Toxic Tort Litigation Blog : Toxic Tort Lawyer & Attorney : Epstein Becker Green Law Firm : Product Liability, Contamination, Pollution

In an Opinion and Order, dated May 31, 2013, the Hon. Sandra J. Feuerstein granted summary judgment to a defendant pesticide manufacturer after determining that plaintiff''s expert failed to meet the reliability requirements of Rule 702 and Daubert, in Mallozzi v. EcoSMART Technologies, Inc., E.D.N.Y., no. 11-cv-02884, 5/31/13.

Defending toxic tort claims against pesticide manufacturers is always challenging because pesticides, by their very nature, are designed to cause injury and death to pests. Plaintiff’s counsel is only too willing to permit the jury to infer that a pesticide product that can be harmful to bugs can also be injurious to humans. Therefore, if a defendant pesticide manufacturer can subject plaintiff’s expert to Daubert scrutiny prior to trial, it may be possible to dispose of scientifically suspect cases before they reach trial.

In Mallozzi, plaintiff claimed that he developed severe gastroesophageal reflux disease (“GERD”) and laryngopharyngeal reflux (“LPR”) as a result of an inhalatory exposure to EcoSmart Organic Home Pest Control, which contains 1% peppermint oil.

However, it was not until plaintiff returned from dinner at an Italian restaurant the night of the alleged pesticide exposure that he experienced nausea, a racing heartbeat and burning in his stomach and chest. Plaintiff obtained the expert opinion of Dr. Barry S. Levy, an occupational and environmental health physician and epidemiologist, that his exposure to peppermint oil caused his LPR by relaxing his lower esophageal sphincter.

In its motion for summary judgment, the defendant argued that Dr. Levy’s testimony was unreliable and did not meet the Daubert standard primarily because Dr. Levy was unable to establish the amount of peppermint oil inhaled.

The articles that Dr. Levy relied upon discussed ingestion of peppermint oil rather than inhalation, which was the case here. Moreover, none of the articles relied upon by Dr. Levy addressed whether inhalation of a substance containing 1% peppermint oil, over the course of a matter of minutes, could relax the lower esophageal sphincter or cause LPR.

In part, defendant's motion was successful because defendant’s counsel laid the groundwork for the motion by obtaining helpful testimony from plaintiff's expert in deposition. During Dr. Levy’s deposition, defendant's counsel elicited testimony that none of the scientific articles relied upon by Dr. Levy involved inhalation of peppermint oil.

In addition to establishing a strong record in deposition, defendant’s counsel was also able to raise issues concerning the cause of plaintiff’s illness by obtaining a detailed medical history of plaintiff. The court rejected Dr. Levy’s reliance on the temporal proximity between plaintiff’s exposure to the product and the onset of plaintiff’s symptoms. In particular, the court observed that plaintiff began experiencing reflux hours after having a heavy meal of “spaghetti with seafood.”

Indeed, plaintiff had been hospitalized in 2001 for esophageal reflux after eating a donut and drinking coffee. On another occasion, he had experienced reflux prior to April 2010 when he had apparently overindulged on linguini with clam sauce. This prior medical history no doubt predisposed the court to believing plaintiff's causation claim was suspect. The court found that Dr. Levy had “failed to justify his conclusion that reflux specifically caused by inhalation of the product caused plaintiff’s LPR and not reflux caused by plaintiff’s persistent GERD, both before and after April 19, 2010.” 
 

It is the dream of many landowners in the United States to one day have both oil wells and wind turbines on their land. For this happen, however, landowners must play an active role in keeping oil and wind companies from trying to overreach each other in concurrent development of the land.

In their excellent article published by the University of Denver Sturm College of Law titled, “Jousting at Windmills: When Wind Power Development Collides with Oil, Gas, and Mineral Development,” authors K.K. DuVivier and Roderick E. Wetsel suggest that landowners will have to act as referees in an energy “Super Bowl” if they are to be successful in having concurrent wind and oil development on a single piece of property.

As DuVivier and Wetsel discuss, the spread of wind farming across mineral-producing states has raised concerns among mineral rights owners because of the large swaths of land needed for wind development. Today’s turbines, like those produced by General Electric, rise to a height of 262 feet at their hub and have a rotor radius of approximately 125 feet. Although the surface footprint of each turbine is relatively modest in relation to its height, wind development requires more extensive surface use than traditional oil and gas development due to: (1) turbine spacing; (2) buffer zones; (3) other surface uses such as roads, substations, operations and maintenance facilities, and laydown yards; and (4) overhead and underground transmission, collection and distribution lines.

Significantly, the turbines are linked by a spiderweb of underground and overhead transmission, collection and distribution lines. Although these lines may take up little surface space, they may interfere with concurrent use of the same land for oil, gas or mineral exploration and development.

Although there is a well developed common law concerning whose rights are superior to whom in any given situation, a landowner is much better off altering these common law approaches by making express agreements with wind project developers and prospective mineral estate lessees. If the landowner, as grantor, can negotiate clauses in the lease agreements that put pressure on lessees to work together, it may eliminate some of the battles that can occur between wind and mineral developers in the absence of clear contractual terms.

Over the years, mineral companies have come into conflict with surface owners and other lessees such as farmers, ranchers and hunters. These conflicts are due primarily to the conflict rising from the severance of the surface estate from the mineral estate such that surface owners frequently do not own the minerals underneath their own property. Although the mineral lessee may interfere with a landowner’s ranching or farming operation, many courts view it as unreasonable to allow the mineral estate owner to give way to grazing animals and not be allowed to develop the underlying minerals, i.e., by not drilling wells, building roads, powerlines, flowlines and tank batteries.

Unfortunately for the surface owner, the laws of certain states, such as Texas, require the landowner to provide the mineral lessee a large measure of deference to permit the development of mineral resources.
 

Wind power can help address the nation’s compelling demand for electric power without increasing greenhouse gas emissions or enlarging our carbon footprint. Environmental activists, who are critical of the use of fossil fuels due to their perceived negative impact on the environment, are generally supportive of developing wind power as an alternative energy source. Wind is renewable, sustainable and non-polluting.

Why is it then that environmental groups sometimes oppose the development of wind power in the courtroom? From a global or even regional perspective, environmentalists should be rallying behind wind power, not opposing.

The short answer is that any commercial-scale, land-based development project within the United States is likely to involve a matrix of regulatory and environmental issues that arise during the siting process. Wind farm siting often involves addressing issues concerning aesthetics, noise and wildlife impacts. In many instances, environmental groups have joined local activists and Nimbies in opposing a wind power development.

A more responsible role for an environmental group, which should recognize the benefits of wind power, should be to mediate siting disputes rather than oppose development. From the environmentalist’s perspective, the more available wind power to generate electricity the better.

Many of the so-called environmental groups that oppose wind power are actually not environmentalists at all, but single purpose organizations whose sole object is to oppose wind development. Most environmental groups have an agenda that balances the pros and cons of various types of energy. However, these single purpose groups do not advocate in favor of anything.

For example, Friends of Maine’s Mountains claim to be dedicated toward working to “foster a civil and fact-based debate with the goal of exposing the true costs of mountain-based industrial wind development in Maine.” This group seeks donations to further its work in “shaping a sound, scientific and economics-based energy policy for the State of Maine.” However, a review of its website demonstrates that it offers neither constructive energy policies nor recommendations for keeping Maine on the energy grid. Rather, it is a NIMBY group that advocates the view that any public or governmental support for wind power is misplaced.

In Friends of Maine’s Mountains v. Board of Environmental Protection, 61 A.3d 689 (Me. 2013), Friends of Maine’s Mountains, along with other environmental groups, opposed the approval of a wind energy project near a lake and multiple homes. The Maine Department of Environmental Protection (“DEP”) set the appropriate nighttime noise level and refused to treat Webb Lake, which is located near the project, as a “scenic resource of national resource.”

The Board of Environmental Protection (“BEP”) upheld DEP’s approval of the wind energy project. However, in doing so, BEP agreed to a higher noise threshold than what it had previously agreed to for wind projects generally. Plaintiffs brought suit to block the plan, claiming that BEP abused its discretion and violated the Maine Constitution.

On appeal, the court agreed that BEP had abused its discretion by approving the higher noise threshold. On the basis of this determination, the case was remanded for further consideration of the appropriate nighttime decibel level.  However, the decision represents a considerable setback for Friends of Maine’s Mountains (and other neo-environmentalists) despite the remand on the noise level issue.

The Supreme Judicial Court rejected plaintiffs’ constitutional arguments that: (1) the Maine Wind Energy Act denied plaintiffs equal protection by denying protection for lakes listed among “Maine’s Finest Lakes”; (2) the Wind Energy Act violated the separation of powers clause of the Maine Constitution; and (3) DEP and BEP denied plaintiffs’ due process rights because of demonstrated bias. The court  also rejected  plaintiffs’ argument that Webb Lake, despite its natural beauty, was deserving of protective “scenic resource” status. The Court determined that legislative action, not administrative orders, determines what lakes in Maine are protected as “scenic resources.”

In addition, the court flatly rejected plaintiffs’ argument that the Wind Energy Act’s criteria for assessing visual impact are overly vague and therefore violative of the Separation of Powers Clause. The criteria in dispute were the six factors that the Board considers when making its determination regarding a wind energy project’s impact on scenic resources.

The court held that a statute is not constitutional merely due to difficult application. For example, in an earlier case, the court grappled with the difficulty of defining an “annoying” dog bark. As difficult as it is to judicially determine when and under what circumstances a bark becomes an annoyance, this criterion was upheld as constitutional.

Maine’s Legislature enacted the Wind Energy Act as a means to promote wind as a renewable energy source and streamline the permitting process for wind energy. Despite the opposition of the NIMBY groups like Friends of Maine’s Mountains, the Supreme Judicial Court had previously held that the “state interest in facilitating the rapid development alternative, renewable energy resources” is a legitimate interest that rationally relates to provisions in the Wind Energy Act.

There is a constructive role for environmental activists to play in the wind power siting discussions, but single-minded opposition to the expanded use of wind power as an energy source is misplaced. These so-called “environmentalists” would better serve their stakeholders by engaging in constructive discussion rather than running to the courthouse. 

 

In Gresser v. Dow Chemical Co., Ind. Ct. App., No 79A02-1111-CT-1014, 4/30/13, the plaintiffs in this toxic tort case alleged that their children developed a variety of illnesses after a purported exposure to Dursban TC in their home following a pesticide application by the co-defendant pesticide applicator.

Plaintiffs alleged that defendants Dow Chemical Company and Dow Agrosciences (collectively, “Dow”) failed to use reasonable care to instruct about the use of the product; warn about its danger; and appropriately test the design of the product. Following discovery, both plaintiffs and Dow filed motions for summary judgment.

On April 13, 2013, the Indiana Court of Appeals reversed a trial court order granting Dow summary judgment on FIFRA preemption grounds, but granted Dow summary judgment on the basis of the rebuttable presumption in Indiana’s product liability statute (the “IPLA”) that a product is not defective if it complies with federal or Indiana standards or regulations. Thus, Dow obtained from the IPLA presumption relief that it could not obtain by preemption.

Ind. Code § 34-20-5-1  provides a rebuttable presumption that a product which caused physical harm is not defective, and the manufacturer or seller of the product is not negligent, if before the sale by the manufacturer, the product “complied with applicable codes, standards, regulations, or specifications established, promulgated, or approved by the United States or by Indiana, or by an agency of the United States or Indiana.”

In determining that Dow was entitled to the statutory presumption, the court held that Dursban TC’s compliance with both FIFRA and Indiana law had a significant impact under IPLA’s consumer expectation-based product liability regime because the risk of harm had been evaluated by agencies with the duty of monitoring the effects of Dursban TC. Furthermore, Dursban TC’s labeling and warnings had been approved by experts.

On the basis of this ruling, the appellate court determined that the trial court correctly granted Dow summary judgment motion on plaintiffs’ failure to warn claims
 

This decision is significant because Dow was able to obtain through the use of the statutory presumption the same end result that it would have obtained had the appellate court found that the plaintiff’s claims were subject to preemption. Other states, including New Jersey, have similar provisions in their statutes in varying contexts.  In New Jersey, the New Jersey Product Liability Act, N.J.S.A. 2A:58C-1 et seq., specifically provides an evidentiary presumption in the favor of drug manufacturers against failure-to-warn claims:

"If the warning or instruction given in connection with a drug or device or food additive has been approved or prescribed by the federal Food and Drug Administration under the Federal Food, Drug and Cosmetic Act, 52 Stat. 1040, 21 U.S.C. Sec. 301 et seq., … rebuttable presumption shall arise that the warning or instruction is adequate."

Thus, product liability practitioners, in both the FDA and FIFRA contexts, should be mindful of the importance of developing evidence in discovery and at trial concerning the regulatory approval process and the  evaluations performed by the agency of the appropriateness of the product warnings, directions for use, and of the product's safety and efficacy.
 

On April 10, 2013, I participated in “Justice Speaks,” an event sponsored by the Justice Action Center at New York Law School on hydraulic fracturing.

 Joining me on the podium was Daniel Raichel, a Project Attorney with the Natural Resources Defense Council (“NRDC”), and the lead attorney with the newly formed Community Fracking Defense Project. Pursuant to this initiative, NRDC provides legal assistance to towns and local governments in potential shale drilling zones upstate that seek to prohibit hydrofracking in their communities.

 My presentation concerning hydrofracking centered broadly around the following points:

1.  The technology under discussion, by which oil and gas is extracted from shale deposits, is a game-changer. Due to technological advances, the use of horizontal drilling and hydrofracking has had a transformative effect on oil and gas exploration;

2.  The discussion over hydrofracking is not merely an environmental debate. What is at stake has important economic and social implications, not just for the United States, but for the entire world. The extent to which this technology can make the United States energy independent has significant national security and foreign policy ramifications.

 3.  Among mainstream environmentalists, hydrofracking is no longer a “Yes/No” question. Both industry and the environmental community recognize a need for more comprehensive regulation and environmental oversight. This recognition has resulted in significant joint efforts to develop standards and best practices.

The players on both sides of the debate have come together to find common ground. For example, a partnership has emerged between energy firms involved in hydraulic fracturing, including Chevron and Royal Dutch Shell, and environmental groups that are often opposed to fossil fuel development, including the the Environmental Defense Fund, the Clean Air Task Force, and the Group Against Smog and Pollution.

These entities jointly established the Center for Sustainable Shale Development (“CSSD”), which will provide independent and voluntary evaluations and certifications of shale gas developers. CSSD will establish standards to limit flaring, maximize water recycling, and reduce the toxicity of injection fluids, among other initiatives.

There is recognition by both the environmental community and industry that industry made a number of missteps early on and did not do as good a job as it could have in bringing this new technology online. Part of the problem was that regulators in many states were overwhelmed by the increased industrial activity and did not have the manpower or the necessary regulations on the books to properly oversee the activity that was occurring. Another problem was that the horizontal drilling technology was developing so rapidly. However, as public scrutiny on horizontal drilling has increased and as the industry has become more mature with the passage of time, the likelihood of serious environmental problems occurring due to hydrofracking has significantly diminished.

Mr. Raichel argued convincingly that there remain many gaps in regulatory oversight of hydraulic fracturing, particularly in existing statutory schemes such as the Clean Water Act and the Clean Air Act. However, New York’s deliberate and painstaking approach to understanding the potential impacts of hydrofracking on human health and the environment will  hopefully result in a well-regulated program once permits are issued and gas exploration finally gets off the ground.

The publication of “Diet for a Small Planet” in 1971 by Francis Moore Lappé was a conscious-raising event for many Americans. The book makes the case that grain-fed meat production is wasteful and a contributor to global food scarcity. The author argues that eating a planet-centered diet means choosing what is best for the Earth and our bodies – a daily action that reminds us of our power to create a more rational world. The book’s most significant conclusion is that world hunger is not caused by a lack of food but by ineffective food policy. A vegetarian diet can  produce sufficient protein for one’s nutrition, according to the book.

Fast forward some forty years to today. The organic food movement has transformed the way many Americans think about food and has had a significant impact on food shopping. Organic food has become a multi-billion dollar industry with significant influence in education and public policy, and on law makers. We have certainly become more educated consumers by understanding how food products are manufactured and processed, which is an important part of the organic food industry's message. But as Business Week put it, the organic food industry is a "far cry from the old food co-ops, wheatgrass, tofu, and alfalfa sprouts options, organic food and the industry supporting it has grown up".

There is a certain romanticism about the organic farming, which leads some to ask why can’t we just go back to the way we farmed in the 19th century? From a societal standpoint, what are the pros and cons of organic food vs. “genetically modified” food? How can we differentiate between the myths about the food we eat and the facts? In an article in the Wall Street Journal on December 24, 2012, John R. Block, the former secretary of the Department of Agriculture (1981-1985) tackles this issue head on.

Food Safety  According to Mr. Block, there has never been a single instance in which genetically modified food has caused an illness or contributed to a contaminated product. Nevertheless, you can open a newspaper or a website on any given day and be barraged by scientific-sounding warnings that gene-altered substances can enter our bodies and wreak genetic havoc.  One such article is titled, "Is Genetically Modified Food Killing Us?" or another simply "Genetic Roulette".  

 In fact, America’s farmers and ranchers have built a sophisticated food-safety infrastructure to improve the health of their animals and deliver fresh, clean produce. There is no evidence that organic food is “better for you” from a safety perspective. As a result of the use of biotechnology in agriculture, genetically modified crops taste better, take less time to mature, provide increased nutrients, yields and stress tolerance, and have improved resistance to disease, pests, and herbicides.  According to the Human Genome Project, on the horizon are bananas that produce human vaccines against infectious diseases such as hepatitis B and cows that are resistant to Mad Cow Disease. 

Crops from biotech seeds are identical to those from non-biotech seeds. In addition, organic foods are identical in nutritional value to non-organic foods.   Numerous studies have shown no nutritional difference between commercially available GMO (short hand for "genetically modified organisms") and non-GMO foods.

Food Choices  Not that long ago, what Americans ate depended on the farmer’s skill, the weather and other unpredictable variables. Pre-industrial agricultural yields were low before the introduction of machines, fertilizers, plant and animal breeding, pesticides and genetic engineering. We are no longer limited to a small variety of local and seasonal food. Modern agriculture is simply more productive, providing more variety at lower prices. As romantic as it would be to only eat food grown on a farm where two horses pulled a two-row corn planter, it probably wouldn’t feed the world's population for all that long.

Environmental Stewardship  Today’s farmers use agricultural practices that improve the sustainability of the land and limits the use of herbicides, pesticides and fertilizers. The goal of the much of the research into genetically engineered crops is higher yield with less water and chemical use.

Sustainability  Most significantly, the large scale sophisticated farming of today is better equipped to sustain the world’s growing population.

According to Mr. Block, America’s farmers grow five times as much corn as they did in the 1930’s on 20% less land. To meet the goal of helping to feed a global population of what the United Nations estimates will be eight billion people in 2030, our farmers and ranchers will have to use the latest and most effective technologies to produce more with less.  

I support organic and conventional farming. I love shopping at Whole Foods. I shop at every Farmer's Market I come across.  Thanks to the organic farming movement, our collective consciousness about food  has been heightened.  However, a higher consciousness alone cannot meet the world’s food demands. The underlying assumptions are different than they were forty years ago, but the basic premise holds true today.  Effective food policy remains the key to feeding the planet. A strong first step in developing effective food policy is separating fact from fiction when it comes to biotechnology and American agriculture.
 

We have written previously about the increasing acceptance by courts to entertain the use of Lone Pine orders as a case management tool. For example, in the Happyland Social Club Fire Litigation, which involved 87 wrongful death claims, the Bronx Supreme Court’s entry in 1992 of a Lone Pine order was instrumental in obtaining dismissals on behalf of defendants whose products plaintiffs could not identify as being in the club at the time of the fire.

More recently, we discussed the use of a Lone Pine order by a Colorado state court in a hydrofracking toxic tort case. In that matter, the court dismissed the claims of plaintiffs who failed to submit sworn expert affidavits establishing a causal relationship between their illnesses and hydrofracking chemicals they claimed to have been exposed to.

Increasingly, Lone Pine orders are being employed as a case management tool in pharmaceutical mass tort cases. Most recently, Judge John F. Keenan, who presides over the Merck Fosamax Products Liability MDL in the SDNY, issued a sweeping Lone Pine order on November 20, 2012.

In its Opinion and Order, the court considered whether to apply the Lone Pine order to all of the plaintiffs’ cases or merely a sub-set. In evaluating this issue, the court observed that was at least some medical or scientific evidence that Fosamax could cause osteonecrosis of the jaw (known as “ONJ”). In light of this purported evidence, the court refused to apply the Lone Pine order to those plaintiffs alleging that they suffered from ONJ.

Why did Judge Keenan enter the Lone Pine order in 2012 when he had rejected earlier efforts by Merck to enter a Lone Pine order in 2010 and 2011? In short, he had become skeptical about the bona fides of plaintiffs’ claims and the candor of Plaintiff’s Steering Committee. “Plaintiffs’ habit of dismissing cases after both parties have expended time and money on case-specific discovery demonstrates that this MDL is ripe for a Lone Pine order.”

Based upon plaintiff’s pattern of behavior, the court said it had “reason to believe that spurious or meritless cases are lurking in the some 1,000 cases on the MDL docket.” The court noted that “more than 50% of the cases set for trial had been dismissed by plaintiffs as had some 31% of cases that had been selected for discovery.

Judge Keenan has been hearing cases in the SDNY since September 1983. Having presided over trials for thirty years, he has developed good instincts in determining when judicial resources are being squandered. Although he did not come right out and state as much, he had clearly become frustrated by Plaintiff’s Steering Committee wasting the court’s time and forcing Merck’s trial counsel to jump through unnecessary hoops. 

Apart from the litany of stringent (and precedential) Lone Pine requirements imposed upon the plaintiffs to whom the order applied, the decision is helpful because it cites with approval the decisions of multiple other courts overseeing complex pharmaceutical MDLs using Lone Pine orders to streamline their dockets. The cited cases include: In re Avandia Mktg., Sales Practices and Prods. Liab. Litig., MDL No. 1871 (E.D. Pa. Nov. 15, 2010); In re Zyprexa Prods. Liab. Litig., MDL No. 1596 (E.D.N.Y. June 2, 2010); In re Bextra and Celebrex Mktg. Sales Practices and Prod. Liab. Litig., MDL No. 1699 (N.D. Cal. Aug. 1, 2008); In re Vioxx Prods. Liab. Litig., MDL No. 1657 (E.D. La. Nov. 9, 2007, July 6, 2009); In re Rezulin Prods. Liab. Litig., MDL No. 1348 (S.D.N.Y. May 9, 2005); In re Baycol Prods. Liab. Litig., MDL No. 1431 (D. Minn. Mar. 18, 2004).

In ruling on the Lone Pine application, the court rejected the Plaintiff's Steering Committee’s suggestion that the MDL had outlived its usefulness and that the court should adopt an “exit plan” and remand all of the cases for trial rather than entertain a Lone Pine order. The court also rejected Plaintiffs’ argument that a Lone Pine order should only be entertained after a global settlement was reached.

The court reasoned that the primary purpose of Lone Pine orders is to eliminate meritless cases, which is at best only tangentially related to the status of settlement negotiations. Whether the MDL culminates in a global or partial settlement, or the remand of cases back to their home districts, the court believed that a Lone Pine order would boost efficiency under either scenario. “In the event the parties reach a settlement, the elimination of spurious claims will ensure that only plaintiffs with meritorious cases are compensated. If the MDL concludes without settlement, and cases are transferred back to their home districts, Lone Pine will ensure that the home districts receive only viable cases.”
 

In product liability litigation, a single tactical advantage may determine whether the case is won or lost. Often, being able to anticipate an issue before it arises and addressing it in the Case Management Order may be critical.  This is particularly the case  in pharmaceutical mass tort litigation.

In pharmaceutical product liability cases, the plaintiff’s treating physician is a critically important witness. If one of the parties in the case  is permitted to “woodshed” the treating physician, it gives that party an enormous tactical advantage.  

For example, if only the plaintiff’s’ attorney can interview the treating physician and is able to control what information that the physician is able to see, such as defendants internal documents, plaintiff may have an enormous advantage when the physician’s deposition takes place. The physician's opinion at deposition concerning whether a drug's prescribing information provided an adequate warning may well be influenced by his prior review of internal company documents that she never would have seen but for review of those documents with her patient's lawyer.

The plaintiff bar is very concerned about a defendant’s ability to be in touch with plaintiff’s treating physicians. To them, control of their client’s prescribing physician is sacred ground. 

In an excellent article on this subject titled “Ex Parte Communications with Healthcare Providers in Pharmaceutical  Mass Torts--Highlights of Recent Rulings,” Lela Hollabaugh, a partner in the Nashville office of Bradley Arant Boult Commings LLP, discusses how plaintiffs and defendants lawyers continue to jockey for position with regard to their ability to talk with treating physicians and other healthcare providers outside of the presence of opposing counsel. Increasingly, courts handling pharmaceutical mass tort litigation are entering case management orders that directly address communications with healthcare providers by all parties. Therefore, it is critically important for defense counsel to make the court aware of their concerns as early in the case as possible.

On their side, plaintiff’s counsel seek to prohibit all communications between defense lawyers and healthcare providers regardless of the subject matter. Plaintiffs vehemently argue that such communications are prohibited by the physician-patient privilege.

On the other hand, defense counsel often seek both the opportunity to talk with the doctor about the patient’s care and work to prevent the plaintiff from “woodshedding” the doctor with confidential documents from the defendant company’s internal files.

According to Ms. Hollabaugh, a frequently cited decision on this issue is that of Judge Eldon Fallon in the Vioxx litigation. In re Vioxx Products Liability Litigation, 230 F.R.D. 473 (2005).

Judge Fallon’s decision gave significant deference to the attorney-client privilege and reasoned that defendants had access to the prescribing physician’s information through medical records, depositions and defendant’s sales representative’s records. Judge Fallon’s decision does not place any limitations on plaintiff’s ex parte discussion with these private physicians. Other decisions, particularly in the MDL context, have done more to even the playing field between adversary counsel.

Ms. Hollabaugh’s paper discusses a number of decisions that have placed a limit on the part of the communications with treating physicians. These decisions prohibit plaintiff’s counsel from discussing with their client’s physicians anything other than “the particular plaintiff’s medical condition at issue in the current litigation”. In at least one case cited by Ms. Hollabaugh, plaintiffs agree to this limitation during oral argument over case management issues. 

In another important MDL, In Re Yasmin and Yaz (Drospirenone Marketing, Sales Practices and Products Liability Litigation, plaintiff’s counsel was permitted to provide treating physicians with documents not previously seen by physicians, including confidential and internal documents of the defendant, but plaintiff was required to provide detailed descriptions or copies of all documents shown to the physician to the defendants at least 72 hours before the doctor’s deposition. In addition, the plaintiffs were not permitted to provide notes, highlighting or underlining to the documents provided to the physician. 

This case law cited in the article reflects that courts recognize that the parties before the court are seeking to gain an advantage for their clients by controlling the information provided to a future trial witness. While Ms. Hollabaugh advises that we may expect the courts to continue to protect the physician-patient privilege would exist, that privilege does not and should not be permitted to extend to allow the “woodshedding” of physicians with documents and information that they have never seen, known and that have no bearing on their treatment of the individual plaintiff.  Her article providesa discussion of how several MDL courts have addressed these concerns.

For the practitioner, Ms. Hollabaugh has highlighted an important issue for defense counsel that may not otherwise be picked up during the routine course of defending a pharmaceutical product liability case. This case law should apply not just in mass tort litigation, but in “one off” pharmaceutical product liability cases as well. 

The Second Circuit yesterday rendered its much-anticipated decision in United States v. Caronia, the most important Food Drug and Cosmetics Act enforcement case pending in the country. Not only did  the court’s 2-1 holding determine that the First Amendment bars the criminal prosecution of pharmaceutical manufacturers or their sales representatives for truthful, non-misleading speech promoting the lawful, off-label use of an FDA-approved drug affect criminal FDA enforcement cases, it also has great potential impact on False Claims Act cases.

Stuart Gerson, an Epstein Becker & Geen partner in Washington, D.C., who has defended a number of significant  False Claims Act cases (and qui tam cases), opined  this morning that "the Caronia decision is revolutionary, dealing the government a very hard blow in its effort to quash all off-label promotion, and incidentally to try to limit off-label use, irrespective of the fact that such use is a lawful matter to be decided by doctors and patients. And that is the point, since such use is lawful, making truthful statements about such use would infringe allowable speech."

According to Gerson, the Second Circuit "read the FDCA in a hyperliteral way, holding that the misbranding provisions of the Food Drug and Cosmetics Act do not prohibit such truthful promotion of an off-label prescription drug that otherwise is approved, and thus avoided having to make what it also held would have been the constitutional determination that blocking such speech would have violated the First Amendment."  Caronia adopts a view that pharmaceutical companies and trade associations have attempted to advance for years. Gerson believes that the issue  might well reach the Supreme Court.

In any event, Caronia will stand as an important precedent, not only in criminal cases like this one, but in civil fraud cases as well where the government and qui tam relators have argued that off-label promotion is tantamount to false certification and hence a violation of the federal False Claims Act.

Given the importance of the case, it is likely that rehearing en banc will be sought and, perhaps, a petition filed by the government with the Supreme Court. However, it also may be the government’s strategy to follow a policy of non-acquiescence and litigate the point in other circuits, hoping to create a split. In any event, this is a case that pharmaceutical and medical device companies need to watch closely.
 

In an article titled, “Introduction to Hydraulic Fracturing Natural Gas Exploration,” Rebecca Jo Reser, an IADC member and partner at the San Antonio, Texas law firm of Davidson Troilo Ream & Garza, discusses the potential burden that hydraulic fracturing imposes on water resources in South Texas.  In areas of South Texas stricken by drought, the issue of water allocation balances signficant strides in economic development and employment attributable to energy exploration and the interests of growers and others who fear that fracking activity may draw down too large a share of scarce water resources.

According to Reser, hydrofracking drilling and production companies compete for scarce water supplies in areas of South Texas,particularly in the Eagle Ford Shale, where drought has resulted in widespread pasture losses, crop failures and shortages of water in reservoirs, rivers and wells.   Based upon the tone of the article, it would appear that the battle lines are being drawn in Texas along the fault lines of this issue.

 Reser writes, "In an area known for drought and scarcity of water, the fact that this much valuable water will be pumped out, used and then disposed of forever in deep injection wells is something every South Texas resident should be concerned about."

But Chesapeake Energy, an energy company involved in deep shale development in the Eagle Ford Shale, strongly disputes that industry is using too much of the area’s water supply. According to a Chesapeake Energy Fact Sheet, the volume of water necessary to drill and fracture Eagle Ford deep shale wells represents a very small percentage of the total water resources used in the Eagle Ford Shale.

Citing Texas Water Development Board statistics, Chesapeake Energy states that the primary water users in Eagle Ford Shale are irrigation (approximately 70%) and municipal/public water supply (approximately 26%). Moreover, the company observes that its operations differ notably from other uses because it is temporary, occurring only once during the drilling and completion phase of each well. Unlike agricultural uses, use of this water does not represent a long term commitment of the resource.  According to a San Antonio Express-News article, last year, the Eagle Ford contributed $25 billion in total economic output in a 20-county South Texas region and provided 47,097 full-time jobs, according to statistics provided by UTSA. Thus, the econoimic benefits of drilling in Eagle Ford Shale are both measurable and significant.

Closer to home, in and around the Marcellus Shale region, the impact of water withdrawals for hydraulic fracturing on the Upper Delaware River and in the Delaware River Basin is the subject of ongoing investigation; however, the discussion has largely focused on environmental issues rather than on competition over scarce  resources.
 

Opponents of fracking argue that it is necessary for the public, and health and safety professionals, to have full access to information on the constituents of hydraulic fracturing fluids and waste. In a report released on July 26, 2012 titled, “State Hydraulic Fracturing Disclosure Rules and Enforcement: A Comparison,” the Natural Resources Defense Counsel (“NRDC”) argues that no state can boast a comprehensive chemical disclosure requirement for oil and natural gas producers using hydraulic fracturing. In an article, dated July 31, 2012, Bloomberg BNA Toxics Law Reporter reported on NRDC’s assertion that “each of the state rules we analyzed has significant gaps in its requirements.”

In particular, the NRDC report zeroes in on trade secret exemptions, which it claims creates loopholes in most state disclosure rules. According to the report, not only may the companies decide what information is considered proprietary and should not be but, in many cases, the states have not consistently enforced the disclosure requirements on the books.

The oil and gas industry argues that state chemical disclosure rules provide strong evidence that state regulation is adequate and that new federal standards for disclosure are unnecessary.

NRDC’s report provides a helpful state-by-state analysis of trade secret exemptions to disclosure requirements and under what circumstances disclosure can be restricted.  For example, NRDC reports that six states provide for access to trade secret information by health care providers. These states are: Arkansas, Colorado, Montana, Ohio, Pennsylvania and Texas. Four of the states (all but Ohio and Arkansas) require that health care providers sign a confidentiality agreement before gaining access to the information, except in emergency situations. Health care professionals and health law experts have questioned whether such provisions violate doctors’ ethical obligations.

Meanwhile, participants of FracFocus, a joint project of the Ground Water Protection Council and the Interstate Oil and Gas Compact Commission, provide voluntary public disclosure of the fracking chemicals they use. Broad industry commitment to FracFocus suggests that NRDC’s concerns concerning inadequate disclosure are being addressed by the industry.

Whatever purported loopholes exist in state statutes, it is likely that toxic tort plaintiffs will be able to obtain full disclosure of chemicals used in fracking through the courts, assuming that they execute Confidentiality Agreements. 
 

The Texas Supreme Court rendered judgment in favor of Centocor, Inc., the pharmaceutical manufacturer subsidiary of Johnson & Johnson, in a landmark decision involving the learned intermediary doctrine, Centocor, Inc. v. Patricia Hamilton, Thomas Hamilton and Michael G. Bullen, M.D. (No. 10-0223). The International Association of Defense Counsel (IADC), which often weighs in on signficant jurisprudential issues before appeals courts, filed an amicus brief requesting that the Court reject the direct-to-consumer advertising exception to the learned intermediary doctrine that had been recognized by the intermediate appellate court.  Porter Hedges LLP  filed the brief on IADC's behalf.

The decision is significant because it the first time that the Texas Supreme Court has expressly recognized the learned intermediary doctrine. Texas now joins the vast majority of states that have adopted the learned intermediary rule. In a press release issued yesterday, IADC reported that the Court declined to create a direct-to-consumer advertising exception to the learned intermediary rule, despite the fact that two other states had done so. The Court also recognized that a plaintiff cannot plead around the learned intermediary rule by asserting causes of action such as fraud in what is, at its core, a failure to warn case. Significantly, the Court also recognized that the learned intermediary rule is not an affirmative defense, but a legal doctrine that is part and parcel of the plaintiff's burden of proof. Further, the Court determined that where a prescribing physician is aware of a drug's risks, "any inadequacy of the product's warning, as a matter of law, is not the producing cause of the patient's injuries."

In the opinion, the Court indicated that "Under the learned intermediary doctrine, the manufacturer of a pharmaceutical product satisfies its duty to warn the end user of its product's potential risks by providing an adequate warning to a 'learned intermediary,' who then assumes the duty to pass on the necessary warnings to the end user." The Court held that "the doctrine generally applies within the context of a physician-patient relationship and allows a prescription drug manufacturer to fulfill its duty to warn end users of its product's potential risks by providing an adequate warning to the prescribing physician."

Notably, the Texas Supreme Court was critical of the lower court's opinion, which had attempted to carve out an exception to the learned intermediary doctrine for direct-to-consumer advertising. Although plaintiff Hamilton alleged various common law causes of action, all of her claims pivoted on the issue of whether the Centocor had provided an adequate warning to her physician in its prescribing information.  Therefore, the Court ruled,  the learned intermediary doctrine applied to all of Hamilton's claims. It was incumbent upon plaintiff to demonstrate that an inadequate warning to her prescribing physician was responsible for her injury.  Because plaintiff failed to present any evidence that the purportedly  inadequate warning was at the root of the physician's  decision to prescribe the medication, her claims failed as a matter of law."
 

What is the duty of a real estate developer to disclose to prospective residential purchasers information about the neighborhood that may adversely impact property values? Apparently none if the developer is not in privity with the homeowners, according to the Eleventh Circuit.

 On May 21, 2012, Law 360 reported on the Eleventh Circuit’s decision in Luis Virgilio v. Terrabrook Vista Lakes L.P., et al. , Case No. 11-11027 (5/18/12).  We have discussed in a past article the circumstances under which a commercial  real estate broker may be found have a duty to disclose environmental liabilities to a prospective purchaser.  Here, the court was clearly troubled by the question of how far the developer's potential liablity to disclose "inside information" would extend and how an obligation to disclose this information could be satisfied.. 

By way of background, class action plaintiffs purchased their homes from a builder, The Ryland Group, Inc. (“Ryland”), in a subdivision in Vista Lakes, a residential development in Orlando, Florida. Unbeknownst to the Virgilios (and other members of the class), the homes they purchased from Ryland were located adjacent to Pinecastle,  a World War II bombing range that, to this day, remains laden with unexploded bombs, ammunition, ordinance and related chemicals. Once Pinecastle’s existence became public, the homes in the subdivision lost considerable market value and the Virgilios brought this lawsuit to compensate for their loss.

Plaintiffs entered into a $1,200,000 settlement with Ryland and then turned their attention to the four other defendants involved in the development and marketing of the subdivision. However, on the same day that the district court certified the plaintiff class and approved the Ryland settlement, it dismissed plaintiffs’ claims against the remaining defendants as legally insufficient. On appeal, the Eleventh Circuit affirmed the trial court ruling in all respects.

Plaintiffs pursued four legal theories against the developer defendants, all based on their failure to inform plaintiffs about Pinecastle before they purchased their homes. One developer/defendant, Terrabrook, sold Ryland the undeveloped land that became the subdivision. At the time of the sale, Terrabrook informed Ryland of Pinecastle’s existence. Terrabrook actively marketed Vista Lakes to prospective buyers and received a commission for each home or lot sold.

Count 1 of the Complaint attributed the defendants’ duty to disclose to the Florida Supreme Court’s landmark decision in Johnson v. Davis, which holds that “when a seller of a home knows the facts materially affecting the value of the property which are not readily observable and are not known to the buyer, the seller is under a duty to disclose them to the buyer.”

In Johnson v. Davis, the court overturned the old rule that  “where the parties are dealing at arms length and facts lie equally open to both parties, with equal opportunity of examination, mere non-disclosure does not constitute fraudulent concealment.” The Florida Supreme Court concluded, however, that this rule was “not in tune with the times and did not conform with current notions of justice, equity and fair dealing.” Thus, Florida’s high court held that the law required “full disclosure of all material facts” whenever “elementary fair conduct demands it.”

In rejecting plaintiffs’ argument that Johnson v. Davis should be applied to uphold their claims, the Eleventh Circuit found no facts to support the plaintiffs’ conclusory allegation that the defendants were acting as Ryland’s agent in promoting homes in the development. As the Court noted, “Count 1 is missing an essential allegation – the critical element of an agency relationship – that the principal exercised, or had the ability to exercise, control over the agent.”

Count 2 is silent as to the source of the duty, but suggests that it lies in equity since it is a claim for unjust enrichment. Count 2 alleges that because defendants failed to inform plaintiffs about Pinecastle, it would be inequitable for defendants to retain the benefits. Count 3 locates the duty in the Florida Deceptive and Unfair Trade Practices Act (“FDUTPA”), FLA Stat. §§ 501.201 et seq., asserting that defendants’ failure to inform plaintiffs about Pinecastle constituted a “deceptive, misleading and unfair trade practice.” Count 4 locates the duty to disclose in common law negligence.

The heart of the Eleventh Circuit's decision is its refusal to extend Johnson v. Davis.  The court found that the case did not apply because: (1) the defendants were not in privity with the buyer or acting as an agent in privity with the buyer (such as the seller’s real estate broker); and (2) there was no allegation in Count 1 that defendants’ “marketing efforts were at the behest or direction of Ryland, that Ryland exercised any control over [the] marketing efforts, or that [defendants] actually listed any of the homes… on behalf of Ryland.”

Applying the same logic to Count 2, the court held that even assuming the plaintiffs conferred a benefit on defendants, Johnson’s duty to disclose did not extend to defendants. Thus, since defendants did not breach a duty to plaintiffs, plaintiffs had not been wronged and defendants were not unjustly enriched. The trial court dismissed Count 3 because the alleged FDUTPA “deceptive or unfair trade practice” was the breach of an affirmative duty of disclosure. Since the Court determined in dismissing Count 1 that there was no such duty, the FDUTPA claim was dismissed as well.

In essence, the Eleventh Circuit found plaintiffs’ "argument – that because defendants developed and marketed Vista Lakes, they had a duty to warn prospective purchasers of Pinecastle’s existence – without merit."  Rejecting plaintiffs’ logic, the Court observed:

What about those to whom Ryland’s home buyers sold their houses? Would Terrabrook have a duty to them as well? Since Terrabrook was not a party to Ryland’s contracts with the buyers, and thus did not know the buyers’ identities, under Plaintiffs’ approach the only way Defendants could discharge their duty of care would be through marketing: Defendants could not escape liability unless they saturated the market place with the negative information

Would  the case have turned out differently if the developer had prepared brochures that affirmatively misrepresented the environmental condition of the neighborhood?  In granting summary judgment, the district court said that while it was foreseeable that the defendants' general marketing campaign could lead some members of the public to consider purchasing a home in Vista Lakes, the general marketing had nothing to do with any particular home in Vista Lakes and simply put plaintiffs in face-to-face discussions with Ryland.

  For more on the lower court's decision and a discussion of developments built on former bombing ranges, see Larry Schnapf's informative discussion titled "Home on the Bombing Range" and his more recent discussion about the Eleventh Circuit's decision.

.
 

On April 18, 2012, Winston & Strawn and the Environmental Law Institute co-hosted an informative seminar on, “Hydraulic Fracturing Risks and Opportunities: Regulator, NGO, Industry and Investor Perspectives,” in New York City. The meeting was expertly chaired by May Wall, a partner in the law firm’s Environmental Law Department in Washington, D.C. The panelists included Kate Sinding, an NRDC Senior Attorney and Deputy Director of NRDC’s New York Urban Program; John Imse, a principal at Environ in Denver, who advises clients in the oil and gas industry; Lawrence A. Wilkinson, an analyst with Standard & Poor’s Oil & Gas Team; and Carol P. Collier, the Executive Director of the Delaware River Basin Commission. All four speakers were knowledgeable, informative and articulate. Unfortunately, there is insufficient space here to summarize all of the speakers' discussion points.

John Imse emphasized how horizontal drilling evolved from the development of  “game-changing technology,” which has spurred significant changes in the gas exploration industry. As a result of new technology, there may be multiple horizontal wells drilled and developed from a single pad location – four to eight wells from a single drilling pad is not uncommon. Each well may have from as few as four to as many as twenty fracturing intervals. According to Imse, “these are not your wildcat wells of the early twentieth century,” but represent highly sophisticated technology.

Imse also discussed the evolving environmental consciousness of the gas exploration industry. He emphasized that “protective steel casing” and “a good cement job” is critical to a well’s success. Contrasting prior poor practices with current practices, Imse described the construction of drilling pads as “highly engineered sites” with liners and berms for spill control, and structural panels on working surfaces to protect the integrity of the liner. He emphasized the evolving consciousness concerning materials management, including the handling of chemicals in large volume containers; spill containment and secondary containment; and on-site 24/7 spill response.

To date, thirteen states have enacted statues requiring disclosure of fracking chemicals used by industry. These thirteen states account for 90% of current gas drilling, according to Imse. In response to pressure by the public and environmentalists, the additives used in fracking have evolved to “more green and more benign components.” For example, Halliburton is increasingly using guar-based gels and food grade mineral oil carriers, and less diesel for fracking.

There are a number of new web-based resources available to the industry. For example, the University of Colorado Natural Resources Law Center has assembled a compilation of Best Management Practices, which Imse strongly recommends as a reference.

Carol R. Collier, the Executive Director of the Delaware River Basin Commission, discussed the importance of the Delaware River Basin to New York City, which extracts 8.7 billion gallons of water per day. Collier’s “bosses” are the governors of the four states that comprise the Delaware River Basin – Pennsylvania, New Jersey, New York and Delaware. Significant portions of Marcellus Shale underlie portions of the Delaware River Basin. Water withdrawal from the Delaware River Basin is a significant concern. In addition to the 100,000-500,000 gallons of water extracted during the drilling of the well, another 5,000,000 gallons of water is withdrawn during the production life of each well.

Kate Sinding, a Senior Attorney with NRDC, discussed the highly charged political backdrop to the fracking controversy. According to Sinding, experiences in Pennsylvania over the past three to four years have given rise to much of the current environmental debate. Fracking has challenged the long held assumption that natural gas is a more environmentally benign fuel than coal, an assumption that is now coming under fire. Sinding expressed concern about environmental issues that she believed were “not amenable to best practices.” 

Until now, there has been a split of appellate authority in New York concerning what a prospective purchaser must show in seeking damages for a seller’s repudiation of a contract for the sale of real property. It is the general rule that a prospective purchaser seeking specific performance of a real estate contract must demonstrate that it is “ready, willing and able to close.” However, there has been a split of authority concerning whether the purchaser must demonstrate that it is “ready, willing and able” to close in seeking damages for seller’s anticipatory breach of contract.

In Pesa v. Yoma Development Group, Inc. et al., 18 N.Y.3d 527, … N.Y.S.2d … (Feb. 9, 2012), the New York State of Appeals examined the issue whether prospective buyers in a damages suit must show that they were “ready, willing and able” to close the transaction – that is, but for the seller’s repudiation, the transaction could and would have closed. In reversing the Appellate Division, Second Department, the Court held that the burden of proof was the “real question” in a case like this:

"Should the buyers be required to show they would and could have performed? Or should the seller have the burden of showing that they would not or could not? Since the buyers can more readily produce evidence of their own intentions and resources, it is reasonable to put the burden on them."

To New York's high court, its conclusion was "supported by common sense" Thus, the Court of Appeals held that the buyers were not entitled to summary judgment and that issues of fact needed to be resolved, in favor of the buyers, before the buyers could be found to be actually “ready, willing and able.” In the instant case, for example, the buyers needed to demonstrate that they could secure a mortgage commitment within the required sixty day period.

The take-away from this decision is that buyers seeking redress for a seller’s repudiation of a real estate contract now have the same burden of proof whether they are seeking damages or specific performance.
 

In an earlier blog post, we discussed a setback for the consideration of climate change impacts in “Reverse Environmental Impact Statements” as a result of a California Court of Appeal invalidating guidelines to the California Environmental Quality Act (“CEQA”). The California guidelines required that a developer’s EIR analyze any significant potential climate change impacts to a proposed mixed use real estate development project in Marina Del Rey in Los Angeles County. In striking down the guidance, the court found held that the purpose of the EIR was to identify significant effects of a project on the environment, not significant effects of the environment on the project. At the time, we were awaiting the California Supreme Court's decision on appeal.

In March 2012, the California Supreme Court decided not to hear the appeal of the Court of Appeal decision. Thus, at least for the time being, developers in California will not be required to discuss potential climate change impacts on proposed projects in environmental impact statements. Consequently, the Agency will no longer be able to examine the significance of certain impacts, such as potential flooding and earthquake risks, on such projects. The ruling will almost certainly narrow the scope of issues the Agency will consider for an EIR review, which may significantly reduce the time and costs involved.

As I recently discussed with Environmental Law 360, it is now up to the California legislature to decide whether to amend CEQA to permit regulatory consideration of climate change impacts on proposed projects. Developers may factor climate change into their planning regardless because it is likely that prospective long-term commercial tenants will want to know how climate change could impact the property. As California is often a bellwether on environmental issues, it will be interesting to see how other state agencies, with regulatory guidelines similar to California’s, will proceed.
 

The traditional environmental impact statement (“EIS”) examines the effect of a proposed project, such as a construction project, on the environment. However, various federal, state and local statutes and rules are now looking in the opposite direction – at how environment changes might affect a project.

In an article in the New York Law Journal, dated March 8, 2012, “Reverse Environmental Impact Analysis: Effect of Climate Change on Projects,” Michael B. Gerrard, a distinguished professor at Columbia Law School, examines what he terms “reverse environmental impact analysis.” For example, if during the expected lifetime of a proposed building, the building site may be endangered by sea level rise, should this be disclosed in an EIS?

In a recent case involving a proposed mixed-use real estate development project in Marina del Rey in Los Angeles County, the court invalidated recent guidelines to the California Environmental Quality Act (“CEQA”), which is similar to New York’s SEQRA. The California guidelines required that the EIS (or EIR as it is referred to California) analyze any significant environmental impacts the proposed project might cause. In striking down the guidance, the California Court of Appeal held in Ballona Wetlands Land Trust v. City of Los Angeles (November 2011) that this “reverse” analysis was inconsistent with the CEQA statute. The court found that the purpose of the EIS was to identify significant effects of a project on the environment, not the significant effects of the environment on the project. The issue is now before the California Supreme Court, where the case is expected to receive significant attention.

At the federal level, the Counsel on Environmental Quality, which was created by the National Environmental Policy Act of 1970 (“NEPA”), issued a draft guidance in February 2010 urging consideration of the effects of climate change and greenhouse gas emissions on future projects. For example, if climate change studies were to demonstrate that a proposed airport will be underwater in twenty years, the EIS should contain that information.

On the state level, New York DEC in October 2010, issued a policy on climate change directing DEC’s staff to incorporate climate change adapation strategies into DEC programs and activities, as appropriate. Finally, at the local level, New York City’s Environmental Quality Review (“CEQR”) procedure now mandates consideration of greenhouse gas emissions resulting from projects.  

The take-away is that real estate developers will increasingly be required to consider  in their environmental impact statements how changes brought about by climate change may impact their proposed projects down the road.  Ultimately, legal challenges to regulations requiring reverse environmental impact statements will be turned aside and there will be a paradigm shift in how EISs are performed. 

DEC Commissioner Joe Martens told a panel of state lawmakers on February 7, 2012,  that it was “conceivable” that a handful of hydraulic fracturing permits could be issued in 2012 but that a final decision is “months, not years away.”  Martens cautioned that the number of permits that could be issued in 2012 would be “extremely limited” in part due to the “considerable work that remains before we finalize our regulatory framework.”

An additional hurdle to overcome before hydraulic fracturing can commence in earnest is the need to build up DEC’s regulatory staff to sufficiently oversee the proposed activity.  According to the Ithaca Journal, Commissioner Martens stated that DEC currently employs 16 gas drilling regulators, but estimates that the Agency would need 140 additional regulatory staffers during the first year that permits are issued.  According to the Public Employees Federation (“PEF”), DEC has lost more than 800 full time employees since 2008 because of budget cutbacks.  The PEF represents some 1,700 scientific and technical workers at DEC.  Wayne Bayer, a shop steward for PEF, advised lawmakers that his union continues to support a moratorium on hydrofracking because existing staff shortages at DEC do not support this labor-intensive mission.

Based upon Commissioner Martens’ statements and the comments of Albany lawmakers, it does not appear that any significant hydraulic fracturing activity will be permitted until 2013, at the earliest.  We should look to any new DEC staff hires as a sign of New York’s commitment to allow fracking to commence.

Guest Blogger SHEILA A. WOOLSON, a member of Epstein Becker & Green in Newark,  focuses her practice on complex litigation matters across a wide array of commercial and environmental  disputes.  In expertly handling the defense of environmental and toxic tort matters across New Jersey, New York and Pennsylvannia, Sheila draws on her training as a former professional  chemist in the pharmaceutical industry.  She represents clients in those types of  products liability and toxic tort claims where her  scientific background is a valuable asset.  In the following discussion, Sheila analyzes the potential CERLCA liability of medical facilities for the disposal of non-medical solid waste and makes practical recommendations concerning how medical facilites can limit their CERCLA exposure.

Health care facilities are among the most heavily regulated facilities in the country. Along with the myriad of laws and regulations pertaining directly to the provision of health care, health care facilities are also subject to federal and state environmental regulations regarding their operations, waste, emissions, and discharges. There are over 40 federal regulations and several different acts that potentially affect health care facilities, including the Resource Conservation and Recovery Act; the Comprehensive Environmental Response Compensation and Liability Act (“CERCLA”); the Safe Drinking Water Act; the Emergency Planning and Community Right to Know Act; the Clean Air Act; the Clean Water Act; the Toxic Substances Control Act; and the Federal Insecticide Fungicide and Rodenticide Act. See Profile of the Healthcare Industry, EPA Office of Compliance Sector Notebook Project (Feb. 2005).  Most states have their own regulatory schemes that overlay these federal schemes. In addition to complying with these regulations, health care facilities face the possibility of being named as potentially responsible parties (“PRPs”) in CERCLA litigation arising out of the disposal of non-medical waste in landfills.

Municipal solid waste is essentially the same as waste produced by a household, is picked up by normal municipal collections, and does not contain hazardous substances greater than the waste generated by a single-family household. The Environmental Protection Agency (“EPA”) estimates that hospitals produce approximately 3.4 billion tons of solid waste annually, more than half of which is paper. The waste also includes glass, plastic, metal, and other substances. Often, hospitals contract with haulers to dispose of this solid waste in landfills. 

There are currently over 1,300 sites on the National Priority List of Superfund sites that the EPA is currently investigating or remediating, many of which are landfills. There are even more landfills that are under investigation or remediation by state environmental agencies. If a landfill becomes the subject of an investigation and remediation by the EPA or concomitant state agencies, a health care facility could be named a PRP if it allegedly generated or arranged for the disposal of waste in that landfill.

CERCLA contains an exemption for certain nonprofit organizations. To be eligible, a nonprofit organization must qualify as a 501(c)(3) organization and have no more than 100 paid employees at the location generating the waste. This exemption does not apply if the EPA deems that the solid waste contributed significantly to the cost of the response, or the generator failed to comply with an information request or subpoena or impeded the response at the site.

The federal and state environmental agencies usually begin their investigations by sending out information requests that require the PRPs to provide information and documents relating to their activities at the landfill. This is an opportunity to educate the agency about why an entity should not be considered a PRP or why its contribution is de micromis.

If the agency cannot be persuaded to drop its claims against a health care facility, the agency will usually agree to negotiate with all the identified PRPs to have them pay for or undertake the cleanup. CERCLA encourages settlement by barring claims for contribution against settling PRPs. Often, early settlement is a more cost-effective option than litigation, although, of course, this depends on the individual circumstances, including the health care facility’s alleged nexus to the site, the amount of the individual contribution sought from the facility, and the cooperation of the PRPs.

When litigation is started, it is often a lengthy process from which it can be difficult for the entity to extract itself. For example, in United States v. El Dorado County, 2006 WL 1281860 (E.D.Ca. 2006), the government began its investigation in 1995 and filed a lawsuit in 2001. Barton Hospital was named as a third-party defendant in a CERCLA cost-recovery case. The hospital had allegedly deposited ash from incinerated solid waste in a landfill. In 2006, the hospital sought summary judgment, alleging that the contaminants driving the remediation—volatile organic compounds (“VOCs”)—had no connection to its ash. The landfill operator opposed the motion, contending that, because the investigation of the site was not yet completed, it was premature to argue that the VOCs were the only contaminants of interest. In particular, the landfill operator contended that the hospital’s incinerated ash contained detectable levels of metals that also may have required remediation. Therefore, the hospital was unable to demonstrate that its waste did not contain hazardous substances or that response costs would not be incurred to address those substances. This litigation continues to be active to some extent, even now.

In addition to the routine disposal of waste, hospitals and other health care facilities also can become embroiled in CERCLA disputes through construction projects and acquisitions. CERCLA provides for an “innocent landowner defense,” which requires the purchaser to have made “all appropriate inquiries” and to have no knowledge and no reason to know of any alleged contamination. If a health care entity cannot qualify for that defense, acquisitions and purchases of facilities can create liability.

In Hidden Lakes Development v. Allina Health System, 2004 WL 2203406 (D. Minn. 2004), Allina Health Partners (“Allina”) acquired a health care facility in Minnesota that had been constructed by its predecessors. The predecessors had undertaken a significant construction project, and they had used the resulting construction and demolition debris to fill a ravine on the property. They also contracted with a third party to allow it to dispose of additional construction and demolition debris in the ravine. Allina later sold part of its property to Hidden Lakes Development, which was aware of the fill at the time of the purchase. Hidden Lakes Development subsequently determined that the debris used to fill the ravine contained hazardous substances, including asbestos. The disposal of contaminated fill by Allina’s predecessors made Allina a “responsible party.”

Allina’s predecessors also sold a portion of the property to another party, Transitional Hospitals Corporation (“THC”). THC sold its portion of the property to Hidden Lakes Development, as well. Allina filed a third-party complaint against THC for contribution. However, unlike Allina, THC had settled with Hidden Lakes Development before the lawsuit was filed, paying the sum of $2 million. Because CERCLA bars claims for contribution/indemnification following a settlement of CERCLA liability, the federal district court granted THC’s motion for summary judgment, stating that THC had paid for its peace.

As these cases demonstrate, the disposal of non-medical solid waste may expose a hospital or other health care facility to potential liability under CERCLA, which may be difficult and/or expensive to resolve. Accordingly, health care facilities may want to review their practices, including the haulers and disposal sites, in order to minimize any risk. Additionally, health care facilities undertaking acquisitions should carefully review the current and historic disposal practices of any targets in order to assess and address any potential CERCLA liability. 

Guest Blogger ANDREA J. LAWRENCE is a Senior Counsel at Epstein Becker & Green in New York.  She provides legal advice and counsel to clients in the real estate industry. Andrea has extensive commercial litigation experience, and has provided legal representation to real estate companies, landlords, developers, property management companies, and commercial tenants  She recently published an article about bed bug litigation in the New York Real Estate Journal.  Despite some recent highly publicized bedbug personal injury litigation involving prominent New York hotels, Andrea concludes on the basis of a recent New York appellate case, that bedbug cases may not fare well in a commercial setting. 

Many people don't necessarily associate bedbugs with other environmentally hazardous conditions such as toxic mold or oil contamination. However, the reemergence of bedbugs in this country has created unsafe and hazardous living conditions, and has spawned a recent spate of lawsuits throughout the United States. Just recently in New York, the Appellate Division, First Department, shed some light on the issue of liability in the sale of an apartment building with an alleged bedbug infestation. In 85-87 Pitt St., LLC v 85-87 Pitt St. Realty Corp., 83 A.D.2d 446, 921 N.Y.S.2d 40 (1st Dep't 2011), the appellate court upheld a lower court dismissal of a lawsuit, where a buyer sought damages from a seller after its purchase of a residential apartment building with a prior bedbug infestation. The Appellate Division affirmed the lower court's dismissal of the case, predicated upon the contract clause setting forth that the buyer had accepted the building "as is" after having had an opportunity for inspection, as well as the merger clause contained therein that extinguished any claims arising from the seller's alleged misrepresentations concerning bedbugs. Thus, at least in this jurisdiction, there is not much legal recourse for purchasers of buildings, or even apartment units, with a bedbug history, where such relief is precluded by contract.

 The lesson to be learned from this case is simple – in the course of a buyer’s due diligence in today’s market, it should search building records for reports of a bed bug (or any insect/vermin) infestation, and may want to conduct its own physical inspection with an exterminator to uncover any such infestation, past or present. Moreover, should a buyer wish to have some safeguard against this issue, it should insist on a clause within the contract of sale whereby the seller proffers a representation about the presence or absence of bedbugs so as to be enforceable. 
 

In the case of Wyeth v. Weeks, the Alabama Supreme Court consented to answer the following question from the Middle District of Alabama: “Under Alabama law, may a drug company be held liable for fraud or misrepresentation (by misstatement or omission), based on statements it made in connection with the manufacture or distribution of a brand-name drug, by plaintiffs claiming physical injury from a generic drug manufactured and distributed by a different company?" In its brief filed on December 12, 2011—a combined effort with the Alabama Defense Lawyers Association—the Defense Research Institute (DRI)  argues that well-established state tort duty principles prohibit imposing liability on a brand-name manufacturer that did not manufacture the product ingested by plaintiffs. The contrary decision of the Middle District of Alabama is one of but three decisions in the entire country that have allowed failure-to-warn claims to proceed against a brand-name manufacturer where the plaintiff ingested a generic version of the brand-name drug.

The dispute in this case stems from plaintiffs who ingested generic metoclopramide and developed tardive dyskinesia. The plaintiffs claimed that the generic manufacturer failed to warn of the dangers of metoclopramide adequately, and sued the generic defendant on a failure to warn theory. However, the United States Supreme Court recently ruled in PLIVA, Inc. v. Mensing that, because federal regulations prohibit generic manufacturers from unilaterally altering their warning labels, state tort failure-to-warn claims against generic manufacturers are preempted by federal law. Accordingly, the plaintiffs brought suit against the brand-name manufacturers, and the Middle District of Alabama denied in part the brand-name manufacturers’ motion to dismiss. DRI argues against extending common tort principles out of their shape to impose a duty on a defendant who did not manufacture the product and has no control over it. DRI maintains that federal preemption of generic manufacturers does not change this result, even if application of proper tort principles leaves the plaintiff without a remedy.

It would be bad jurisprudence and bad precedent for the Alabama Supreme Court to uphold plaintiffs' position and impose liability on a drug manufacturer, whose  product did not cause the alleged harm.  If that was the result, it is conceivable that a manufacturer with only 10% market share could be held strictly liable for adverse drug reactions caused by generic competitors, who might collectively control 90% of the market.  It would be unfair and unequitable to shift the burden of liability to a manufacturer whose product did not cause the injury merely because the Supreme Court has ruled that preemptioin protects generic manufacturers against state tort failure-to-warn claims. 

A recent Michigan Court of Appeals decision, Alfieri et al. v. Bertorelli et al., dated October 18, 2011 re-visits the issue of whether a real estate agent has a duty to disclose environmental information to a prospective purchaser in the absence of privity. The take-away in this and similar cases is that the  result is often dependent upon the specific facts presented, and even then, the result may vary depending upon the law of the state at issue. For example, New York strongly adheres to the doctrine of caveat emptor, which imposes no liability on a seller (let alone the seller's agent)  for failing to disclose information regarding the premises in an arms length transaction, unless there is some conduct on the part of the seller which constitutes active concealment.  In New York, the purchaser of contaminated property would arguably have a difficult time, in the absence of some affirmative misrepresentation and a showing of reasonable reliance, holding seller's agent liable.

Although the Alfieri case is based on Michigan, not New York, law, its holding is instructive. Alfieri arose out of plaintiffs’ purchase of a condominium unit in what had once been an abandoned factory. The factory had been contaminated with trichloroethylene, and in the process of converting it into condominiums, a vapor barrier was installed. Nonetheless, the former factory property was never properly decontaminated. However, plaintiffs were led to believe that the contamination had been cleaned up. In part, plaintiffs relied upon a sales brochure, prepared by Coldwell Banker, the seller’s agent, indicating that the site had been decontaminated. The plaintiffs purchased the condominium without conducting any independent diligence of their own and only learned following the closing that the property was seriously contaminated.

In rejecting Coldwell Banker’s motion for summary judgment, the Michigan court discussed two of plaintiffs’ theories of recovery – silent fraud and negligent misrepresentation. The court explained that common law fraud or fraudulent misrepresentation involves: (1) a defendant making a false representation of material fact with the intention that a plaintiff would rely on it; (2) the defendant either knowing at the time that the representation was false or making it with reckless disregard for its accuracy; and (3) plaintiff actually relying on the representation and suffering damage as a result. Silent fraud is essentially the same, except that it is based on a defendant suppressing a material fact that he or she was legally obligated to disclose, rather than making an affirmative misrepresentation. A silent fraud may be a misleadingly incomplete response to the purchaser’s inquiry concerning a particular concern.

The court did not accept seller’s agent’s argument that Michigan jurisprudence did not impose upon the seller’s agent a duty of disclosure, in contrast to the duty imposed on the sellers themselves. The court held that a duty of disclosure may be imposed on seller’s agent to disclose newly acquired information that is recognized by the agent as rendering a prior affirmative statement untrue or misleading. In this case, there was evidence that the plaintiffs made direct inquiries of defendants about the condition of the property. The Michigan Department of Environmental Quality provided information to the seller which suggested that the sales brochure contained inaccurate and misleading information. What is troubling about the court’s holding is that the agent for the seller prepared the sales brochure on the basis of information obtained from the client. Did the agent have reason to believe that the contents of the sales brochure were not true until the plaintiffs filed suit? The decision does not provide a clear answer. However, the court apparently believed that there was a sufficiently genuine issue of material fact to deny the agent’s motion for summary judgment.
 

In an article titled, “How Phase I Reports Can Hurt Your Clients,” (ALI-ABA Practical Real Estate Lawyer, Vol. 27, No. 6, November 2011), environmental guru Larry Schnapf cautions purchasers of property that an ill-conceived Phase I report may result in their losing CERCLA ability protection or expose them to misrepresentation claims.  The article’s primary concern is that a Phase I report may not necessarily assist a purchaser in establishing a CERCLA:  1) third-party defense; 2) innocent landowner defense; or 3) bona fide prospective purchaser defense, the requirements for each of which are set forth in the statute. 

To qualify for CERCLA liability protection, a property owner or operator must, among other things, demonstrate that it investigated the past use and ownership of the property consistent with the requirement of the EPA “All Appropriate Inquiries” (“AAI”) rule and exercised appropriate care with respect to contamination at the property.  In an earlier article, “The New ‘All Appropriate Inquiries’ Rule,” (ALI-ABA Practical Real Estate Lawyer, January 2007), Schnapf observes that ASTM’s standard practice for environmental site assessments (ASTM E1527-00) may be inconsistent with the statutory criteria set forth in Small Business Liability Relief and Brownfields Revitalization Act of 2002 (the “2002 Brownfields Amendments”) and spurred EPA to develop the AAI rule.  Thereafter, ASTM worked with EPA to revise E1527-00 to ensure that a revised standard would satisfy the requirements of the AAI rule. When EPA issued the final AAI rule, which became effective November 1, 2006, the agency announced that E1527-05 was now consistent with the final rule so that environmental site assessments consistent with the ASTM standard could be considered compliant with the rule.  Do pitfalls remain?

Schnapf cautions that the absence of a “recognized environmental condition” (“REC”) in a Phase I may not guarantee that there is no “business environmental risk” (“BER”).  For example, over the years, some Phase I reports have come to include environmental issues (e.g., asbestos, lead-based paints, radon mold) that do not fall within the definition of an REC because they do not involve releases of hazardous substances, although they could still be of concern to a property owner, tenant or lender.

  In Bank of New York Mellon Trust Company et al. v. Morgan Stanley Mortgage Capital Inc. (MSMCI), 2011 U.S. Dist. LEXIS 69168 (S.D.N.Y. June 27, 2011), a New York federal district court denied a motion to dismiss filed by a mortgage originator who was alleged to have failed to adequately disclose environmental conditions at a shopping center.  In that case, a mortgage loan purchase agreement was entered into in connection with a shopping center that had been constructed on a former landfill.  The landlord at the shopping center was required to monitor methane gas and had been subject to a number of violations.  Just before the loan closed, the largest tenant of the shopping center issued a Notice of Default accusing the owner of failing to properly manage the methane gas and alleging that methane gas levels had reached dangerous levels.  Although the landlord’s Phase I discussed the methane issue, the court declined to grant the defendant’s motion to dismiss finding that the purpose of the report was to identify RECs, that the report had not identified any RECs.  The court held that an “item of environmental concern” was not necessarily congruent with an REC.  Accordingly, the court found there was a legitimate dispute as to whether the Phase I had adequately disclosed the existence of a material environmental threat, which resulted in the loss of the primary tenant.

In addition to providing a caution to due diligence counsel concerning the scope of the Phase I, Larry also raises a concern about the practice of some environmental consultants in providing recommendations for further investigation or remediation in the Phase I report.  If such recommendations are made, and the purchaser fails for any reason to promptly implement them, the purchaser’s bona fide prospective purchaser defense arguably may be jeopardized.  Accordingly, the article recommends that any recommendations for further investigation or remediation be provided by the consultant in a separate letter to counsel and not be transmitted to the client directly. 

Sunovion Pharmaceuticals obtained summary judgment on October 5, 2011 after oral argument before the Hon. Stefan R. Underhill in federal court in Bridgeport, Connecticut in the case of Swoverland v. GlaxoSmithKline, 2011 U.S.Dist.LEXIS 127753.  Co-Defendant GlaxoSmithKline, represented by King & Spalding, also obtained summary judgment.  William A. Ruskin and Victoria Sloan of Epstein Becker & Green represented Sunovion. 

The plaintiff alleged that his use in combination of Sunovion’s Lunesta, a sleep aid, and GSK’s Paxil, an anti-depressant, caused depression and suicidal ideation, which resulted in an unsuccessful attempt to kill both himself and his daughter.  As a result of the incident, plaintiff was sentenced to prison and forfeited his position as a prison guard.  Sunovion defended the case on the basis that it adequately warned of the drug’s potential risks and that there was no causal connection between any alleged failure to warn and the treating physician’s prescription of the drug. 

In granting summary judgment to Sunovion, the court reaffirmed Connecticut’s adherence to the learned intermediary doctrine on the basis of the Connecticut Supreme Court's 2001 decision in Vitanza v. Upjohn, 257 Conn 365.   Judge Underhill described the learned intermediary doctrine as "essentially hold[ing] that because there is, or when there is a traditional physician/patient relationship, because the physician is the decision-maker as to whether a particular drug will be used by the ultimate consumer, it is the adequacy of the warnings to the physician that matter.  The Court also rejected plaintiff’s assertion that the learned intermediary doctrine should not apply in this case either because Lunesta directly advertised to the patient or over-promoted the product.  The Court held that there was no factual basis in the record to support the application of either of these exceptions to the learned intermediary doctrine and that, as a matter of law, Connecticut did not recognize these exceptions.

Recently, New York DEC issued its draft regulations for hydraulic fracturing based on the proposed requirements in the revised supplemental generic EIS released earlier this month. Public comment began yesterday and will run concurrently with the public comment period on the DSGEIS, which ends on December 12.  DEC  also released the proposed SPDES general permit for storm water discharges associated with hydraulic fracturing.  Public hearings will be held during November and here in New York on Nov. 30 at Tribeca Performing Arts Center. No permits can be issued for hydraulic fracturing until the SGEIS is finalized and the DEC issues the required Findings Statement.  The summary of express terms can be found on the DEC website at  http://www.dec.ny.gov/regulations/77373.html

At a recent Shale Gas Insight conference in Philadelphia, Aubrey McClendon, the outspoken Chairman of Chesapeake Energy, expressed optimism concernining progress made by industry to address methane contamination of drinking water supplies due to faulty gas well construction. According to McClendon, "Problem identified; problem solved".  However, according to the Times-Tribune writer, Laura Legere, DEP data concerning environmental violations demonstrates that McClendon's optimism may be premature and that problems with cemented steel well casings designed to protect groundwater from gas and fluids in Marcellus wells perist.  Of course, casing and cementing violations do not necessarily indicate that gas has migrated or will migrate into drinking water supplies. Moreover, methane is present in many water wells in PA from natural pathways unrelated to gas drilling.  However, the crux of environmentalists' opposition  to hydrofracking appears to center on the gas casing and cementing concerns.  In his comments, McClendon credited an "updated and customized casing system" included in PA state regulations which will hopefully prevent new instances of gas migration.  It is recognized, however, that the geology in Marcellus Shale is neither uniform nor predictable and that the geologic issues are complex.  In planning for Marcellus Shale natural gas exploration in New York, NYDEC personnel have taken to heart (we hope) the lessons of  PA's experience--good and bad--with hydrofracking and will craft a set of regulations in NY that will promote safe natural gas exploration on a sound economic footing. DEC's website contains a detailed discussed of DEC staffers' visit to PA in July '11 that detailed the environmental issues in PA that NY needs to address in its regulatory framework.

The Wall Street Journal reported today that Texas Governor Rick Perry signed into law Friday a bill that will require companies to make public the chemicals they use on every hydraulic fracturing job in the state.  Texas' law is significant because the oil and gas drilling industry, which is powerful in Texas, vocally supported the measure.  Opponents to fracking in the Marcellus Shale region of  New York and Pennsylvannia have long accused the drilling companies of secrecy for failing to disclose the chemicals used in hydrofracking.  Widespread support for this measure, and similar measures in other states, provide some indication of just how untenable the industry's former stance had been.  Fracking involves blasting millions of gallons of water, sand and chemicals into the ground to break up oil and gas-bearing rocks.  Environmentalists and residents in drilling areas fear that the fracking process may result in chemical contamination of drinking water aquifers.  Until now, industry's argument that fracking is safe has been hamstrung by drillers' refusal to disclose the chemicals used.  Going forward, the fracking debate can now refocus on the important issues, such as the likelihood that faulty well construction may result in contamination of an aquifer.  According to industry spokespersons, tens of thousands of wells have been drilled with relatively few problems.  In those rare instances where a problem has been reported, the industry believes that the problem is most likely attributable to an improperly constructed well.  Earlier this year, some of the larger gas producers, notably Chesapeake, Chevron and BP, announced that they would voluntarily begin to publicize the chemicals they use online at FracFocus.org. This website is a joint project of the Ground Water Protection Council and the Interstate Oil and Gas Compact Commission.

Consumer Reports, among others, reported this week that the International Agency for Research on Cancer ("IARC"), which is part of the World Health Organization ("WHO"), has classified low-level radiation from cell phones as "possibly carcinogenic to humans" based on limited evidence linking cell phone use to glioma, a type of brain cancer.  Although Consumer Reports concluded in its article that IARC's action was based on "limited evidence" and doesn't "convincingly" link typical cell phone use with cancer, an American public that often skims only headlines of articles, may be susceptible to appeals of sympathy by plaintiff lawyers representing long-time cell phone users with brain cancers.  Throughout the 1980's the utility industry battled spurious claims, premised upon junk science, that electromagnetic field radiation was responsible for "cancer clusters" of child leukemias and other dreaded diseases.  Although virtually every major EMF toxic tort claim was successfully defended by industry over a period of years, tens of millions of dollars was spent defending these lawsuits, which were brought in courts all  across the country.  As in the case of low dose radiation from cell phone use, there were  millions of millions of potential plaintiffs in the EMF cases and all of the prospective utility industry defendants had deep pockets. Following issuance of the IARC release, a spokeswoman for the Federal Communications Commission ("FCC") stated that FCC currently requires that all cell phones meet safety standards based upon the advice of federal health and safety agencies.  Moreover, according to the National Cancer Institute's Surveillance Epidemiology and End Results Program ("SEER"), the incidence of brain cancer in the United States has actually declined over recent years as cell phone use has skyrocketed.  Despite these reassuring pronouncements, well-heeled plaintiff lawyers may bring some cases as trial balloons to test industry resolve based upon other equally ambiguous pronouncements, such as the contention that cell phone use can affect "brain function".  As in the cases brought against chemical manufacturers in the 1980's,  which alleged that chemicals cause generic  "immune system dysfunction", enterprising plaintiffs may attribute any number of injuries to purported "brain function" impacts.  Hopefully, courts will continue to exercise their gatekeeper roles to maintain some semblance of scientific rigor in the courtroom to exclude inconclusive science  if these cases are brought. 

On November 6, 2009, we reported here concernining a case of first impression brought by the Ecological Rights Foundation ("ERF") in federal court in California.  In her decision, dated March 31, 2011, the Hon. Saundra Brown Armstrong, sitting in the United States District Court for the Northern District of California (Oakland Division), dismissed ERF's  environmental claims brought  against Pacific Gas & Electric (“PG&E”) and Pacific Bell Telephone (“Pacific Bell”).  The Ecological Rights Foundation alleged that the Defendants’ wooden utility and telephone poles were pressure treated with an oil-based pentachlorophenol preservative which was “oozing” to the surface and being washed off of the Poles, thereby contaminating San Francisco Bay and adjacent waterways.  As a result of the migration of this material over time from the Poles into the soils, ERF alleged that “dioxin-like” compounds were released into the environment placing surrounding homeowners, commercial fisherman and the general public at significant risk.  As a practical matter, if ERF had prevailed, PG&E and Pacific Bell may have had to replace tens of thousands of Poles throughout California. 

In dismissing the case, which was brought pursuant to the Clean Water Act (“CWA”) and the Resource Conservation and Recovery Act (“RCRA”), the Court examined the required showings under each statute.  The CWA distinguishes between point and nonpoint sources.  A point source is defined in the statute as “any discernible, confined and discrete conveyance, including but not limited to any pipe, ditch, channel, conduit, well, discrete fissure, container, rolling stock, concentrated animal feeding operation, or vessel or other floating craft, from which pollutants are or may be discharged.”  All other sources of pollution are characterized as “nonpoint sources.”  To succeed, ERF had to demonstrate that the Defendants’ discharges were point source discharges. 

In dismissing the CWA claim, the Court held that “point and nonpoint sources are not distinguished by the kind of pollution they create or by activity causing the pollution, but rather by whether the pollution reaches the water through a confined, discrete conveyance.”

The key issue in the analysis of ERF’s RCRA claim was whether the chemical preservatives used on the Poles qualified as a “solid waste” within the meaning of RCRA.  The term “solid waste” is statutorily defined as “discarded material.”  Although not defined by statute, EPA regulations specify that “discarded material” includes any material that is “abandoned.”  ERF alleged that solid waste was disposed of into the environment when the chemical preservative leaked, spilled or dripped from the Poles due to rain, and when dust impregnated with the chemical is blown into the air during dry seasons.  In dismissing the RCRA claim, the Court held that the “flaw in plaintiff’s theory of disposal is that in this case, there is no allegation that Defendants engaged in any conduct that resulted in the discharge of the chemical preservative. To the contrary, Plaintiff merely alleges that the purported contamination is the result of natural forces – mainly, rain and wind… Such allegations, on their face, are insufficient to establish that Defendants engaged in the ‘disposal’ of hazardous waste under § 6972(a)(1)(B).”  The Court rejected Plaintiff’s theory that the “passive” spilling or leaking of materials from a place of containment into the environment constitutes “disposal” of solid waste.  In so holding, the Court distinguished prior cases that found that leakage fromgasoline USTs may be actionable under RCRA.  The UST holdings are only applicable to situations where the discharge of hazardous waste leaked or spilled from a container intended to hold the waste.  In contrast, the Court found that “the Poles are not containers; but rather, they were used to suspend wires for the transmission of electricity for PG&E and data for Pacific Bell.”  Thus, liability under RCRA ¶ 7002 did not attach based on the “discharge” of chemical preservatives from the Poles attributable to natural forces, such as rain and wind.

Ed Lowenberg, the Coordinator of the Toxic Torts Group in the Litigation Department at ExxonMobil, is retiring after 32 with the company on November 30, 2010.  He will be greatly missed by members of the toxic tort bar--by both the defendant and plaintiff lawyers with whom he has worked over his long career  To many of us, Ed Lowenberg personified Exxon.  Over the years, he was responsible for some of the most high profile toxic tort litigations in the United States.  Like the consummate fighter that he was, Ed always looked to land a decisive  knockout blow on an adversary. At the same time, however , Ed handled all of his matters with professional integrity, creativity and good humor.  He will be greatly missed by the toxic tort bar. 

After receiving a B.A. in Political Science from the City College of New York in 1967 and a J.D. from the University of Texas in 1970, Ed worked at HEW, as a Trial Counsel for Justice, and as Special Counsel for the SEC. He also served as Special Assistant United States Attorney in Houston, New Orleans and in other venues. However, he found his true calling working in-house at Exxon, which he joined in 1978, defending the the company's toxic tort litigation.

Ed was an early advocate of joint defense groups in mass tort litigation.  In cases in which plaintiffs would sue 20 chemical manufacturers, each manufacturer would routinely retain its own legal team to defend the case.  In a joint defense, the defendants agree to waive conflicts and to retain a single law firm to represent the entire defense group.  When joint defense groups were initially proposed, there was a tremendous backlash within both the in-house bar and among outside law firms, who feared the  loss of significant clients to the "joint defense counsel"  and bemoaned the the loss of revenue from defending the case.  However, Ed and other pioneering in-house lawyers recognized that the industry could more properly defend baseless toxic tort cases once a joint defense group comprised of in-house lawyers could was able to instruct defense counsel how best to defend a case.  With multiple law firms appearing for multiple defendants, the temptation for some companies to settle for "nuisance value" to avoid high defense costs was often irresistible.  In a joint defense, in which each of the twenty law firms pays only a fraction of the cost of defense, nuisance value is greatly diminished and plaintiff lawyers often lose their enthusiasm about their claims.  The joint defense was just one of many innovations Ed brought to toxic tort defense.

Eileen Millett is Counsel to the law firm of Epstein Becker & Green, P.C. where she represents clients on environmental matters, including solid and hazardous waste and the Clean Water Act,  and counsels clients on general regulatory compliance questions, including issues related to toxic waste and water quality, permitting, emerging obligations under impending climate regulations and other federal, state, and local environmental statutes and regulations.  Ms. Millett previously served as Assistant Counsel with the Hazardous Waste Task Force at NYDEC and as General Counsel to the Interstate Environmental Commission, a tri-state water and air quality enforcement authority, where she conducted and managed litigation to control and abate water pollution and ensure adequate water and sewer infrastructure.  She teaches environmental law at the Syracuse University College of Law. 

Marcellus Shale is shale formation that extends deeply underground from Ohio and West Virginia, northeast into Pennsylvania, and into New York’s southern tier. Although the shale is exposed in some locations in New York, it descends to a depth of as much as 7,000 feet or more below the ground surface along New York’s Pennsylvania border.  Estimates project that this shale formation contains enough natural gas to fuel New York State’s energy needs for decades to come. Some geologists have estimated that the entire Marcellus Shale formation could contain between 168 trillion to over 500 trillion cubic feet of natural gas throughout its entire extent. New York uses approximately 1.1 trillion cubic feet of natural gas a year. How much gas will be recoverable from the shale is not yet known. Nonetheless, natural gas has emerged as an energy source capable of contributing to alleviating some of the United States’ dependence on foreign oil. Thus, the ability to effectively capture natural gas in the Marcellus shale efficiently and in an environmentally sound manner is of the utmost importance.

It is the process associated with the recovery of natural gas from the shale and the attendant interstate environmental impacts that have become the subject of much debate. The natural gas is both very deeply and very tightly embedded in the shale. However, of late, new technological developments with extraction, notably hydraulic fracturing, have demonstrated promising results.   Interest has naturally advanced because of the shale’s proximity to high demand markets and the development of the Millennium Pipeline. This interest, however, has not been without question about the effects on the surrounding communities and the environment. The concerns raised have been with the technology, horizontal drilling and hydraulic fracturing.

Horizontal drilling is one of the techniques used in the process of reaching the natural gas. One drills down vertically first and then special tools are used to turn the well horizontally. This type of drilling has two advantages, one, is the production of more gas from a single well, since perpendicular penetration of the vertical rock fractures allow engineers to drill more area in the zone of gas producing rock, and, two, many more horizontal wells may be drilled from the same surface location, thus, disturbing less ground surface as compared to using vertically wells. Both, horizontal drilling and hydraulic fracturing technologies have enhanced the cost-efficient recovery of natural gas contained within Marcellus shale. The NYDEC website provides a description of the drilling technology.

Hydraulic fracturing is the high pressure pumping of fluid with a material adept at propping, such as sand, to both expand or fracture the rock to facilitate recovery of the gas, and at the same time, allow the space that’s been expanded to stay open long enough to allow the maximum amount of gas to flow into the well. Unlike of types of drilling, no blasting is used. The hydraulic fracturing process is especially helpful for the type of “tight” rock formation found in rocks like shale. Water and fine sand are pumped through the rock with pressure, fracturing the shale and leaving the grains propping up the rock so that gas escapes. Extracting gas from shale is not as simple as this process may sound. Each shale rock formation is different, thus, to achieve the optimal gas production, could require one to change the amount and mix of fluid and sand. The results cannot be guaranteed and experience and experimentation is the normal way of operating.  

Concerns have been raised that the fracking technique could contaminate groundwater, and that its use should be closely regulated. Most fractured wells are thousands of feet below any potable water zone, thus concerns about groundwater while understandable may be misplaced.  Notable among the concerns is the volume of water required for the process, the chemical composition of the fluid used and the challenges posed by the proper disposal of those fluids. First, Hydraulic fracturing requires the use of large volumes of water to fracture the rocks and produce gas, with each well using up to a million gallons of water. Secondly, the fracturing fluid contains compounds added to it to make the process more effective.   These fluids could include chemicals to reduce friction, inhibit the growth of bacteria, assist in carrying the propping agents into fractured rock, substances to ensure that the propping agent stays in the fracture and agents to prevent or retard corrosion of pipes in the wells. Thirdly, fluid removed from the wells is required to be handled, transported and disposed of properly.

ANALYSIS OF THE WATER QUALITY ISSUE

Among the many issues of concern for the environment in the water quality context are water usage, effluent content, and disposal. Among the most pressing of these issues are the following: the amount of water usage, the need to withdraw surface water, what authority controls and regulates the withdrawal of public drinking water, what authority regulates the withdrawal of surface water for commercial and industrial use, the management of the water withdrawals outside of the authority of water quality commissions (the Delaware River Basin Commission (DRBC), the Susquehanna River Basin Commission (SRBC) and the Great Lakes Commission (GLC)), what approved pretreatment programs exist, and the adequacy, the capacity and the ability of treatment facilities to properly treat and dispose of water. The challenge for attorneys and for courts will arise as communities grapple with:

● Managing the use of water, water withdrawals, what authority controls and who regulates;

● Impacts if any on waterbodies and aquatic life in affected water bodies accepting chemical fluids of varying composition;

● Adequacy and availability of treatment and pre treatment facilities.

According to recent reports in the Greenwich Time, Greenwich, CT state legislators are proposing a bill that would prohibit building cell towers within 750 feet of a school or day care because of a perceived health risk from electromagnetic radiation. However, some Cos Cob, CT residents believe that the cell towers should not be permitted within 5,000 feet of any schools, day cares and elderly homes due to health concerns. Reportedly, the cell tower bill has been proposed by Rep. Fred Camillo, R-151st District, and supported by fellow Reps. Livvy Floren, R-149th District, Lile Gibbons, R-250th District, and Sen. L. Scott Frantz, R-136th District. There is no good evidence that attending school near a cell tower, such as the one proposed, creates a health risk. During the 1980’s, some plaintiff lawyers ballyhooed electromagnetic field (“EMF”) litigation as the “new asbestos.” A series of well-funded EMF trials were litigated against various electric utility companies around the United States in the 1990’s. After the presentation of the scientific evidence, judges and juries uniformly rejected plaintiff health claims. The Centers for Disease Control (“CDC”) website contains a great deal of reliable scientific information concerning health effects from radiation exposure from cell towers, cell phones, microwave ovens and hair dryers. According to the CDC, the risk is extremely low. The low frequency radiation that those fields emit may have a biological effect, but do not cause adverse health effects, according to the website of the World Health Organization (“WHO”), which has devoted years of study on EMFs. So what is a biological effect? WHO’s literature explains that “biological effects” may include “listening to music, reading a book, eating an apple or playing tennis,” none of which cause health effects. WHO's conclusion is that there is no health risk to the EMF radiation to which the public is exposed. Thus, contrary to popular hysteria, there is no evidence that proximity to EMFs can “fry” a person’s brain or cause cancer. If our legislators are going to propose EMF safety precautions, they should base their proposals on strong science rather than fear. The "dose" or exposure from cell tower EMFs can be measured and quantified. Once that “exposure” is known, it is then necessary to look to the scientific literature to evaluate the likelihood of a health risk from that exposure. If EMF radiation posed a health risk to everyone living near a cell tower, it is a no-brainer that all cell towers should be dismantled--not just those near schools and day cares and homes for the elderly. The cell tower issue has always been about diminution of property value and aesthetics; it is not about our health! 
 

According to a report issued by Cornell Law School, the State of New York’s blueprint for Marcellus Shale development proposes 187 new regulatory activities necessary for the oversight of natural gas drilling, but the blueprint does not explain how DEC will carry out these activities.  Cornell’s report concludes that DEC does not have the manpower to appropriately regulate economic development in the Marcellus Shale Formation. According to Adjunct Professor Keith Porter at Cornell Law School, “There is no way they [DEC’s Division of Mineral Resources] have enough people to visit the sites to make sure conditions are met.”  The Cornell study notes that DEC’s proposals require firsthand inspections and the development of detailed spill prevention plans on a site-by-site basis. The proposals also involve assessing and monitoring water resources to ensure they are not damaged by the gas industry’s need for huge volumes of fresh water to stimulate gas production in the fracking process. This process involves shooting millions of gallons of chemical solutions into each well, which then regurgitate brine and wastewater with chemicals, heavy metals and naturally occurring radioactivity. For their part, industry proponents point to New York’s strict regulations and a strong track record by industry. Environmental advocates challenge industry claims, pointing to hundreds of incidents and complaints involving natural gas and oil drilling buried in the DEC’s hazardous spills database. However,  it was reported on January 11, 1010 that DEC Commissioner Pete Grannis had asserted in a letter to Assemblyman William Parment, a member of the legislature's Environmental Conservation Committee, that reports of accidents relating to natural gas drilling in New York have been overblown and taken out of context.  Without additional DEC inspectors, says Professor Porter, Marcellus Development “will rely on self-compliance.” Environmental advocates point to the water contamination and regulatory violations that plagued the operations of Cabot Oil & Gas in Dimock, Pennsylvania as an object lesson. The Cornell study summarizes the proposed regulatory obligations DEC sets forth in the draft Supplemental Generic which include, among other things,  protecting water resources such as New York’s portion of the Great Lakes Basin;  reviewing permits for equipment and structures that might disturb surface water bodies such as rivers and streams or potentially impact aquatic wetland and terrestrial habitats and water quality;  impacts to wetlands; aquifer depletion arising from proposed groundwater withdrawals for high-volume hydraulic fracturing; reviewing major water withdrawals and approved diversions in the Great Lakes-St. Lawrence River Basin under the Great Lakes-St. Lawrence River Water Resources Compact; comprehensive storm water pollution prevention plans and review of permits to address storm water runoff and storm water discharges; industrial activities, including addressing potential sources of pollution and determining when drilling and hydraulic fracturing operations are completed; surface spills and releases at the Well Pad; drilling rig, fuel and tank refueling activities; groundwater impacts associated with well drilling and construction;  private water well testing;  infrastructure control from waste transport to road spreading; and, not least, protecting New York City’s subsurface water supply infrastructure. The import  of the Cornell Law School study is that New York can build an elaborate regulatory scheme designed to protect the environment, but unless there are enough of the right people to enforce the regulations and ensure that they are being rigorously adhered to, the regulations do not amount to much. 

Environmental groups and proponents of economic development and natural gas exploration are on a collision course of competing economic and environmental interests involving an enormous untapped reservoir of natural gas in the Marcellus Shale Formation. That the Marcellus Shale Formation lies in part across economically depressed regions in upstate New York and Pennsylvania, in urgent need of  an economic boost,  only adds fuel to the dispute. At the heart of the controversy lies the New York City watershed, pristine waters in upstate New York  counties that provide the drinking water for millions of people in New York City. The Marcellus Shale Formation sits underground and stretches southwest from New York through Pennsylvania, and into West Virginia and Ohio. According to experts at Penn State University, the Marcellus Shale Formation is the largest known shale deposit in the world. Recently developed extraction techniques in horizontal drilling and hydraulic fracturing are expected to provide an additional boost to the productivity of Marcellus gas wells. Terry Englander, a geoscience professor at Penn State University, estimates that recoverable reserves in Marcellus Shale could be as high as 489 trillion cubic feet! The Draft 2009 New York State Energy Plan recognizes the great potential benefit to New York from development of the Marcellus Shale natural gas resource. But what environmental safeguards should accompany this monumental enterprise?

On December 23, 2009, the New York City Department of Environmental Protection (“DEP”) (not to be confused with theNew York State Department of Environmental Conservation or "DEC"),  called for a prohibition on natural gas drilling in the New York City watershed, urging that, “[N]natural gas drilling and exploration are incompatible with the operation of New York State’s unfiltered water supply system and pose unacceptable risks for more than nine million New Yorkers in this City and State.” According to DEP’s Final Impact Assessment Report, drilling in the watershed requires invasive industrialization and would create a substantial risk of chemical contamination and infrastructure damage. In particular, the DEP’s report singled out the high-volume hydrofracking and horizontal drilling as posing significant environmental risks. Clearly, measures will be taken to protect the watershed, but the devil will be in the details.  A Congressional Research Service report, released on September 9, 2009, examines gas drilling in the Marcellus Shale region.  The report acknowledges that groundwater contamination from improper drilling and casing is a risk.  Water sources in New York listed as "primary" or "principal" aquifers may be at risk, according to the report, due to the permeable "unconsolidated sand and gravel deposits" in northern Pennsylvania and southern New York because of short distances from the land surface to the water table. 

In a first-of-its-kind litigation, the Ecological Rights Foundation ("ERF") has alleged in a Complaint brought in federal district court in San Francisco that Pacific Gas & Electric Company (PG&E)  is  in violation of the Clean Water Act ("CWA") and the Resource Conservation and Recovery Act ("RCRA").  ERF alleges that the treatment of PG&E's utility poles treated with pentachlorophenol ("penta"), a wood preservative, has resulted in contamination of groundwater and surface water throughout four counties in Northern California -- Alameda, Contra Costa, Marin, and San Francisco, including San Francisco Bay.  The suit implicates all of the estimated 300,000 utility poles that support Northern California's electrical power grid. Does ERF expect a court will order that all of those utility poles be taken down and replaced with poles comprised of an as-yet-to-be-invented-space-age-material that does not require chemical treatment, never deteriorates, causes no environmental harm and does not cause hazardous waste to be emitted during manufacture? 

In an article posted on its website, Foley & Lardner, which has been tapped by PG&E, cautions that  this lawsuit potentially has far-reaching implications. The Milwaukee-based law firm notes that millions of utility poles throughout the country are treated with penta or other preservatives, which are necessary to keep the utility poles from deteriorating and to keep electricity and telephone service flowing to homes and businesses.  Significantly, they observe that the environmental impact of the penta-treated poles was examined in great detail by the USEPA when the use of penta-treated wood poles as utility poles was approved.  By approving the use of penta, USEPA found that penta did not cause the significant environmental harm now alleged by ERF. If ERF is successful in San Francisco, where might this type of litigation lead? 

Apart from the serious policy considerations at issue here, ERF's lawsuit will have to overcome significant legal hurdles, including for starters: (1) that under CWA, ERF must demonstrate that each individual pole is a "point source". It may be difficult to argue with a straight face in federal court that PG&E should have obtained a permit for each discharge from every pole--all separate violations of the statute: and (2) that under RCRA, ERF must demonstrate that PG&E is a generator of solid waste that presents "an imminent and substantial endangerment to the environment. The defendants are not the applicators of the material.  The sub-text of the litigation appears to revolve around  ERF's unhappiness over USEPA's past decision making concerning the use of Penta on utility poles. If so, ERF take it up with USEPA and leave our fragile power grid alone! 

Kenneth Ross, one of the more discerning authors in the product liability defense bar, has authored a thoughtful piece titled, Is There Anything Optional About Safety? in the August '09 DRI Product Liability Committee Newsletter--"Strictly Speaking".  As manufacturers design new products and update the design of old products, many times they sell and offer for sale differing levels of safety and quality.  Ken's article explores the legal and practical risks in selling products with these differences and provides advice to manufacturers about minimizing risk.  As one law professor notes, the case law is "muddled and quite sparse".  There are cases on both sides--those that hold that safety devices can be optional and those that hold that not installing a safety device establishes a basis for liability.  Ken discusses several important considerations that should be weighed in performing this delicate balancing act.

According to Senator Herb Kohl, the intention of the "Sunshine in Litigation Act of 2009" (S. 537) is to require federal judges to perform a " simple balancing test" to ensure that in any proposed secrecy order, the defendant's interest in secrecy truly outweighs the public interest in information related to public health and safety.  Citing court-approved confidential settlement agreements in product liability cases entered into by drug and tire manufacturers, Senator Kohl argues that federal judges must be required to consider public health and safety when deciding whether to allow a secrecy order.   Although this proposal may have a populist appeal, the  American Bar Association believes that the proposed law would make discovery more burdensome, more expensive, and more time-consuming, and would threaten important privacy interests.  The Act would change Federal Rule of Civil Procedure 26(c) by limiting a court's ability to enter an order in a civil case: (1) restricting disclosure of information obtained through discovery; (2) approving a settlement agreement restricting the disclosure of such information; or (3) restricting access to court records in civil cases. Before entering a secrecy order, a court would first have to perform the balancing test discussed by Senator Kohl or reach a determination that the order would not restrict the disclosure of information relevant to the protection of public health or safety.  I concur with the ABA that the Sunshine Act is a bad idea; its adoption would not serve the public interest.

The Committee on Rules of Practice and Procedure of the Judicial Conference of the United States reported last year that empirical studies demonstrate that there is no evidence that protective orders create a significant problem of concealing information about public hazards.  The Judicial Conference Advisory Committee on Civil Rules strongly opposes the measure as unnecessary legislation that will burden the courts and have significant adverse consequences for civil litigation.  Moreover, the ABA already has adopted policy that encourages courts to permit disclosure of information relevant to potential hazards.  Typically, in cases involving a sealed settlement agreement, there is sufficient information available to the public providing details of a potential public health or safety hazard. As product liability litigators are well aware, protective orders serve to facilitate the timely production of documents. Requiring that a court hearing be conducted before such an order is entered into in every civil case would consume precious judicial resources and further delay litigants' day in court.

In his  recent article, "Made in China: Consumer Product Lawsuits Imported to the United States", Seattle defense lawyer and IADC member Gregory Shelton offers American importers several good suggestions for avoiding potential liability from imported products.  These include: (1) requiring the exporter to comply with all applicable U.S. product quality standards and product safety regulations; (2) obtaining legal counsel in the exporter's home jurisdiction; (3) requiring the exporter to obtain appropriate insurance coverage from an American or international insurer that will protect the importer in the event of a recall or lawsuit; and (4) retaining good legal counsel early.  I would add to Greg's checklist: (5) having an independent U.S. consultant available to test, if necessary, the components of imported products, particularly if an American consumer reports a complaint to the company or to the CPSC.  Early independent product evaluation can be critical for an importer in planning its next steps, such as whether to perform a recall or halt future shipments until an issue can be addressed.  There are many good consultant firms to chose from. One excellent consultant up-to-speed on the new CPSC requirements is Exponent.

However, we disagree with Mr. Shelton when he argues that Chinese imports are more likely to result in lawsuits or recalls than imports from other countries.  There is simply no empirical evidence to support this assertion.  To the contrary, China has made enormous progress, particularly over the last year, to police its domestic suppliers.  To blame China for the spate of recalls over the last couple of years is to ignore the past lack of adequate funding for the CPSC, the agency that provides regulatory oversight of consumer products.  Moreover, blaming China results in Americans turning a blind eye to problems in our domestic product supply chain. 

In a provocative thought piece appearing in the Wall Street Journal on March 9, 2009, L. Gordon Crovitz predicts that the United States Supreme Court decision in Wyeth v. Levine will usher in an era of increased prices for drug and create a disincentive for new product innovation. Mr. Crovitz compares the American legal culture behind the Court's decision to the Luddites that smashed mechanized looms in England at the beginning of the Industrial Age in 19th century England.  He also suggests that the decision's logic may lead product manufacturers to "carry 50 different warnings, one for each state, updated by local juries from time to time."  Despite his misgivings about the decision, it is not likely that any product manufacturers, drug makers or otherwise, are likely to start tailoring their warning on a state by state basis.  As a practical matter, products are sold nationally, often through distributors, and it would be virtually impossible to  ensure that product warnings for Texas purchasers ended up in Texas and that product warnings intended for California purchasers ended up in California.  Moreover, from a jury standpoint, nothing would please a plaintiff's lawyer more than to be able to argue that the manufacturer provided a less strict warning for the product in the jurisdiction where his client's accident occurred. 

How can a brand-name pharmaceutical manufacturer owe a duty to patients who take only a generic version of its product? In a case of first impression in California, a state appellate court held on November 7, 2008 that Wyeth, Inc. owed a duty to plaintiff Elizabeth Conte, who developed a serious and irreversible neurological condition as a result of taking metoclopramide, the generic version of Wyeth’s Reglan, which is used to treat gastroesophageal reflux disease. In so holding, the California appellate court declined to follow the holdings of a majority of courts that have grappled with this issue.

In Elizabeth Ann Conte v. Wyeth, Inc. et al., the Court of Appeal of the State of the California in the First Appellate District in San Francisco, held that a brand-name pharmaceutical manufacturer’s common law duty to use due care when providing product warnings extends not only to consumers of its own product, but also to those patients whose doctors foreseeably rely on the name-brand manufacturer’s product information in prescribing a medication, even if the prescription is filled with the generic version of the drug. In reversing summary judgment granted to Wyeth by the trial court, the appellate court accepted Conte’s argument that Wyeth should be liable for her injuries because a brand-name manufacturer that disseminates information about its product owes a duty of care to ensure the information’s accuracy to all physicians who prescribe the drug in reasonable reliance on that information, even if the patient ends up taking the product’s generic equivalent.

The court agreed with Wyeth that Conte could not pursue a strict products liability claim against Wyeth. Indeed, Conte did not allege that Wyeth was strictly liability due to inadequate warnings. Rather, she claimed that Wyeth failed to exercise due care in disseminating its product information to physicians.  The court rejected Wyeth’s contention that Conte’s case was merely a product liability suit masquerading as a negligence case. The court held that the plaintiff could pursue claims of intentional and/or negligent misrepresentation based upon Wyeth’s labeling information about the safety of metoclopramide, the risks of its long term use, and the likelihood of serious side effects. 

Was the court correct in determining that Wyeth owed the plaintiff a duty in a negligence context where no such duty could be found to exist in a strict liability case? As a matter of public policy, should a brand-name drug manufacturer be subjected to what Wyeth argued might be “permanent and uncontrolled liability” in perpetuity. Even as a brand-name manufacturer’s sales decrease over time, its potential product liability exposure may actually increase because of higher market share won by generic competitors. Ironically, the generic manufacturer takes precious market share from the brand-name manufacturer at the same time that the court shifts the generic’s product liability exposure back to the pioneer. 

We believe that the better reasoned analysis of this issue may be found in Foster v. American Home Products Corp. (4th Cir. 1994) 29 F.3d. 165 (2003), in which the Fourth Circuit held that a manufacturer of a name-brand drug could not be held liable under a theory of negligent representation for an injury arising from the ingestion of a generic version of the drug. Taken to its logical extreme, in the brave new world envisioned by the Conte court, it may not matter that a plaintiff cannot identify the manufacturer of a product that caused an alleged injury so long as the plaintiff can plausibly claim to have relied on some other manufacturer’s operator’s manual.

The Consumer Product Safety Improvement Act of 2008 ("CPSIA") provides that the Consumer Product Safety Commission ("CPSC") will establish and maintain an Internet database on the safety of consumer products.  The CPSIA Section 212 requires that the database be: (1) available to the public; (2)  searchable; and (3) accessible on the CPSC's website.  Reports of harm caused by consumer products may be reported by consumers; local, state or federal govenment agencies; health care professionals; child service providers; and public safety entities. Ideally, the database will encourage the sharing of information and direct communications among consumers, consumer advocacy groups and state attorneys general, who have been given an important new role under the CPSIA.  For the first time, consumers will have direct instant access on the Agency's website to potentially important product safety information. 

The CPSIA of 2008 is much needed legislation to upgrade the level of  protection provided to the American consumer by the federal government.  The law represents the Congress' response to a year of multiple, embarrassing consumer product scandal after another during what some commentators have termed the "Year of the Recall".  In the past, information vital to the public welfare concerning defective consumer products has not been promptly provided to the American people.  At times, this delay may have been responsible for what may have been preventable injuries or deaths --  hence, the legislative mandate for the database.   

In light of these public benefits, can there be any dark side to this new era of governmental transparency?  Are consumer product companies justified in fearing that the database has the potential to  spread disinformation and unfairly tarnish reputations? 

The statute requires that a report submitted for inclusion on the database: (1) describe the consumer product; (2) identify the manufacturer or private labeler; (3) describe the harm related to the use of the product; (4) provide contact information; and (5) contain a verification that the report is true and accurate. Based upon informal Commission staffer comments, the CPSC is not required to perform an independent investigation to determine the veracity of a report or whether the incident that is the subject of the report occurred in the manner claimed or occurred at all.  For this reason, there is a risk that the database may morph into a  consumer Wikipedia, but with the imprimatur of United States approval and the gloss that comes from being hosted on a federal regulatory agency website.  What opportunity will  manufacturers have to comment on a report that one of their products may have triggered a fire in a home or caused a child to suffocate before the report is posted?  Unfortunately, not a whole lot!  The statute requires that within five days of receiving a report the Commission shall "to the extent practicable" transmit the report to the manufacturer identified in the report prior to the report being posted on the database.   Because the person making the report need not be identified to the manufacturer unless he or she explicitly consents, there may not be much the manufacturer can do, within the 10 day window provided before the report is posted, to determine whether the report is accurate. Certainly, this narrow window does not permit a manufacturer to obtain the product from a consumer, assuming the consumer can be identified, and inspect it.  The manufacturer can request that proprietary or trade secret information not be posted on the database, but that request, if granted, will result only in the sensitive information being redacted, not in a delay in posting the report on the database.  The statute permits a manufacturer to request that its own comments also be included in the database, but in the absence of a realistic time frame to perform an investigation of the underlying report, what would be an appropriate comment to make?  Moreover, the manufacturer may be at a disadvantage if reporters call seeking comment after the consumer's report is posted by the Commission. 

Whether electricity supplied to a homeowner by the local electric utility  is viewed as a "product" or a "service" may have significant ramifications in litigation.  If providing electricity constitutes a "product", injured plaintiffs can seek recovery under a theory of strict liability.  If it is not a product, the plaintiff would have to demonstrate the electric utility failed to use reasonable care.  In a recent Connecticut case, Travelers Indemnity Company of America v. Connecticut Light & Power Co, Hartford J.D. at Harford (Docket No. CV-07-5012441-S ) 2008 WL 2447351 (Conn. Super.), the trial court  held that once electricity entered the homeowner's residence, it constituted a "product" rather than a "service" and that plaintiff could  proceed under the Connecticut Product Liability Act ("CPLA").   In the case, a fire allegedly caused by voltage fluctuations broke out in the home of Travelers' insureds, Linda and Michael Murphy, resulting in property damage.  Apparently,  the Murphy's had complained to CL&P earlier about the voltage fluctuations and had been assured that the problem had been addressed.  After paying the claim,

Connecticut courts are split concerning whether electricity can be classified as a product such that a claim could be brought under the CPLA..  However, the court in Travelers relied upon what appears to be an emerging majority view nationally.  In a 1985 California appellate decision, Pierce v. PG&E, the court opined that policy justifications warranted the imposition of strict liability: (1)  difficulty of proving negligence involving a vast and complex electrical power system; (2) economic incentive for improved product safety; (3) to encourage reallocation of resources toward safer products; and (4) to spread the risk of loss among all who use the product.  What judicial limitations may be reasonable to prevent increased access to strict liability in tort for toxic tort plaintiffs injured by electricity? One bright line test might be permit electricity to be viewed as a product only when the electricity has been transferred to the consumer in a usable voltage.  Only then could a court reasonably view electricity as a consumer product.  Under this test, exposure to high voltage transmission lines would not result in a strict liability lawsuit.