The Supreme Court and Product Liability

The product liability case was Smith v. Bayer Corp., 131 S. Ct. 2368 (2011), which arose from the Baycol litigation, and which involved the parallel class actions pending in federal and state court. The question was whether a federal court, which had already denied certification of a class, could enjoin a motion to certify the identical class by a different plaintiff in a state court proceeding. The Supreme Court held that, in almost all circumstances, the federal court will be prohibited from doing so under the Anti-Injunction Action, 28 USC ' 2283. The Anti-Injunction Act prohibits federal courts from enjoining state court proceedings with three exceptions ' one of which, argued to be applicable by Bayer, permits injunctions of state court proceedings where necessary “to protect or effectuate [the federal court's] judgments,” thus precluding the relitigation in state court of issues decided in federal court. The Supreme Court held that the relitigation exception did not apply for two reasons: first, the issues were not identical in the federal and state class actions because the state court applied a different (more liberal) class certification standard than the federal court; and second, because the parties were not identical in the two actions because there was a different named plaintiff in the state court class action. Although it resolved an issue on which there had been a circuit conflict, the impact of the Smith case on mass tort litigation may be minimized by the subsequent passage of the Class Action Fairness Act (CAFA), 28 USC ” 1332(d), 1453. That Act permits removal of most product liability class actions to federal court, based on minimal (rather than complete) diversity of citizenship, thereby making the fact pattern of parallel federal and state class actions that led to the circuit conflict less likely. Combined with the Multi-District Litigation statute, which permits pretrial consolidation in a single federal court of multiple class actions filed in different jurisdictions, it should now be possible in most instances to obtain a single, consistent class action ruling in product liability class actions.

Class Actions: The Wal-Mart Case

The more significant class action ruling occurred in a non-product liability case: Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011). The Wal-Mart case involved employment discrimination, alleging that Wal-Mart systematically discriminated against women at 3,400 separate stores employing more than one million people nationwide. A mandatory class was sought under Fed. R. Civ. P. 23(b)(2), because injunctive relief was requested in addition to back pay; the plaintiffs also requested an opt-out class under Fed. R. Civ. P. 23(b)(3).

Although Wal-Mart is a discrimination case, its discussion of class action standards applies equally to all class actions pending in federal court, including product liability cases. Simply put, the Supreme Court has made it more difficult to certify any type of class action, including medical monitoring and consumer/fraud refund class actions that typically accompany mass tort product liability litigation. Among the holdings of the Court that will be frequently cited:

• Class actions are “an exception to the usual rule that litigation is conducted by and on behalf of the individual named parties only.” Id. at 2550.
• “Rule 23 does not set forth a mere pleading standard. A party seeking class certification must affirmatively demonstrate his compliance with the Rule ' that he must be prepared to prove that there are in fact sufficiently numerous parties, common questions of law or fact, etc.” Id. at 2551.
• A federal court must conduct a “rigorous analysis” of the propriety of class certification, and that rigorous analysis will frequently “overlap with the merits of the plaintiff's underlying claim” ' indeed, the “class determination generally involves considerations that are enmeshed in the factual and legal issues comprising the plaintiff's underlying claim.” Id.
• “What matters to class certification ' is not the raising of common questions ' even in droves ' but, rather the capacity of the classwide proceeding to generate common answers ' .” Id.

These statements by the Court undermine arguments frequently raised by plaintiffs seeking class certification that class determinations should be made solely based on their allegations, and that any consideration of the underlying facts or of the merits is impermissible.

The Supreme Court in Wal-Mart also confirms that Rule 23(b)(2) class certification is not available where there also are individualized claims for monetary relief ' in the Wal-Mart case, claims for back pay. Id. at 2257-59. This will make certification of medical monitoring classes more difficult ' class plaintiffs frequently attempted to evade the Rule 23(b)(3) requirements of typicality, adequacy of representation, predominance and superiority by arguing that medical monitoring was a form of injunctive relief that could be certified under Rule 23(b)(2) rather than under Rule 23(b)(3).

Finally, in what is perhaps the most far-reaching ruling, the Supreme Court held that statistical proof could not substituted for individualized proof of liability, causation and damages in order to render a class action feasible. In particular, the Court held that the defendant could not be deprived of its right to rebut each individual's claim of discrimination, through proof that the particular individual was not promoted for lawful reasons, by substituting a statistical cross sampling of claims and applying that average award to all class members. Id. at 2561. This is a technique frequently attempted in consumer fraud/refund class actions: The claim being that the defective product, even if it did not fail in a particular plaintiff's case, is “less valuable” to the purchaser because of alleged misstatements about the safety or utility of the product. The Supreme Court rejected this “Trial by Formula” as inconsistent with the Federal Rules' Enabling Act, which prohibits procedural devices such as class actions from abridging, enlarging or modifying any substantive right. Id. If, under the applicable law, the defendant is entitled to individualized rebuttal to each plaintiff's claim ' by proving, for example, lack of reliance upon an alleged misrepresentation ' then the class-action device cannot be used to deprive the defendant of that right.

Pharmaceutical Marketing Practices

Those who try pharmaceutical and medical device product liability cases know that frequently the most contentious part of any trial is the plaintiff's attack on the manufacturer's marketing efforts. Particularly harsh criticism is often leveled at the practice of “detailing,” whereby representatives of pharmaceutical or medical device companies visit prescribing physicians to provide information about the manufacturer's product. Frequently, not only juries, but also judges, react negatively to the very concept of a medical product manufacturer trying to influence a prescribing physician's decisions.

The Supreme Court's decision in Sorrell v. IMS Health Inc., 131 S. Ct. 2653 (2011), may influence this debate about whether the very concept of “detailing” is offensive. Sorrell was not a product liability case but a case arising under the First Amendment's guarantee of free speech. The Vermont Legislature, reflecting the perception of many judges and juries that detailing results in misleading presentations to doctors, enacted a statute that prohibited pharmacies from disclosing physician's prescribing practices for marketing purposes, while permitting pharmacies to disclose that information to academic institutions and to the State. The Supreme Court held that the statute violated the First Amendment because: 1) pharmaceutical manufacturers had a free speech right to communicate truthful information concerning their products; and 2) that being so, the State could not condition the disclosure of prescribing information necessary for the communication to be effective depending on the identity of the recipient and the likely content of their message to physicians.

It is beyond the scope of this article to address the nuances of the constitutional ruling. But the decision could affect product liability litigation. The very fact that the Supreme Court characterized detailing as a protected First Amendment activity is helpful to pharmaceutical and medical device defendants. Indeed, those defendants may now request jury instructions that the defendants have the right under the U.S. Constitution to discuss their products with prescribing physicians. This alone could go a long way to counteract the attempt to demonize such activity.

Moreover, the Supreme Court described detailing in extremely objective non-inflammatory terms. Detailing “involves a scheduled visit to a doctor's office to persuade the doctor to prescribe a particular pharmaceutical”;

“[d]etailers bring drug samples as well as medical studies that explain the 'details' and potential advantages of various prescription drugs”; “[i]nterested physicians listen, ask questions, and receive follow-up data.” Id. at 2659. In response to charges that detailing is sinister, the Court says simply: “If pharmaceutical marketing affects treatment decisions, it does so because doctors find it persuasive.” Id. at 2670. This language can be used in briefs in order to educate judges that detailing is not to be automatically condemned, and perhaps some of the language can be incorporated into jury charges to properly instruct the jury that only misleading statements ' and not the marketing efforts themselves ' can be a basis for liability.

Arbitration

In another non-product liability case, AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011), the Supreme Court struck down a California law that refused to enforce, on public policy grounds, an arbitration agreement that required class members to arbitrate individually and prohibited class arbitration. According to the Supreme Court, California decisions, which voided arbitration agreements if they prohibited class arbitration, conflicted with, and therefore were preempted by, the Federal Arbitration Act, 9 USC ' 2.

Although Concepcion involved a commercial dispute, the sweeping language of the opinion could be read to cover claims that often accompany mass tort litigation, where class actions are frequently brought for full or partial refunds on the ground that the manufacturers misrepresented the safety or utility of the product. Under Concepcion, when consumers purchase a product, manufacturers can seek to have them sign contracts that require arbitration in lieu of jury trials and prohibit class resolution of claims. Whether the arbitration could be extended to cover tort claims arising from the use of a product is not addressed by Concepcion, but is certainly worth exploring.

One cautionary note, however. The Concepcion arbitration provisions were written to provide consumers with a practical means to resolve small claims. This included: 1) that AT&T would pay the entire cost of the arbitration if the claim was non-frivolous; 2) that AT&T could not recover attorneys fees if it won; 3) that if the consumer won an amount greater than AT&T's last written settlement offer, the award would be no less than $7,500 plus twice the consumer's attorneys' fees; and 4) that the arbitration would be held in the consumer's home county and the consumer could elect arbitration either in person, by telephone or based solely on written submissions. Based on these provisions, the district court concluded that consumers were better off with AT&T's arbitration mechanism than with a class action, a factor that influenced the Supreme Court's decision. Id. at 1753. Whether the FAA would preempt a state law that voided a more onerous arbitration scheme ' in the face of a challenge that the arbitration provision did not offer a meaningful opportunity to obtain relief ' was not before the Court.

Proximate Cause

The Supreme Court weighed in on issues relating to proximate causation in CSX Transportation, Inc. v. McBride, 131 S. Ct. 2630 (2011). CSX was a case arising under the Federal Employers' Liability Act, 45 USC
' 51, which provides a federal cause of action for railroad workers who sustain on-the-job injuries “resulting in whole or in part” from the railroad's negligence. Id. at 2632.

The Supreme Court held that the FELA statutory language was more expansive than the common law doctrine of proximate causation, and therefore held it was not error to refuse to give a traditional proximate cause instruction that requires not only “but for” causation, but that the injury must be the “natural and probable,” i.e., foreseeable, consequence of the defendant's negligence.

If this is all that the case said, CSX would be of little interest to product liability practitioners, since the precise holding was limited to a narrow question of federal statutory interpretation. Indeed, the Supreme Court explicitly held that the common law doctrine of proximate cause applicable in traditional negligence cases was not at issue in the case.

Four Justices, however, took the opportunity to criticize the common law proximate cause standard. According to these Justices, the term “proximate cause” is “notoriously confusing” and has resulted in “the lack of consensus on any one definition.” Id. at 2642. The four Justices cited studies showing that “85% of actual and potential jurors were unable to understand a pattern proximate cause jury instruction” and cited with approval the decision of the drafters of the Restatement (Third) of Torts to drop the term “proximate.” Id.

It is of course impossible to know whether and to what extent the opinions of these four Justices will influence the development of the common law or have any impact on the pattern instructions given to juries in product liability cases. Five Justices ' the four dissenters plus Justice Thomas ' did not endorse the criticism of the proximate cause standard. But the four Justices have given critics of confusing and inconsistent jury instructions ammunition to work with. What product liability practitioners and state courts do with that ammunition remains to be seen.

Steven Glickstein, a member of this newsletter's Board of Editors, is Chair of Kaye Scholer's Product Liability and Counseling Department, which was recognized as the best product liability practice in the country in June 2008 by Chambers and Partners, and in January 2006 by The American Lawyer, as a result of the firm's “unparalleled expertise in cutting edge product liability defense work.”

Part One of this article discussed the impact of Supreme Court decisions addressing personal jurisdiction and preemption. Part Two herein discusses decisions involving class actions, pharmaceutical marketing practices, arbitration and proximate cause.

Class Actions: The Smith Case

The Supreme Court decided two cases involving class action practice ' one a product liability case and the other not ' that could have significant impact on product liability practice.

The product liability case was Smith v. Bayer Corp. , 131 S. Ct. 2368 (2011), which arose from the Baycol litigation, and which involved the parallel class actions pending in federal and state court. The question was whether a federal court, which had already denied certification of a class, could enjoin a motion to certify the identical class by a different plaintiff in a state court proceeding. The Supreme Court held that, in almost all circumstances, the federal court will be prohibited from doing so under the Anti-Injunction Action, 28 USC ' 2283. The Anti-Injunction Act prohibits federal courts from enjoining state court proceedings with three exceptions ' one of which, argued to be applicable by Bayer, permits injunctions of state court proceedings where necessary “to protect or effectuate [the federal court's] judgments,” thus precluding the relitigation in state court of issues decided in federal court. The Supreme Court held that the relitigation exception did not apply for two reasons: first, the issues were not identical in the federal and state class actions because the state court applied a different (more liberal) class certification standard than the federal court; and second, because the parties were not identical in the two actions because there was a different named plaintiff in the state court class action. Although it resolved an issue on which there had been a circuit conflict, the impact of the Smith case on mass tort litigation may be minimized by the subsequent passage of the Class Action Fairness Act (CAFA), 28 USC ” 1332(d), 1453. That Act permits removal of most product liability class actions to federal court, based on minimal (rather than complete) diversity of citizenship, thereby making the fact pattern of parallel federal and state class actions that led to the circuit conflict less likely. Combined with the Multi-District Litigation statute, which permits pretrial consolidation in a single federal court of multiple class actions filed in different jurisdictions, it should now be possible in most instances to obtain a single, consistent class action ruling in product liability class actions.

Class Actions: The Wal-Mart Case

The more significant class action ruling occurred in a non-product liability case: Wal-Mart Stores, Inc. v. Dukes , 131 S. Ct. 2541 (2011). The Wal-Mart case involved employment discrimination, alleging that Wal-Mart systematically discriminated against women at 3,400 separate stores employing more than one million people nationwide. A mandatory class was sought under Fed. R. Civ. P. 23(b)(2), because injunctive relief was requested in addition to back pay; the plaintiffs also requested an opt-out class under Fed. R. Civ. P. 23(b)(3).

Although Wal-Mart is a discrimination case, its discussion of class action standards applies equally to all class actions pending in federal court, including product liability cases. Simply put, the Supreme Court has made it more difficult to certify any type of class action, including medical monitoring and consumer/fraud refund class actions that typically accompany mass tort product liability litigation. Among the holdings of the Court that will be frequently cited:

• Class actions are “an exception to the usual rule that litigation is conducted by and on behalf of the individual named parties only.” Id. at 2550.
• “Rule 23 does not set forth a mere pleading standard. A party seeking class certification must affirmatively demonstrate his compliance with the Rule ' that he must be prepared to prove that there are in fact sufficiently numerous parties, common questions of law or fact, etc.” Id. at 2551.
• A federal court must conduct a “rigorous analysis” of the propriety of class certification, and that rigorous analysis will frequently “overlap with the merits of the plaintiff's underlying claim” ' indeed, the “class determination generally involves considerations that are enmeshed in the factual and legal issues comprising the plaintiff's underlying claim.” Id.
• “What matters to class certification ' is not the raising of common questions ' even in droves ' but, rather the capacity of the classwide proceeding to generate common answers ' .” Id.

These statements by the Court undermine arguments frequently raised by plaintiffs seeking class certification that class determinations should be made solely based on their allegations, and that any consideration of the underlying facts or of the merits is impermissible.

The Supreme Court in Wal-Mart also confirms that Rule 23(b)(2) class certification is not available where there also are individualized claims for monetary relief ' in the Wal-Mart case, claims for back pay. Id. at 2257-59. This will make certification of medical monitoring classes more difficult ' class plaintiffs frequently attempted to evade the Rule 23(b)(3) requirements of typicality, adequacy of representation, predominance and superiority by arguing that medical monitoring was a form of injunctive relief that could be certified under Rule 23(b)(2) rather than under Rule 23(b)(3).

Finally, in what is perhaps the most far-reaching ruling, the Supreme Court held that statistical proof could not substituted for individualized proof of liability, causation and damages in order to render a class action feasible. In particular, the Court held that the defendant could not be deprived of its right to rebut each individual's claim of discrimination, through proof that the particular individual was not promoted for lawful reasons, by substituting a statistical cross sampling of claims and applying that average award to all class members. Id. at 2561. This is a technique frequently attempted in consumer fraud/refund class actions: The claim being that the defective product, even if it did not fail in a particular plaintiff's case, is “less valuable” to the purchaser because of alleged misstatements about the safety or utility of the product. The Supreme Court rejected this “Trial by Formula” as inconsistent with the Federal Rules' Enabling Act, which prohibits procedural devices such as class actions from abridging, enlarging or modifying any substantive right. Id. If, under the applicable law, the defendant is entitled to individualized rebuttal to each plaintiff's claim ' by proving, for example, lack of reliance upon an alleged misrepresentation ' then the class-action device cannot be used to deprive the defendant of that right.

Pharmaceutical Marketing Practices

Those who try pharmaceutical and medical device product liability cases know that frequently the most contentious part of any trial is the plaintiff's attack on the manufacturer's marketing efforts. Particularly harsh criticism is often leveled at the practice of “detailing,” whereby representatives of pharmaceutical or medical device companies visit prescribing physicians to provide information about the manufacturer's product. Frequently, not only juries, but also judges, react negatively to the very concept of a medical product manufacturer trying to influence a prescribing physician's decisions.

The Supreme Court's decision in Sorrell v. IMS Health Inc. , 131 S. Ct. 2653 (2011), may influence this debate about whether the very concept of “detailing” is offensive. Sorrell was not a product liability case but a case arising under the First Amendment's guarantee of free speech. The Vermont Legislature, reflecting the perception of many judges and juries that detailing results in misleading presentations to doctors, enacted a statute that prohibited pharmacies from disclosing physician's prescribing practices for marketing purposes, while permitting pharmacies to disclose that information to academic institutions and to the State. The Supreme Court held that the statute violated the First Amendment because: 1) pharmaceutical manufacturers had a free speech right to communicate truthful information concerning their products; and 2) that being so, the State could not condition the disclosure of prescribing information necessary for the communication to be effective depending on the identity of the recipient and the likely content of their message to physicians.

It is beyond the scope of this article to address the nuances of the constitutional ruling. But the decision could affect product liability litigation. The very fact that the Supreme Court characterized detailing as a protected First Amendment activity is helpful to pharmaceutical and medical device defendants. Indeed, those defendants may now request jury instructions that the defendants have the right under the U.S. Constitution to discuss their products with prescribing physicians. This alone could go a long way to counteract the attempt to demonize such activity.

Moreover, the Supreme Court described detailing in extremely objective non-inflammatory terms. Detailing “involves a scheduled visit to a doctor's office to persuade the doctor to prescribe a particular pharmaceutical”;

“[d]etailers bring drug samples as well as medical studies that explain the 'details' and potential advantages of various prescription drugs”; “[i]nterested physicians listen, ask questions, and receive follow-up data.” Id. at 2659. In response to charges that detailing is sinister, the Court says simply: “If pharmaceutical marketing affects treatment decisions, it does so because doctors find it persuasive.” Id. at 2670. This language can be used in briefs in order to educate judges that detailing is not to be automatically condemned, and perhaps some of the language can be incorporated into jury charges to properly instruct the jury that only misleading statements ' and not the marketing efforts themselves ' can be a basis for liability.

Arbitration

In another non-product liability case, AT&T Mobility LLC v. Concepcion , 131 S. Ct. 1740 (2011), the Supreme Court struck down a California law that refused to enforce, on public policy grounds, an arbitration agreement that required class members to arbitrate individually and prohibited class arbitration. According to the Supreme Court, California decisions, which voided arbitration agreements if they prohibited class arbitration, conflicted with, and therefore were preempted by, the Federal Arbitration Act, 9 USC ' 2.

Although Concepcion involved a commercial dispute, the sweeping language of the opinion could be read to cover claims that often accompany mass tort litigation, where class actions are frequently brought for full or partial refunds on the ground that the manufacturers misrepresented the safety or utility of the product. Under Concepcion, when consumers purchase a product, manufacturers can seek to have them sign contracts that require arbitration in lieu of jury trials and prohibit class resolution of claims. Whether the arbitration could be extended to cover tort claims arising from the use of a product is not addressed by Concepcion, but is certainly worth exploring.

One cautionary note, however. The Concepcion arbitration provisions were written to provide consumers with a practical means to resolve small claims. This included: 1) that AT&T would pay the entire cost of the arbitration if the claim was non-frivolous; 2) that AT&T could not recover attorneys fees if it won; 3) that if the consumer won an amount greater than AT&T's last written settlement offer, the award would be no less than $7,500 plus twice the consumer's attorneys' fees; and 4) that the arbitration would be held in the consumer's home county and the consumer could elect arbitration either in person, by telephone or based solely on written submissions. Based on these provisions, the district court concluded that consumers were better off with AT&T's arbitration mechanism than with a class action, a factor that influenced the Supreme Court's decision. Id. at 1753. Whether the FAA would preempt a state law that voided a more onerous arbitration scheme ' in the face of a challenge that the arbitration provision did not offer a meaningful opportunity to obtain relief ' was not before the Court.

Proximate Cause

The Supreme Court weighed in on issues relating to proximate causation in CSX Transportation, Inc. v. McBride , 131 S. Ct. 2630 (2011). CSX was a case arising under the Federal Employers' Liability Act, 45 USC
' 51, which provides a federal cause of action for railroad workers who sustain on-the-job injuries “resulting in whole or in part” from the railroad's negligence. Id. at 2632.

The Supreme Court held that the FELA statutory language was more expansive than the common law doctrine of proximate causation, and therefore held it was not error to refuse to give a traditional proximate cause instruction that requires not only “but for” causation, but that the injury must be the “natural and probable,” i.e., foreseeable, consequence of the defendant's negligence.

If this is all that the case said, CSX would be of little interest to product liability practitioners, since the precise holding was limited to a narrow question of federal statutory interpretation. Indeed, the Supreme Court explicitly held that the common law doctrine of proximate cause applicable in traditional negligence cases was not at issue in the case.

Four Justices, however, took the opportunity to criticize the common law proximate cause standard. According to these Justices, the term “proximate cause” is “notoriously confusing” and has resulted in “the lack of consensus on any one definition.” Id. at 2642. The four Justices cited studies showing that “85% of actual and potential jurors were unable to understand a pattern proximate cause jury instruction” and cited with approval the decision of the drafters of the Restatement (Third) of Torts to drop the term “proximate.” Id.

It is of course impossible to know whether and to what extent the opinions of these four Justices will influence the development of the common law or have any impact on the pattern instructions given to juries in product liability cases. Five Justices ' the four dissenters plus Justice Thomas ' did not endorse the criticism of the proximate cause standard. But the four Justices have given critics of confusing and inconsistent jury instructions ammunition to work with. What product liability practitioners and state courts do with that ammunition remains to be seen.

Steven Glickstein, a member of this newsletter's Board of Editors, is Chair of Kaye Scholer's Product Liability and Counseling Department, which was recognized as the best product liability practice in the country in June 2008 by Chambers and Partners, and in January 2006 by The American Lawyer, as a result of the firm's “unparalleled expertise in cutting edge product liability defense work.”