Johnson & Johnson (through a wholly-owned subsidiary) manufactures Benecol Regular and Benecol Light Spreads. J&J has had to defend against multiple suits, including one by a Thomas Young, who filed a consumer fraud class action against alleging that Benecol's labeling was false and misleading In particular, the complaint focused on Benecol's claims, on its packaging, that Benecol was: (1) "Proven to Reduce Cholesterol"; and contained (2) "NO TRANS FAT."

In fact, Benecol does contain a tiny amount of partially hydrogenated oil (aka trans fat): an amount that FDA called "insignificant." As for the "Proven to Reduce Cholesterol" claim, Young asserted that it must be false too, because Benecol is allegedly rendered so unhealthy by virtue of containing "dangerous, non-nutritious, unhealthy partially hydrogenated oil" that the cholesterol claim is misleading. So Young sued, invoking New York and New Jersey consumer laws.

In April 2012, the federal district court granted Johnson & Johnson's motion to dismiss the complaint, ruling inter alia that Young's claims were expressly preempted by the Federal Food, Drug, and Cosmetic Act (FDCA), 21 U.S.C. § 301 et seq., which (since the adoption of the Nutrition Labeling and Education Act (NLEA) in 1990) expressly preempts any state law "requirement" regarding food labeling "that is not identical to the requirement[s]" imposed by federal law. FDA regulations "require that trans fat levels less than 0.5 grams per serving 'shall be expressed as zero.'" Thus, even if the trans fat claims were misleading under New York and New Jersey statutes, these laws could not be enforced. Young disagreed and appealed to the Third Circuit, arguing that his state consumer protection claims were not preempted because they were "not inconsistent" with FDA regulations. The alert reader has doubtless noted, however, that the statutory test is not whether state requirements are "consistent" with FDA requirements;, but whether they are "identical." Thus did the Third Circuit today affirm that NLEA pre-empts state consumer laws as regards food product labeling.

Another victory for common labeling standards for goods marketed nationally, and for amicus Washington Legal Foundation, which filed a persuasive brief for the winning side!

Bowman v. Sunoco, a very interesting decision on tort liability waivers, was rendered by a divided Pennsylvania Supreme Court on April 25.

Here's the factual backdrop. P signs on as a security guard for Acme, a firm that sends guards to protect the operations of clients. P's contract with Acme specifies that P is an employee of Acme, not of the client firms where P may work on any individual day. In case of injury, P will be able to benefit from the Workers' Compensation policy paid for (pursuant to its legal obligation) by Acme.

Now, additional recovery by injured workers has been the bane of many a liability insurer. Perhaps 25% of all products liability suits are filed by workers injured on the job. The latter collect their workers' compensation benefits, cannot sue their employers (that is the statutory quid pro quo for workers' comp), but then turn around and sue the manufacturer of the tool that injured them, on the grounds that said tool was imperfect ("defective") in some way.

In the instant case, the additional suit would not be against a product manufacturer, but against the client, for some alleged negligence. Obviously clients might be disgruntled to be sued in such instances. So Acme added a clause to its employment contract, according to which P waived

"any and all rights I may have to:

-make a claim, or
-commence a lawsuit, or
-recover damages or losses

from or against any customer (and the employees of any customer) of [Acme] to which I may be assigned, arising from or related to injuries which are covered under the Workers' Compensation statutes."

P was injured while guarding a Sunoco refinery, and sued Sunoco for negligence after collecting his workers' compensation benefits from Acme. Sunoco invoked P's contract with Acme, and obtained summary judgment at trial and in the intermediate appellate court. P appealed, and challenged the waiver clause on several grounds, most importantly on the grounds that it was prohibited by Pennsylvania public policy. For § 204(a) of the Pennsylvania Workers' Compensation Act reads in pertinent part as follows:

(a) No agreement, composition, or release of damages made before the
date of any injury shall be valid or shall bar a claim for damages resulting
therefrom; and any such agreement is declared to be against the public
policy of this Commonwealth.

But a majority of the Pennsylvania Supreme Court disagreed with P's statement that the plain meaning of § 204(a) invalidated the waiver. The court pointed out that the article read in its entirety applied clearly only to waivers of the employer's liability, not to waivers of liability to third parties. The court added that waivers of liability for future negligence are in principle possible in Pennsylvania (unlike many other states). The court cited to friendly case-law in two other jurisdictions:

"As the Appeals Court of Massachusetts found in Horner v. Boston Edison Company, 695 N.E.2d 1093 (Mass. App. Ct. 1998), the disclaimer here "extinguishes only the employee's right to recover additional amounts as a result of a work-related injury for which the employee has already received workers' compensation benefits." Id., at 1095. Similarly, the Supreme Court of Arkansas found, with facts nearly identical to the present case, a similar disclaimer did not violate public policy because it did not indicate the employer was "attempting to escape liability entirely, but [was] instead, attempting to shield its clients from separate tort liability for those injuries that are covered by workers' compensation ...." Edgin v. Entergy Operations, Inc., 961 S.W.2d 724, 727 (Ark. 1998)."

The tantalizing question is whether a Pennsylvania employer could similarly contract with its employees to waive liability claims against too manufacturers for workplace injuries. It's hard to see why the same rationale would not obtain. Tool manufacturers would presumably give employers a better deal on tool sales in consideration for such a waiver, were it enforceable.....

Six weeks ago the Virginia Supreme Court issued a very interesting, and in my opinion controversial, decision regarding lawyer advertising. It seems that one Horace Frazier Hunter, who practices criminal defense law in Richmond, authors a trademarked blog called This Week in Richmond Criminal Defense. The blog consists almost entirely of summaries of criminal cases won by Mr. Hunter -- though it also is sprinkled with occasional legal commentary. The summaries contained the real names of Hunter's clients and the crimes they were alleged to have committed.

As a result of Hunter's blog posts, the Virginia State Bar launched an investigation. One of Hunter's former clients complained to the Virginia State Bar that Hunter's publication of his criminal trial was embarrassing or detrimental to him, even though the trial was public, because few knew about the trial while the entire world could read Hunter's blog. [The Virginia Rules of Professional Responsibility, like rules in most states, prohibit the release of "information gained in the professional relationship ... the disclosure of which would be embarrassing or would likely be detrimental to the client unless the client consents after consultation...."]

The State Bar investigated and agreed with the complainant. In addition, the Bar found that the blog was essentially commercial advertising, and was in violation of state rules requiring appropriate disclaimers ["Advertising;" "Your results may vary"; "Each case is unique and these outcomes are not representative;" etc.]. Hunter was admonished by the state bar for violating ethics rules, and appealed its decision. Eventually the case reached Virginia's high court.

The court made two interesting rulings.

1. A 5-2 majority held that Hunter's blog was indeed commercial speech that could constitutionally be regulated by the State Bar to the extent of requiring appropriate disclaimers. [The two dissenters held that the First Amendment prohibits the requirement of disclaimers.] The majority notably rejected Hunter's claim that all legal speech is political speech, while the dissent essentially agreed that information about the criminal justice system inevitably had political implications.

2. A unanimous court held that applying Virginia's confidentiality rules violated Hunter's First Amendment rights, since the trials were over and all information released in the blog was public. The unanimous court rejected the State Bar's assertion that, though journalists could have written about the case, lawyers are restricted from massively publicizing embarrassing information about their clients if that information is technically public but little known.

Hunter has vowed to appeal the disclaimer holding to the United States Supreme Court. I hope the Bar will cross-appeal the confidentiality holding. I had always thought that being someone's lawyer imposed duties toward that client that were greater than those incumbent on a beat reporter.....

In many instances, in tort law, if the defendant causes no physical harm to the plaintiff's person or property, there is no tort liability. Thus, if Danny Defendant negligently hits a bridge, damaging it, he is liable to the bridge's owner (typically a government) for repairs -- but he is not liable to Peter Plaintiff's restaurant (located 1/2 mile away "on the wrong side of the bridge"), which lost trade during bridge repairs. Similarly, in products liability, if a defectively designed car crashes, its manufacturer is liable for all injuries; but if it doesn't crash but is worth less as a trade-in, traditional doctrine holds that there is no liability for diminished resale value (a pure economic harm).

In the bridge case, as my former colleague Bill Bishop has pointed out [JSTOR access or fee], restaurant trade has likely shifted to other locales, and there is no social loss caused by the alleged tortfeasor other than the cost of repairs to the bridge. In the defective car case, this is deemed to be an issue better dealt with via contract -- and there is typically [there are notable exceptions!] no contractual guarantee of any given resale value.

A recent Florida Supreme Court decision has narrowed the boundaries of the economic loss doctrine in an interesting case, Tiara Condominium Association v. Marsh & McClennan Companies, Inc. et al.. The facts are a bit complicated, but (I think) worth understanding. In brief:

Tiara retained Marsh as its insurance broker, and Marsh secured windstorm coverage through Citizens Insurance, which issued a policy with loss limit of about $50 million. In 2004, Tiara's condos were hit by both hurricanes Frances and Jeanne. Tiara was allegedly "assured by Marsh that the loss limits coverage was per occurrence ... rather than coverage in the aggregate." Tiara thus felt that it could spend up to $100 million in repairs, and proceeded to do so. When Tiara sought payment from Citizens Property, however, Citizens claimed that the policy's loss limit was $50 million total, not per occurrence. Ultimately, Tiara and Citizens settled for approximately $89 million -- Tiara was left in the red for about $11 million. Tiara claimed it would not have made such expensive repairs had it not been told that they were covered by insurance.

Tiara sued Marsh in federal court for this amount, invoking a litany of named torts. The District court granted summary judgment to Marsh on all claims. Tiara appealed to the Eleventh Circuit, which reversed as concerned Tiara's negligence and breach of fiduciary duty claims. On those two counts, the Court certified to the Florida Supreme Court the question whether Florida's economic loss doctrine barred recovery.

The majority decision in the Florida Supreme Court noted that its economic loss doctrine was initially a products liability rule designed to limit an undue incursion by tort on what were traditionally contract law damages. [p.4] Thus, if a product is so poorly designed that its life span is less than expected, there is no tort recovery -- only warranty law in contract will apply. But the court ruled that prior caselaw expansion of the economic loss rule to cases of malpractice by insurance agents had been an overextension of the rule. [pp. 16, 18] Two Justices, including the Chief Justice, dissented, bemoaning that tort had again cannibalized contract law, and that Florida precedent had been too cavalierly overturned by the majority (to the detriment of legal certainty). [pp. 26, 28].

I won't comment much on the Common Law precedent issue here (I'll just say that I am sympathetic to the dissenters' general viewpoint -- among other things, liability insurance premiums obviously rely on stability in legal expectations). On the substantive issue, I think it clear that when the parties are in contractual privity liability should be determined by contract law, at least when there is no bodily injury or property damage.

Note that Tiara apparently spent ONE HUNDRED MILLION DOLLARS without getting legal advice about the extent of its insurance coverage. [Lawyers' advice, by the way, would have been excepted from the economic loss rule in Florida due to a "professional services" exception -- insurance salesmen had previously been held to not be covered by this exception, but that caselaw was overturned in the Tiara case.] Instead, Tiara relied on the word of an independent insurance broker (who was not the insurer's agent). Was that prudent? What did Tiara's contract with Marsh provide as regards any damage limitation (the decision is not clear on this, and rightly so, since the Supreme Court was merely answering a referral from the federal circuit court, not deciding a case)? And in closing I cannot resist asking: was Marsh engaged in the illegal practice of law when it allegedly gave its advice to Tiara? :)

From the American Bar Journal comes the news that a class action suit has been launched against Lance Armstrong. The class is apparently composed of purchasers of his autobiography, It's Not About My Bike: My Journey Back To Life. The class members are apparently seeking refunds and "litigation costs," though it's hard to know what costs there are since lawyers are doubtless operating on a contingent basis.

What's the tort here: will we see the new tort of "false self-aggrandizing"? Of "lying in a book?" Of "selling fiction as fact?" True, if I market myself as a surgeon and you hire me to remove your appendix, you can sue me if it turns out that I'm a quack and the surgery goes amiss. But there a patient was cut into and the result was adverse. Here there was no reliance cost here except for the cost of purchase of an allegedly lying book.

Can you imagine the number of class action suits against disgraced or retired politicians, by purchasers of their memoirs or political puff pieces, that might follow if this class action survives summary judgment?

I recently noted that, and tried to explain the reasons why, Toyota has set aside a humongous amount of money to settle a likely meritless class action case involving alleged unintended acceleration.

But there are over 320 individual cases that had been filed, reunited before U.S. District Judge James Selna of the Central District of California in Santa Ana. Now comes news that Toyota has also reached a settlement in the first of these trials, which had been seen as a bellweather. In Val Alfen v. Toyota, it was alleged that a 66-year old man, Van Alfen, was driving his Toyota Camry on I-80 near Wendover, Utah in November 2010, when his car suddenly accelerated, went through a stop sign and an intersection at the bottom of an exit ramp, then hit a wall, killing Van Alfen and his son's fiancée and injuring Van Alfen's wife and son. Police reported that tire skid marks showed Van Alfen had braked, and the Utah Highway Patrol concluded that the gas pedal must have stuck. Of course this was before government agencies established that Toyota gas pedals never stuck. More likely is the possibility that Mr. Van Alfen was depressing both the accelerator and the brake at the same time.

Why did Toyota settle a case it had a great chance of winning? I don't know for sure, but I note that Toyota's attorneys made one egregious error: they examined Van Alfen's vehicle without giving advance notice to plaintiffs. Judge Seina concluded in June 2012 that this constituted egregious discovery abuse. As punishment, the judge indicated that he would instruct the jury that it could infer that any evidence Toyota gathered from its inspection would have been detrimental to its defense.

Yesterday (the timing clearly indicates this was a quid pro quo of the settlement), Law.com reports, (subscription needed) the judge rescinded his discovery abuse ruling in these terms:

"[T]here will be no reference, either direct or indirect, to the court's order by any party, counsel or witness in this proceeding or any other proceeding, and the parties agree there will be no mention of the June 11, 2012, order to any participant in the November 19, 2010, inspection at any time in any setting, be it trial, deposition or otherwise."

The express terms of the judge's new edict prohibit anyone, in any case, from ever alluding to Toyota's discovery abuse. That alone is worth the price of the Van Alfen settlement, since Toyota has in every case a strong substantive argument that it surely does not wish to see sullied by procedural misconduct.

But is the judge's ruling constitutional? Isn't his past ruling a public decision, citable by any interested citizen? Individual parties can, as was obviously done here, waive their right to a ruling, but what about those whose trials have not yet taken place? It's not clear to me that a judge can, as it were, erase a final ruling in this way. The Law.com report shows that other Legal Ethics professors share my misgivings.

Litigation over the legal effect of the judge's ruling, I predict, will be the next big chapter in this saga.

In an interesting case that enacts a proposal put forth last year by my research assistant, Mr. Wesley Weeks, the Alabama Supreme Court has just held that a name-brand manufacturer is liable for failure to warn if a patient consumes a GENERIC drug with the same inadequate warning as had appeared on the name brand product.

The case, Weeks v. Wyeth (the plaintiff has no relation that I know of with my research assistant!), involves the drug Reglan. Mr. Weeks claimed that he had developed tardive dyskinesia (involuntary, repetitive body movements such as grimacing, tongue protrusion, lip smacking, puckering of the lips and rapid eye blinking) after taking generic versions of Reglan to treat his acid reflux. Mr. Weeks sued Actavis and Teva, the generic companies that made the drugs he took, as well as Wyeth, which developed the drug and marketed the brand exclusively during its patent protected period, for failing to adequately warn about Reglan's risks.

The generic manufacturers, however, have successfully sought protection following a 2011 Supreme Court decision in Pliva v. Mensing. In Pliva the Court accepted the FDA's interpretation of the Food and Drug Act, as amended in 1984 [the "Hatch-Waxman Amendments"] to encourage generic manufacturing, as prohibiting generic manufacturers from altering approved warnings on the brand name drugs they were copying. Since the generic manufacturers could not decide the warnings, the court reasoned in Pliva, they could not be held liable if the warning proved insufficient.

Only a few courts have concluded that, as a result, the brand-name manufacturer is liable in such cases. Most jurisdictions hold that product liability of any kind requires that the defendant's product have injured the plaintiff. Here the product was made by firms other than the defendant firm. But Alabama law has always and not unreasonably held that false information given to a third party can result in liability. [For example, if your doctor tells you that drug X will not make you sleepy, and you take X and drive, falling asleep at the wheel and hitting the victim, the victim has a tort suit against the doctor.] This reasoning was applied by analogy to hold Wyeth liable for the predictable results of an allegedly inadequate warning given with Reglan, even though the plaintiff did not consume that drug.

The defense bar will react to this case with dismay, but in my opinion the real culprit is not the Alabama Supreme Court, but the FDA and the USSC. To quote my research assistant:

"[T]he FDA has interpreted the [1984] Hatch-Waxman Amendments as requiring generic drugs to have identical warning labels as their brandname counterparts; FDA approval can be withdrawn if this continuing "sameness" requirement is not met. This means that unlike brand-name drugs, generic drug manufacturers cannot unilaterally change their warning labels. The FDA has used a similar interpretation to decide that generic manufacturers may not use "Dear Doctor Letters." [page 1263 of the Wesley Weeks article].

No statutory text required this interpretation by the FDA. The interpretation has tied the hands of generic manufacturers, redounding to their own benefit under Pliva. Following this case, risks of making the branded drug in the first place are now exponentially increased, as manufacturers and their insurers must calculate expected risks far into the future, when the branded drug is perhaps no longer even being marketed. Yes, it's only one state, but the reasoning is perfectly logical and I think there is a distinct potential for expansion to other states.

Either the Pliva case or the FDA interpretation of the Hatch-Waxman Amendments, or both, have got to go. To get the whole lowdown and read about excellent proposals for change read my research assistant's law review article, hotlinked in the first paragraph of this comment.

The Toyota settlement, widely reported (here's the WSJ take) is remarkable in many ways.

To recap: there was unintended acceleration in some Toyota vehicles. In every single case that could be verified, by private and government sources, the unintended acceleration had one of two causes: 1) the driver stepped on the accelerator pedal when he wished to brake; or 2) the driver had had the car washed, the driver's side mat had been removed by the car wash attendants and not rebuttoned in place, and it had scrunched up and was inadvertantly pressed against the gas pedal while the car was being driven.

Plaintiffs' lawyers tried to take down Toyota as they had Audi in years past, but this time government studies exonerating the manufacturer did not wait until the company was bled dry. Nonetheless, plaintiffs persisted. The Toyota cars were defective in design, they claimed, as they did not have a brake override (a mechanism that overrides the accelerator and applies only the brake when the driver presses on both pedals simultaneously). Of course a brake override prevents heel-and-toe driving, which requires some simultaneous braking/accelerating, and Toyota was prized among manufacturers for having resisted this dumbing down of its cars. Too bad, the cars will now be retrofitted with a brake override, and future models will be so equipped.

The class action that was settled mostly involved people who had never had an incident of unintended acceleration, but who were suing because the resale value of their vehicles was allegedly diminished by the (false) belief in the market that Toyotas could accelerate all by themselves. That ground of suit is nowhere legally accredited, and is baseless on several grounds: Toyota does not guarantee nor is there any legal right to any given resale value; the mistaken market belief about Toyotas, if it existed, was caused by misleading press reports and not by Toyota; etc.

Nonetheless, Toyota has decided that its future buyers are in large part too uninformed to understand these "complex" issues, and that public relations requires that the litigation end. The firm has made the problem going away with this mammoth payout, which includes a whopping $200,000,000.00 to the law firm that launched the suit. The payout of course makes future shakedown suits much more likely.

And that is what a $1.1B class action settlement has in common with Gilad Shalit's rescue -- both were done with the best of intentions, and both virtually guarantee that those who flout the law will recidivate in the future.

Two Pennsylvania attorneys and a West Virginia doctor they hired to read clients' X-rays have just been found liable by a federal jury in Wheeling, WV for violating the (federal) Racketeer Influenced and Corrupt Organizations Act, and for (state-law) fraud, in connection with asbestos claims made against CSX Transportation. The jury awarded $429,240.47, which was the amount CSX said it had spent to defend the 11 claims, against Pittsburgh attorneys Robert Peirce and Louis Raimond and Bridgeport, WV radiologist Ray Harron.

Peirce had filed more than 14,000 asbestos cases against CSX. Harron had diagnosed tens of thousands of asbestos claims for the attorneys. Harron's diagnoses were first called into question in 2005 by a judge in Texas that heard cases involving the lung disease silicosis. CSX filed its lawsuit later that year, claiming Kentucky railroad worker Earl Baylor was fraudulently diagnosed with asbestosis. At the trial, CSX attorneys argued that Harron had initially found hundreds of patients clear of asbestosis, but later switched his diagnosis. It presented only 11 of those cases, likely because of statute of limitations or solvency issues.

The West Virginia verdict follows a May 2012 federal appeals court ruling upholding a $420,000 fraud verdict against two Mississippi lawyers, William Guy and Thomas Brock, for committing fraud during an asbestos lawsuit they filed in 2001.

I have written about this from the beginning (just search for "Engle" and you'll get the low-down), but here's a recap:

1. In 2006, the Florida Supreme Court quashed a Miami-Dade County jury that had leveled a $145 billion verdict -- the largest punitive damage award in American legal history-- against five tobacco companies in so-called Engle class action. The Florida Supremes correctly found that each smoker's situation was unique, and so a class action was inappropriate. But they also found that the Miami-Dade jury's finding that the five tobacco companies had misrepresented the addictive nature and health dangers of cigarettes was supported by the evidence. Thus, they held, all the individual lawsuits to be expected (and which had to be filed by January 2008) need not re-litigate that issue.

2. The slow drip-drip-drip of litigation against "Big Tobacco" then began. Millions at a time were adjudged to individuals, and the prospect that many billions might eventually have to be paid became real.

3. The biggest single verdict of all in these individual suits was in November 2009, a suit filed by the sister of former Ft. Lauderdale mayor Jim Naugle, against Philip Morris. Plaintiff Lucinda Naugle was awarded a whopping $300,000,000.00, 81% of which was a punitive award. Ms. Naugle had allegedly smoked Benson & Hedges cigarettes, a Philip Morris brand, for 25 years (starting, significantly, before strong mandated government warnings in 1986). She developed emphysema, and alleged she would never have started smoking and become addicted to nicotine had the defendant not committed the fraud and misrepresentation found by the Florida Supreme Court.

4. The trial judge in the Naugle case reduced the award to $36.8 million, an 88% reduction, on the grounds that the jury award was based on anger and passion, not on the evidence.

5. This week, the Fourth District Court of Appeals in West Palm Beach struck even that reduced award, on the grounds that the judge should have ordered a new trial (i.e., declared a mistrial) once he found that the jury award was tainted by passion and prejudice. The Court of Appeals ordered a new trial, but only to determine damages, not to determine liability to Ms. Naugle.

Here's a link to a synopsis of the original $300 million trial verdict. And here is this week's decision by the Fourth District Court of Appeals.

The beat goes on!