2014 is expected to see significant legal developments for products manufacturers across industries. Noteworthy issues to watch for the following topics/industry groups are described herein:
Crisis Management: Have a Plan
No company is immune from having a crisis hit. Crises strike companies in all industries, and may range from a recall to a data breach to a corporate office fire to a catastrophic explosion or toxic chemical release. Companies who do not already have a crisis management plan in place should create one. Companies who have not reviewed or revised their plan in at least the past two years should take a fresh look at their plan. Regardless of the crisis, evidence must be preserved immediately or strong sanctions, including an adverse inference against the company on the key issue in the case, may result. Proper handling of the crisis can minimize the damage to the company. Among the items that should be addressed in a crisis management plan are who to contact when a crisis hits (who is on the company’s Emergency Response Team), other notifications that might have to be made (internally, to insurers, to governmental authorities, and/or to customers), retaining experts immediately, litigation hold notices, document preservation, witness statements, whether and what to photograph or videotape, and public relations considerations.
Automotive: Liability Concerns as Cars Get Smarter
Vehicle-to-vehicle (“V2V”) communications are both the present and the future of automobiles. Car manufacturers have been developing and installing V2V technology, which allows a car to communicate with other cars in a 360 degree radius to provide the driver with information on potential unseen hazards. For instance, a car that is about to run through a red light at an intersection may not be able to be seen by a driver, but the driver would be notified by his/her car verbally, visually, and/or through a sensation (such as vibration) of the danger. In order to work effectively, V2V must be able to communicate among different car manufacturers, the messages must be trustworthy, and the driver must respond appropriately. As V2V becomes more common, liability in the event of a crash remains a concern to automobile manufacturers and component manufacturers. While some reports show that V2V is not expected to raise the liability exposure of car manufacturers since it is a warning technology, this question remains to be addressed. If federal regulations are developed, compliance with such regulations could be helpful to manufacturers in arguing a federal preemption defense.
Chemical: Causation for New Chemicals
In toxic tort cases involving chemical exposure, causation is often the key battleground between plaintiffs and defendants. With new chemicals being developed and emerging claims related to long-term or low-dose exposures, the causation analysis is becoming even more complicated.
The dose-response relationship is a fundamental element of toxicology. Dose, which results from exposure to a chemical, is a function of the concentration of the chemical during the exposure and the amount of time of the exposure. The response is the result of the exposure to a particular dose. For new chemicals, information about this relationship often is limited. While pharmaceutical products undergo studies to determine their potentially harmful effects, less information about the potential effects on human health is required for new chemicals that are not intended for medical use. For low-dose claims, or claims involving long term exposure to low concentrations of chemicals, the only dose-response data available are often from studies involving higher doses for short periods of time. Extrapolating the conclusions of these studies to low-dose or long term exposure claims can be a subject of credibility attacks and admissibility arguments. See Fed. R. Evid. 702 and Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993). All of this can be further complicated by the latency of some potential chemical exposure effects.
How the courts further adapt the traditional tort causation analysis (cause-in-fact and proximate cause), and the general and specific causation analyses for toxic torts, to claims involving new chemicals, low doses and/or long-term exposure is an area of the law to watch in 2014.
Asbestos: New Requirements Promote Transparent Asbestos Bankruptcy Trusts
The House of Representatives recently passed the Furthering Asbestos Claims Transparency (“FACT”) Act, which aims to protect asbestos victims by increasing the transparency of asbestos bankruptcy trusts.
In 1994, Congress amended the bankruptcy code to allow for the creation of trusts for the benefit of those with asbestos-related injury claims against bankrupt entities. Collectively, these trusts now hold approximately $18 billion dollars. While the creation of the asbestos trusts has enabled the continued payment of claims to asbestos claimants, the asbestos trust system has been widely criticized for being susceptible to fraud and abuse. Critics of the asbestos trust system point to the following main problems: the lack of sufficient due diligence procedures, the trusts’ control by the plaintiffs’ bar, and the lack of public accountability.
The FACT Act, H.R. 982, targets these problems by requiring that each trust file quarterly reports with the bankruptcy court that describe each claim the trust has received and the basis for any payment made to that claimant (excluding any confidential medical information or Social Security numbers). The Act also requires that such reports be provided to any party to an action concerning liability for asbestos exposure.
The reporting required by the FACT Act will allow solvent defendants involved in asbestos litigation to determine whether the claims asserted in their case conflict with or duplicate claims already filed with the trusts. The Act will not interfere with or delay asbestos victims’ ability to file legitimate lawsuits or trust claims. Furthermore and most importantly, such requirements would help to ensure that trusts have sufficient funds to pay legitimate claims by rooting out fraud in the system.
Consumer Products: Damages Proof Not Necessary for Class Certification?
The Whirlpool v. Glazer litigation continues to shape the class certification landscape in the Sixth Circuit and beyond. At issue is the proof needed in order to certify a class action. The Ohio District Court certified a class based upon the allegations of damages made in the case, rather than requiring proof of those damages for class members to be submitted. The Sixth Circuit affirmed. The U.S. Supreme Court issued a “GVR” order (granting certiorari, vacating the Sixth Circuit’s decision without finding error, and remanding for further consideration) in light of the Court’s decision in Comcast v. Behrend , 133 S. Ct. 1426 (2013) (holding certification inappropriate when the plaintiff fails to establish a class-wide measure of damages attributable to the alleged theory of liability).
Many commentators viewed the GVR order as a strong hint that the Supreme Court did not, in light of Comcast, view Whirlpool as class-action material. On remand, the Sixth Circuit, however, found the two cases easily distinguishable. See Whirlpool v. Glazer , 722 F.3d 838 (6th Cir. 2013). In particular, the Sixth Circuit emphasized that while the district court in Comcast certified a class to determine both liability and damages, the district court in Whirlpool reserved all issues concerning damages for individual determination. See id. at 860. The Sixth Circuit’s dismissal of Comcast under the facts before it thus begs various questions regarding the Supreme Court’s intended impact of Comcast on individualized damages calculations and class certification.
Whirlpool has once again petitioned for certiorari to the U.S. Supreme Court presenting the following questions for determination:
- Whether the Rule 23(b)(3) predominance requirement can be satisfied when the court has not found that the aggregate of common liability issues predominates over the aggregate of individualized issues at trial and when neither injury nor damages can be proven on a class-wide basis; and
- Whether a class may be certified when most members have never experienced the alleged defect and both fact of injury and damages would have to be litigated on a member-by-member basis.
We are following the Supreme Court’s decision whether to grant Whirlpool’s certiorari petition for any developments that may affect the class certification landscape in the Sixth Circuit.
Pharmaceutical/Medical Device: New Federal Legislation of Compounding Pharmacies
The Drug Quality and Security Act (“Act”) became law on November 27, 2013. This legislation is designed to: (i) clarify the Food and Drug Administration’s (“FDA”) oversight responsibilities for both small- and large-volume compounding pharmacies; and (ii) require higher quality standards for these same facilities, in particular for large-volume compounding pharmacies. Among the Act’s requirements are an annual registration requirement for any outsourcing facility, a biannual reporting requirement of what drugs are compounded at the facility, and submission of adverse event reports.
Food: Sugar Lawsuits Likely to Increase in 2014
The FDA recently issued revised draft guidance on medical foods. The Orphan Drug Act (21 U.S.C. 360ee(b)(3)) defines a medical food as “a food which is formulated to be consumed or administered enterally under the supervision of a physician and which is intended for the specific dietary management of a disease or condition for which distinctive nutritional requirements, based on recognized scientific principles, are established by medical evaluation.” The FDA’s draft guidance can be found here.
The draft guidance has taken some people in the food industry by surprise because the FDA excluded foods aimed at controlling diabetes from being eligible for formulation and marketing as medical foods. With the inclusion of the word “formulated” in the definition, a food that naturally does not cause a spike in blood glucose would not constitute a medical food. The effect of this guidance is that companies targeting consumers who are trying to manage diabetes or pre-diabetes must use words like “low glycemic index” or “healthy blood glucose” rather than mentioning “diabetes.”
The consensus appears to be that the United States is in the midst of an obesity epidemic and the number of people with diabetes is steadily rising, so sugar consumption is on the top of consumers’ minds. As companies attempt to market the attributes of their food related to sugar, consumers and the Plaintiffs’ bar will take notice. Consumer fraud class actions, which were recently focused on “natural” claims, will likely bring blood sugar management claims into the fray.
For more information about the content of this alert, please contact one of the authors.