generic drug manufacturers, and enters summary judgment in favor of brand name counterparts
In Strayhorn v. Wyeth Pharmaceuticals, Inc., Nos. 12-6195, et al. (6th Cir. Dec. 2, 2013), the United States Court of Appeals for the Sixth Circuit held: (1) that plaintiffs’ claims against generic manufacturers of the drug Reglan were preempted under the Federal Food, Drug, and Cosmetic Act (FDCA), 21 U.S.C. §§ 301–399f; and (2) that summary judgment in favor of the brand name Reglan manufacturers was appropriate because plaintiffs ingested only the generic form of the drug. In reaching its decision, the Court affirmed the decision of the United States District Court for the Western District of Tennessee. Importantly, the Court followed the Supreme Court’s decision in PLIVA, Inc. v. Mensing, - U.S. - , 131 S.Ct. 2567 (2011), and found that state law failure to warn claims based on generic drugs were preempted by the federal requirements that generic drug labels conform to the labels on their brand name counterparts. Judge Jane B. Stranch concurred in part, and dissented in part.
Strayhornwas the consolidated product of seven (7) different cases arising under Tennessee state law, all of which had the same factual background. Several people (“Plaintiffs”) alleged injuries arising from their long-term exposure to metoclopramide, the brand name of which is Reglan (the “Drug”). Plaintiffs alleged that both generic and brand name manufacturers (collectively, “Defendants”) of the Drug knew that the warnings on under the law. Plaintiffs maintained that Defendants failed to use reasonable care to communicate information that would constitute adequate warnings regarding the Drug’s long-term risks. The District Court held that the Supreme Court’s decision in Mensing required Plaintiffs to abandon their failure to warn claims against the generic manufacturers. Additionally, the District Court held that the Tennessee Products Liability Act (TPLA) allowed recover solely against the manufacturer or the seller of the product actually causing the harm. Because Plaintiffs ingested only the brand name form of the Drug, the District Court entered summary judgment in favor of the brand name manufacturers.
Writing the opinion of the United States Court of Appeals for the Sixth Circuit, Judge Thomas Anderson affirmed the District Court’s decision. Following the Supreme Court’s ruling in Mensing, the Court of Appeals held that implied warranty claims premised on a failure to warn theory were preempted by the FDCA. Under federal law, the generic manufacturers had to mirror their warnings regarding the long-term use of the Drug after those warnings distributed by the brand name manufacturers. Therefore, Plaintiffs could not maintain a claim that the warnings distributed by the generic manufacturers were insufficient under the TPLA, as any alleged necessity for a more stringent warning would be preempted by federal law. While Plaintiffs’ TPLA claims against the brand name manufacturers were not preempted, the brand name manufacturers were nevertheless entitled to summary judgment because Plaintiffs alleged that they ingested the generic form of the Drug only. Therefore, the Court held that the lower court properly dismissed Plaintiffs claims against the generic manufacturers, and entered summary judgment in favor of the brand name manufacturers. The Court did acknowledge, however, that “[a]lthough we feel compelled to affirm the judgment below in light of the controlling case law, we cannot help but note the basic unfairness of this result.” Strayhorn, slip op. at 38–39. Writing separately from the Court, Judge Stranch concurred with the majority’s decision that Plaintiffs could not bring design defect or failure to warn claims against generic manufacturers, and acknowledged that Mensing barred any such state law claim. Judge Stranch dissented, however, as to the brand name manufacturers, finding that Tennessee state law could impose liability upon brand name manufacturers for failing to produce an adequate drug label, which necessarily had to be mirrored by their generic counterparts.
Submitted by: Marisa A. Trasatti & Wayne C. Heavener, Semmes, Bowen & Semmes (Baltimore, MD)
Fetus Allegedly Injured In Utero Is Patient For Purposes of Application of Virginia’s Statutory Cap on Damages in Med Mal Cases
In Simpson v. Roberts, No. 121984 (Supreme Court of Virginia, Jan. 10, 2014), available at: http://www.courts.state.va.us/opinions/opnscvwp/1121984.pdf, the Supreme Court of Virginia recently examined whether a fetus was a “patient” for purposes of application of Virginia’s statutory cap on damages. The Court concluded that the fetus became a patient when she was born and so the cap applied.
In Simpson, a minor brought a medical malpractice suit through her father and next friend for injuries sustained during a doctor's attempt to extract amniotic fluid from her mother by an amniocentesis procedure. The appellate court held that the circuit court did not err in reducing a $7 million jury verdict to the applicable amount of the statutory cap on damages imposed by the Virginia Medical Malpractice Act, Code § 8.01-581.1, et seq. It was correctly determined that the unborn child was a patient of the defendant doctor and that her claim relating to injuries sustained when she was a fetus in utero was subject to the Act's statutory cap on recoverable damages.
The Plaintiff’s mother was referred to the defendant doctor during the third trimester of her pregnancy because the mother had developed gestational diabetes. The defendant doctor performed an amniocentesis to determine whether the Plaintiff’s lungs were mature enough to induce early labor. When the defendant doctor performed the procedure, bleeding occurred. Complications arose from the unsuccessful amniocentesis. Another physician from that practice performed a caesarean section later that day to deliver Plaintiff. Plaintiff was born with damaged kidneys and cerebral palsy. The jury returned a $7 million verdict in Plaintiff’s favor against both physicians and their practice.
The defendants filed a motion to reduce the jury verdict pursuant to Virginia's statutory cap under the Act. Plaintiff opposed the motion as to the amniocentesis doctor and his employer. Plaintiff argued that when the amniocentesis was performed, and when the standard of care was breached, Plaintiff was not a “natural person” because she had not yet been born, and therefore was not a “patient” as defined by the Act. Plaintiff argued that a common law cause of action, rather than a statutory cause of action, against the amniocentesis doctor was proper, and that the statutory cap should not apply. The trial court disagreed. It concluded that the cap applied and reduced the award to $1.4 million under the cap. The trial court held that Plaintiff was the amniocentesis doctor’s patient because at the time she was born alive, she became a “patient” under the Act.
The appellate court agreed. As to whether Plaintiff was a “patient,” the evidence presented at trial was that the amniocentesis was performed, at least in part, for the child’s benefit to determine whether her lungs were developed enough that she could be safely delivered. When the doctor performed this procedure, he was providing health care to Plaintiff and her mother. If Plaintiff had never been born alive, her mother would have been able to recover for the physical and emotional injuries associated with a stillbirth. However, once Plaintiff was born alive, she became a natural person under the Act. Upon birth, she became a patient of the amniocentesis doctor under the Act and had her own claim against the doctor. Under the Act, her claim for negligence included health care provided in utero consistent with the statutory definition. In addition, the definition of “health care” under the Act was sufficient to encompass the medical services that the doctor provided to Plaintiff while she was in utero.
In a concurring opinion, Justice McClanahan agreed that the Act applied to the Plaintiff’s claim against the amniocentesis doctor, but would have held that the Plaintiff became a “patient” as defined by the Act when the doctor performed the alleged negligent amniocentesis—not at the time of birth.
Submitted By: Marisa A. Trasatti and Colleen K. O’Brien, Semmes, Bowen & Semmes (Baltimore, Maryland)
Dissolved Delaware Corporation amenable to suit at any time, and requires appointment of receiver for all claims made three (3) years after dissolution.
In a case of first impression, the Delaware Supreme Court held that: (1) contingent contractual rights were property of a dissolved corporation, so long as those rights were capable of vesting; (2) that a dissolved corporation’s contingent rights under insurance policies were capable of vesting; and (3) the appointment of a receiver was required in order for the corporation to participate in litigation.
In the matter of In re Krafft-Murphy Co., Inc. --- A.3d --- (2013)(not yet published), the Delaware Supreme Court reviewed the denial of a petition to appoint a receiver for the purposes of allowing the petitioners to seek recovery against the dissolved corporation’s insurers. The petitioners were plaintiffs in asbestos cases filed in Maryland, in which Krafft-Murphy Co. (“KM”) was a defendant. KM was formed in 1952 and formerly dissolved in 1999. During their operation, KM supplied and installed a Spray Limpet Asbestos, allegedly creating a risk of asbestos exposure. In 2010, KM began to file motions to dismiss in the asbestos cases, claiming that it had been dissolved for more than three (3) years and therefore, was no longer amenable to suit as a matter of Delaware law. In response, the petitioners filed a petition to appoint a receiver for KM in the Delaware Court of Chancery. KM opposed, arguing that for claims filed within ten (10) years of dissolution, the corporation would continue to defend the claims. For claims filed over ten (10) years, after the dissolution, however, there were no corporate assets, the corporation was no longer amenable to suit and a receiver was not appropriate. The trial court accepted KM’s argument and granted its motion for summary judgment. The petitioners appealed.
The Delaware Supreme Court first observed that Delaware law extended the corporate life for three (3) years after dissolution, but a receiver could be appointed “at any time” for specific purposes. As such, as long as there was property held by the dissolved corporation, a receiver could be appointed. The Court then analyzed whether contingent property rights could be considered property for purposes of appointing a receiver. Relying on prior case law, the court held that contingent insurance contract rights could vest and were property, much like contingent real property rights. The Court then observed that KM and the trial court had misread the Delaware statutes on post-dissolution actions, noting that the statutes did not act to bar a claim after three (3) or ten (10) years, except in limited circumstances not at issue. A claim could be brought at any time if the corporation still had property. Finally, the Court held that the trial court should have appointed a receiver for all claims that were filed more than three (3) years after dissolution, as the corporation only existed for three (3) years after dissolution, and all other property claims required the appointment of a receiver. The Supreme Court remanded the matter to the Court of Chancery to conduct further proceedings in accordance with its opinion.
Submitted by: Marisa A. Trasatti, Gregory S. Emrick, and Semmes, Bowen & Semmes, Baltimore, Maryland.
Damages: $27,280; Fees Aborted $697,972; Go Figure
Employers’ counsel regularly warn clients that seemingly “small” cases can still pose enormous risk because plaintiff’s who prevail on statutory claims are entitled to recover “reasonable” attorney fees. Now where is that better illustrated than in Muniz v. United Personal Service, Inc., (2013) U.S. APP. LEXIS 24189 handed down by the Ninth Circuit Court of Appeals on December 5, 2013.
Kim Muniz sued UPS in California State Superior Court for claims arising under the state’s Fair Employment and Housing Act. UPS removed the case to federal court on the basis of diversity of citizenship. Muniz claimed that her employer had wrongfully demoted her in violation of FEHA on the basis of her age and gender and for retaliatory purposes.
Ultimately the case was tried on the basis of gender discrimination only, and the jury found that the plaintiff’s gender had motivated UPS to demote her, that it was a substantial factor in causing her harm, and that UPS would not have demoted her for a nondiscriminatory reason. The jury awarded her a total of $27,280 which was the sum of $9,990 for lost earnings, $7,300 for past medical expenses, and $9,990 for her past non-economic loss. The opinion reflects that at the close of trial, she had asked the jury for damages totaling over $700,000.
Over UPS’s objection, the district court determined the plaintiff to be prevailing party and thereupon considered her requested fees under the Lodestar method. The plaintiff also sought a 1.5 Lodestar multiplier. The plaintiff asked for the rather astonishing amount of $1,945,726.50.
In considering the amount sought, the district court largely agreed with UPS’s “vigorous” objections to the hours claimed and arrived at a Lodestar award of $773,514.20. It then reduced that amount to reflect the plaintiff’s limited success (the amount of damages awarded) and the disproportionate fee request resulting in an adjusted fee award of $696,162.78.
UPS appealed the fee award only, and not the jury award. Its primary argument related “to the court’s treatment of Muniz’s limited success and its inflated fee request, which UPS contends required a substantially greater downward adjustment.”
The Ninth Circuit pointed out that under both California and federal law, a fee award must be adjusted to reflect limited success. That determination has two components: First, that the court must deduct from the Lodestar hours spent exclusively on unrelated, unsuccessful claims; and second that the court must evaluate the remaining hours to determine if they were reasonably necessary to achieve the result obtained.
With respect to the first component, the court cited Hensley v. Eckerhart, (1983) 461 U.S. 424, at 440 for the proposition that before hours may be deducted specifically for unsuccessful claims, the claims have to be suitable for entirely separate lawsuits on the basis of both fact and law, and that to deduct time, the court must find that the time deducted did not aid in proving the successful claims. UPS however did not attempt to estimate the actual number of hours that counsel had spent on those unsuccessful claims, and simply assumed that the lawyers had spent an equal amount of time on each claim, whether successful or unsuccessful. The District Court properly rejected that contention. While California law is more open to percentage adjustments of the Lodestar up and down that is federal law, the Ninth Circuit could not find that the District Court was clearly wrong in failing to deduct further for the prosecution of the unsuccessful claims, “particularly where it does not appear that either party could segregate hours and exclusively on the unsuccessful claims.”
The Appellate Court then turned to the second component of the limited success inquiry as to whether the hours allowed were reasonably necessary to achieve the result reached. It noted that the plaintiff had prevailed in establishing that UPS had made an adverse employment decision by demoting plaintiff on the basis of unlawful discrimination. It is not entirely clear how the Ninth Circuit came to the conclusion that the District Court had not abused its discretion in awarding the plaintiff less in fees that it awarded.
What can employers take away from this case? The result of this case underscores the concept that plaintiff fees must be a key component of evaluating the case’s exposure. Secondarily, attacks on fee awards at the trial court level must be specific inasmuch as wildly disproportionate fee claims will not be disallowed on the basis of disproportionality alone.
Reasonably hourly rate times reasonable hours billed.
United States Court of Appeals for Eighth Circuit affirms jury verdict against defendant pharmaceutical manufacturer
Submitted by: Marisa A. Trasatti & Wayne C. Heavener, Semmes, Bowen & Semmes (Baltimore, MD)
In Winter v. Novartis Pharmaceuticals Corp., Nos. 12-3121,12-3409, 2014 WL 67756, ___ F.3d ___ (8th Cir. Jan. 9, 2013), the United States Court of Appeals for the Eighth Circuit held that the trial court appropriately denied defendant-manufacturer’s motion for judgment as a matter of law on the issue of causation. In particular, the Court held that the issue of whether plaintiff’s osteonecrosis of the jaw was a natural and probable consequence of the manufacturer’s alleged failure to provide adequate warnings was for the jury. Writing for the Court, Judge William Duane Benton held that judgment, as a matter of law, was inappropriate on the issue of causation in a failure to warn case, even though the prescribing physician admitted that he did not read the drug insert. The Court reversed, however, the trial court’s award to Plaintiff for costs of eighteen (18) depositions taken in multi-district litigation against the defendant.
Novartis Pharmaceutical Corporation (“Defendant”) manufactures the drugs Aredia and Zomeate. In 2003, Ruth Baldwin (“Plaintiff”) was prescribed Aredia and Zomeate following a procedure in which she had some two teeth extracted. She eventually developed osteonecrosis of the jaw (“ONJ”). When Plaintiff was prescribed the drugs in 2003, Novartis did not include ONJ on its package inserts. Several months after Plaintiff was prescribed the drugs, Novartis added ONJ in the “Post-Marketing Experiences” section of its inserts, but not in the “Warnings” section. Plaintiff eventually filed suit in the United States District Court for the Western District of Missouri, alleging that Novartis negligently failed to provide adequate warnings for Aredia and Zomeate. At trial, Defendant moved for judgment as a matter of law, which was denied. The jury awarded Plaintiff $225,000.00 in compensatory damages. Plaintiff was also awarded full costs for litigation-wide depositions used in multidistrict litigation (“MDL”). Novartis appealed the District Court’s denial of its motion, and argued that the District Court: (1) improperly found that inadequate warnings proximately caused Plaintiff’s injuries, and (2) abused its discretion in awarding Plaintiff costs for depositions conducted in the MDL.
The Court of Appeals affirmed the trial court’s denial of Defendant’s motion, but held that the trial abused its discretion in awarding the plaintiff full costs for depositions used litigation-wide. On the issue of causation, the Court held that a jury could reasonably have found that Plaintiff’s injury was the natural and probable consequence of Defendant’s behavior. Testimony at trial demonstrated that Defendant’s drug representatives did not inform Plaintiff’s prescribing physician of the risk of ONJ until after Plaintiff had begun taking Aredia and Zomeate. The Court rejected Defendant’s argument that the prescribing physician’s admission that he failed to read the package insert before prescribing the drugs to Plaintiff severed any causal link in this case. The Court relied on evidence adduced at trial that there were other ways that the prescribing physician could have learned about the risk.
The Court vacated and reversed the trial court’s award of costs. The Court noted that this case was one of over 650 in multidistrict litigation for consolidated pre-trial proceedings and discovery. The Court rejected the District Court’s reasoning that Plaintiff was entitled to costs for eighteen (18) depositions used throughout the consolidated MDL proceedings simply because she was the first one to request them. Rather, the Court held that where litigation costs are incurred in connection with more than one proceeding, the district court should allocate the costs. Hence, the Court held that the District Court abused its discretion in awarding Plaintiff full costs for litigation-wide depositions.
In D.C. Med-Mal Case, Court Holds that Plaintiff’s Expert Was Not Required to Rely on Data that Would Provide the Highest Degree of Certainty, and that Trial Court Abused Discretion in Excluding Expert’s Causation Testimony
Perkins v. Hansen, No. 11-CV-1540 (District of Columbia Court of Appeals, November 7, 2013), involved a medical malpractice claim advanced by the Plaintiff, whose wife had died at Georgetown University Hospital from severe liver failure. Plaintiff brought a medical malpractice action against his wife’s treating physicians, alleging failure to timely diagnose his wife’s severe liver failure, which caused his wife not to receive a life-saving liver transplant. Plaintiff claimed that had her physicians recognized her liver failure sooner, she would have been admitted to a facility that performed liver transplants and would have survived.
At trial, Plaintiff offered the Dr. Esteban Mezey to testify on causation, explaining that it was more likely than not that if Plaintiff’s wife had been transferred to a hospital that performed transplants, she would have received a transplant and survived. The Defendants objected to the testimony by Plaintiff’s expert because he did not review the relevant data on the mean and median wait times for organ transplants in the relevant area; they asserted that the expert did not have an adequate foundation for his opinion. The trial judge sustained the objection and excluded Plaintiff’s expert’s testimony on causation. Without that testimony, Plaintiff conceded that he could not establish causation, and the trial judge granted Defendant’s motion for a directed verdict. On appeal, Plaintiff alleged that the lower court abused its discretion in excluding his expert’s testimony and also by granting the directed verdict. The District of Columbia Court of Appeals agreed and reversed and remanded the case for a new trial.
The Court of Appeals recognized that there was no doubt that Plaintiff’s expert had the necessary skill, knowledge, and experience to provide a reliable foundation for his testimony based on his credentials, such that he could opine about the likelihood that Plaintiff’s wife would have received a liver transplant and survived if she had been admitted to a transplant facility sooner. He had working knowledge of the likelihood of livers being available to patients coming to transplant hospitals. Still, Defendants argued that in a setting where actual data on the issue in question existed, the witness can and must rely on that data to support his opinions—otherwise, the expert’s experience constituted nothing more than conjecture. Where the expert failed to know and access the relevant data, there was a hole in the foundation of the expert’s opinion.
The Court reiterated that a doctor’s experience alone could qualify him to offer expert testimony and made clear that experts are not required to rely on data that will provide the highest degree of certainty or probability in establishing a prima facie case of medical malpractice. The available data would have been fodder for cross-examination, but was a red herring in assessing the admissibility of the expert’s testimony. Therefore, the Court of Appeals reversed the trial court’s judgment and remanded the medical malpractice case for further proceedings
Submitted by: Marisa A. Trasatti & Colleen K. O’Brien, Semmes, Bowen & Semmes (Baltimore, MD)
This year, Nevada enacted a statute, NRS 597.995 invalidating arbitration agreements that do not include “specific authorization” showing the party has affirmatively agreed to arbitrate. The statute’s legislative history indicates it was motivated by frustration with mandatory arbitration provisions in “click to agree” software licenses, mobile telephone contracts and similar consumer agreements.
But, there are unintended consequences. A great many types of contracts contain provisions treated by courts as arbitration agreements even if they are not the typical consumer-business agreements. For example, in most states (but not Nevada), fire insurance policies are required to include appraisal clauses under which disputes regarding the amount of a covered loss are to be determined by binding appraisal. Courts in many jurisdictions, including Nevada, treat policy appraisals as a form of arbitration. See, Silverman v. Fireman’s Fund American Ins. Cos., 604 P.2d 805 (Nev. 1980).
There is nothing in the legislative history of the Nevada statute to indicate the legislature even thought about its application to first party appraisal clauses. The Nevada Division of Insurance is taking the position the statute applies to insurance policies. Indeed, the statute is not restricted to consumer agreements; the only limitation is the use of “person,” which may not necessarily be restricted to natural persons, namely humans.
Invalidating appraisal clauses where there is no “specific authorization” by the policyholder is almost certainly an unintended consequence of this statute. If Nevada had a statutory fire insurance policy, NRS 597.995 would not apply to those statutorily mandated terms.
Unfortunately, this type of legislative action without full consideration of the ramifications of a pending bill is not unusual and it’s not limited to any particular state. In this instance, the Nevada legislature does not convene again until 2015, so there will not be a legislative “fix” for this issue.
In Miller v. Ortho-McNeil Pharmaceutical, Inc., No. 3:11oe40008 (N.D. Ohio November 5, 2013), the United States District Court for the Northern District of Ohio, Western Division granted defendant pharmaceutical manufacturers’ combined motion for summary judgment, motion for judgment on the pleadings, and motion to dismiss. Writing for the Court, Judge David A. Katz found that the plaintiff’s claims were barred by the learned intermediary doctrine and the applicable statute of limitations. The plaintiff’s claim also set forth facts insufficient to state a plausible claim for relief under Fed. R. Civ. P. 12 (c). Interpreting Mississippi law, the Court, therefore, found multiple reasons for granting the defendants’ combined motions.
Sarah Miller (“Plaintiff”) received the Ortho Evra contraceptive patch from two (2) different providers over the span of two (2) years. The first provider, Certified Nurse Practitioner Donna Cobb, knew the potential side-effects associated with the Ortho Evra patch, including the elevated risk of blood clots. During Plaintiff’s examination in 2006, Ms. Cobb discussed various possible complications with Plaintiff that could result from Ortho Evra, including blood clots. Ultimately, Ms. Cobb believed the benefits of the contraceptive patch outweighed its risks, and she prescribed Ortho Evra to Plaintiff. Plaintiff saw the second provider, Certified Nurse Practitioner Traci Speights, in 2007 and 2008. Ms. Speights was aware that Ortho Evra could increase a patient’s risk for thrombotic disease and pulmonary embolism. Ms. Speights had learned of the patch’s potential side-effects from the FDA-approved package inserts accompanying Ortho Evra, a Dear Healthcare Professional Letter (DHCP), and pharmaceutical representatives. Ms. Speights reviewed the warnings with Plaintiff, and encouraged Plaintiff to re-read the labeling and handouts included with the packet when prescribing her the patch.
In April 2008, Plaintiff suffered a pulmonary embolism, and filed suit against the manufacturers and distributors of Ortho Evra (“Defendants”) in August 2011. Plaintiff’s case was one of many, which the Judicial Panel on Multidistrict Litigation assigned to the United States District Court for the North District of Ohio. Defendants filed a combined Motion to Dismiss, Motion for Judgment, and Motion to Dismiss.
The Court granted Defendants’ motions, finding that Plaintiff’s claims were barred for several reasons. First, the Court held that the FDA-approved package inserts and DHCP letter sufficiently satisfied the Learned Intermediary Doctrine, and adequately discharged Defendants’ duty to warn. In reaching its conclusion, the Court explained that the Learned Intermediary Doctrine recognizes that a manufacturer has a duty to warn physicians, not laymen. The Court rejected Plaintiff’s argument that the warnings provided were inadequate. The Court noted that, while the adequacy of a warning is typically an issue for the trier of fact, a warning may be adequate as a matter of law where the adverse effect suffered by the patient was one that the manufacturer specifically warned against. In this case, Plaintiff suffered pulmonary embolism, and both professionals were aware of these warnings, and even counseled Plaintiff about those warnings. Furthermore, Plaintiff failed to show any disputed issue of fact regarding causation because she did not show that a different warning would have changed the decision to prescribe Ortho Evra.
The Court also found that Plaintiff’s Complaint was insufficient to state a claim under Fed. R. Civ. P. 12 (c). Rather than offer facts that supported a plausible claim for relief, Plaintiff merely provided conclusory allegations. See Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). Plaintiff also failed to bring her claim within Mississippi’s three (3) year statute of limitations. Plaintiff sustained her injury in April 2008, and filed suit in August 2011. The Court rejected Plaintiff’s argument that Mississippi recognizes the Discovery Rule, and ultimately held that her claim was barred.
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Submitted by: Marisa A. Trasatti & Wayne C. Heavener, Semmes, Bowen & Semmes (Baltimore, MD)
Maryland Appellate Court Affirms Defendants’ Motion for Summary Judgment Properly Granted Where Plaintiff Failed to Produce Sufficient Circumstantial Evidence of Lead at Subject Property
In West v. Rochkind, 212 Md. App. 164 (2013), the Circuit Court for Baltimore City granted summary judgment in favor of Defendants, NBS, Inc., and Stanley Rochkind (hereinafter, collectively “Defendants”), who owned and operated a residential property, 1814 Lorman Street, from May 4, 1990, through June of 2001. The Plaintiff alleged that he sustained injury from having ingested lead paint while living with his grandparents at 1814 Lorman Street from his birth in 1989 through February 10, 1992. The case was necessarily based on circumstantial evidence because no lead paint tests were ever conducted on 1814 Lorman Street and the property had since been razed. Discovery revealed that Plaintiff either resided or spent substantial amounts of time at a variety of different residences during the first six (6) years of his life – 1814 Lorman Street, plus an additional three (3) other properties. The trial court ruled that Plaintiff had not made out a prima facie case of negligence against the Defendants. The trial court reasoned that, given Plaintiff’s uncertain residential history and the lack of any direct evidence that 1814 Lorman Street ever contained lead paint, Plaintiff could not point to 1814 Lorman Street as the source of his lead poisoning. The Court of Special Appeals agreed and affirmed the judgment of the circuit court.
In the appeal, the Court of Special Appeals looked to its prior decision in Dow v. L & R Properties, Inc., 144 Md. App. 67 (2002), on the issue of whether the Plaintiff had produced sufficient circumstantial evidence to create a genuine dispute of material fact as to whether the subject property contained lead, and thus, to defeat a Defendant’s Motion for Summary Judgment, even without direct proof of lead in the form of tests conducted at the property. The Court emphasized that under Dow, a lead paint plaintiff may establish a prima facie case of negligence based solely on circumstantial evidence. In this case, however, where there was no direct evidence that 1814 Lorman Street even contained lead paint, Plaintiff may only rely on that critical fact, as a necessary part of his circumstantial evidence, if he can show by the process of elimination that 1814 Lorman Street was the only possible cause for the critical effect of lead poisoning. The existence of lead paint at 1814 Lorman Street can only be inferred from the Plaintiff’s condition if lead paint at Lorman Street is shown to have been the only possible explanation for the Plaintiff’s condition. Put another way, even in the absence of direct proof, the presence of lead paint at a particular site can be inferred by the process of elimination, but only if there is: 1) the effect of lead poisoning in the plaintiff and 2) the fact that the site in question was the exclusive possible source of the plaintiff's lead paint exposure. Such was not the case here.
In this case, at best, the Plaintiff could show that he may have been exposed to lead at any or all of the three (3) or four (4) residences where he spent substantial time as a child. By definition, that does not trigger the process of elimination, and he thereby failed to establish the threshold premise that lead was even present in the paint at Lorman Street. Under those circumstances, whether he spent a significant amount of time or only a negligible amount of time or no time at all at Lorman Street was immaterial, because he failed to establish the necessary premise on which the ultimate conclusion of probable causation logically depended. Therefore, the trial court properly granted Defendant’s Motion for Summary Judgment.
Submitted by: Marisa A. Trasatti and Colleen K. O’Brien, Semmes, Bowen & Semmes, Baltimore, Maryland