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

On May 1, 2013, the Second Circuit issued an important decision in Caronia v. Philip Morris USA Inc., 2d Cir., No. 11-0316 (5/1/13). The Court provides an excellent summary of the law concerning medical monitoring claims in New York state and federal courts, and in other jurisdictions around the country. However, the Second Circuit concluded that the New York Court of Appeals was best suited to determine whether New York recognizes an independent claim for medical monitoring.

Therefore, the Court certified the following questions of New York law to the Court of Appeals: (1) Under New York law, may a current or former longterm smoker who has not been diagnosed with a smoking-related disease, and who is not under investigation by a physician for such a suspected disease, pursue an independent equitable cause of action for medical monitoring for such a disease? (2) If New York recognizes such an independent cause of action for medical monitoring, (a) what are the elements of that cause of action? and (b) what is the applicable statute of limitations, and when does that cause of action accrue?

Caronia, a putative class action, was commenced on January 19, 2006. The class plaintiffs are persons aged 50 years or older who currently smoke Marlboro cigarettes or ceased smoking them within one year prior to the commencement of the lawsuit, and smoked Marlboro cigarettes for at least 20-packed years. The complaint alleges that none of the plaintiffs are presently diagnosed with lung cancer nor under investigation under a physician for suspected lung cancer. Plaintiffs’ most recent amended complaint alleges that a newly established medical surveillance technique known as Low Dose CT scanning of the chest is a safe, efficacious and inexpensive technique which, for the first time, provides the means to identify and diagnose lung cancer at an early stage, when it is still curable.

In the trial court, the plaintiffs sought medical monitoring as a remedy for their tort claims of strict liability, negligence and breach of warranty but had not pled a free-standing claim for medical monitoring. It was not until plaintiffs filed their Fourth Amended Complaint that a stand-alone claim for medical monitoring was pled.

The Second Circuit affirmed the SDNY’s dismissal of plaintiffs’ traditional strict liability, negligence, and breach of warranty claims for redress of the smokers’ increased risk of developing lung cancer on the ground that these claims were time-barred. Thus, whether plaintiffs’ sole remaining claim for medical monitoring is a stand-alone claim or merely an element of consequential damages becomes critical to plaintiffs’ right of recovery. Because the statute of limitations bars plaintiffs’ pursuit of their traditional claims for negligence and strict products liability, any medical monitoring issue becomes moot if it is merely an element of consequential damages. If the underlying negligence and strict products liability claims are time-barred, then no consequential damages are recoverable.

 However, if New York recognizes an independent cause of action for medical monitoring, and, if, as recognized, that claim is viewed as accruing when an effective monitoring test becomes available, then, according to the Second Circuit, the statute of limitations likely will not have run on such an independent cause of action. Thus, the question certified to the New York Court of Appeals takes on critical importance.

 In Donovan v. Philip Morris USA, Inc., an almost identical case brought by the same plaintiff lawyers in the District of Massachusetts, the federal district court certified similar questions of law to the Supreme Judicial Court of Massachusetts. Notably, Sheila Birnbaum, now with Quinn Emanuel, and Gary Long of Shook Hardy & Bacon, argued on behalf of Philip Morris in both Massachusetts and New York.

In Donovan, the court held that plaintiffs who sued for medical monitoring, based on sub-clinical effects of exposure to cigarette smoke and increased risk of lung cancer, stated a cognizable claim under Massachusetts state law.

 The issue is whether the New York Court of Appeals will adopt the reasoning of Donovan, which sets a dangerous precedent, or take a more conservative approach. The obvious concern is that the “damages floodgates” may potentially open if the burden of medical monitoring plaintiffs is reduced to demonstrating a sub-cellular or physiological change rather than an injury or disease. Under such a loosened standard, particularly if an independent cause of action for medical monitoring is permitted to proceed, a sun tan, a skin blemish, a sneeze or elevated cholesterol could justify permitting a medical monitoring claim to proceed.

Perhaps we exaggerate, but why would not McDonald’s restaurants potentially be exposed to claims for diabetes medical monitoring claims brought by customers alleging they suffer  from  fast food-induced obesity?  Why would not Coppertone be subject to damages claims by customers with sunburns who allege they may be at risk for developing skin cancer due to the sun tan lotion’s  lack of efficacy in preventing sunburns?  In both situations, sub-cellular or physiological change could be demonstrated, particularly in the absence of a requirement to demonstrate phsical injury or disease.  A cynic might argue that a Donovan-style medical monitoring rule is designed only  to punish the tobacco industry rather than establish sound jurisprudence..

Although New York courts have held that medical monitoring may be an element of consequential damages, if certain requisites are met, Donovan can be distinguished from several Appellate Division medical monitoring cases in New York. For example, in Abusio v. Consolidated Edison Co., the Second Department upheld the trial court’s dismissal of cancerphobia claims on the grounds that plaintiffs had not presented sufficient evidence to prevail. However, in its decision, the Second Department cited cases which found that future medical monitoring costs could be sought for cancerphobia if a plaintiff could “establish both that he or she was in fact exposed to the disease-causing agent that there is a ‘rational basis’ for his or her fear of contracting the disease… this ‘rational basis’ has been construed to mean the clinically demonstrable presence of PCBs in the plaintiff’s body, or some indication of PCB-induced disease, i.e., some physical manifestation of PCB contamination… .”

A much-cited Fourth Department Appellate Division case, Askey v. Occidental Chemical Corp, examined claims of exposure to toxic discharges from a landfill and considered whether plaintiffs could recover for an anticipated need for medical monitoring. In particular, the court examined the then “novel issue” whether persons with an increased risk of disease could recover the costs of future medical monitoring in the absence of any apparent physical injury. In that case, the court concluded that recovery for medical monitoring was available as an element of consequential damage, but not as a stand-alone cause of action. But this article is not intended to be a survey of New York law on the subject.  The Second Circuit decision provides a cogent analysis of the important New York case law on medical monitoring and .I direct the reader to that discussion.

It is my view that any medical monitoring plaintiff should be required, at a minimum, to demonstrate injury or disease to recover medical monitoring damages and that no stand-alone claim for medical monitoring should be permitted. 

On March 27, 2013, a jury in federal district court in Bridgeport, Connecticut awarded Cara Munn, a 20-year-old  woman who formerly attended the Hotchkiss School  in Lakeville, Connecticut, $41,750,000 in a case styled Orson D. Munn III et al. v. The Hotchkiss School, No. 3:09cv0919 (SRU).  The case raises important issues concerning "duty" and "assumption of risk".

The jury determined that Hotchkiss, a prestigious prep school, was negligent for two reasons: (1) in failing to warn plaintiff before or during a school sponsored trip to China during the summer of 2007 about the risk of insect-borne illness on the trip; and (2) in failing to ensure that plaintiff used protective measures to prevent infection by an insect-borne disease while visiting Mt. Pan in China.

In an article appearing in the Connecticut Law Tribune (Vol. 39, No. 13), titled "Tick Bite Leads To Big Verdict",  it was reported that the school was faulted specifically  for not warning plaintiff (and her parents) that she would be traveling in mountainous and forested terrain. As a result, the jury determined that the plaintiff was not aware that she had to protect herself from insects by wearing bug repellent, long sleeve shirts and trousers, and by avoiding brushy undergrowth.

According to Plaintiffs' Amended Complaint, Ms. Munn's parents had Cara flown back to the United States in July '07, where she was hospitalized for several weeks at Weill Cornell Medical Center in the pediatric ICU and later at the Rusk Institute for extensive rehab.  As a result of her severe encephalitis, plaintiff suffered severe neurological and motor injuries, including permanent loss of speech. 

The case, which will almost certainly be appealed, raises significant issues concerning duty and the assumption of personal responsibility by parents who agree to have their child travel abroad for educational purposes. Apart from the obvious differences in food, culture and living conditions, traveling abroad carries many potential risks, some of which are foreseeable and some of which are not. Stepping back from the facts presented by this particularly tragic case, should a high school be held responsible for failing to prevent a student from being bitten by a tick in China? What if the tick had bitten her during a field trip to Central Park?

Assuming that the Second Circuit upholds this verdict, what does this case portend for high schools and colleges that plan educational trips abroad? Is there some bright line test that would provide guidance to a school evaluating the safety concerns of its students? Short of wrapping all of their students in cocoons and keeping them closely monitored in classroom settings, how can any school protect against the kind of unforeseen liability presented by this case?  

Hotchkiss' Answer to Plaintiffs' Amended Complaint states that plaintiffs' claims should be barred by the doctrine of assumption of risk.  The school argues that plaintiffs voluntarily assumed the risk of travel to China as evidenced by their execution of the pre-trip Agreement, Waiver, and Release of Liability.  In this agreement, plaintiffs agreed that Hotchkiss "would not be responsible for any injury to person or property caused by anything other than its sole negligence or willful misconduct" (emphasis added)   Would legal weight did the court give to this release? 

Based upon the Verdict Form presented to the jury, it would appear that the trial court gave short shrift to the language in the release.  The jury was asked the following questions: (1) Was one or more of Hotchkiss' negligent acts or omissions a cause-in-fact of Cara Munn's injuries; and (2) Was one or more of Hotchkiss' negligent acts or omissions a substantial factor, that acting alone or in conjunction with other factors, brought about Cara's injuries? 

Those inquiries are a lot different from asking whether the jury finds that Hotchkiss' "sole negligence or willful misconduct" caused the injuries.  Although the jury determined that plaintiff did not contribute to any degree whatsoever in causing her injuries, it was not asked to consider whether other intervening factors played any role in causing Cara's injuries.

There are circumstances when a school can and should be held responsible when things go wrong on a school outing.  Three examples come quickly to mind: (1) sending kids into a war zone despite State Department warnings; (2) sending kids abroad into an epidemic earlier identified by the CDC; or (3) taking non-swimmers for an ocean swim outing without proper supervision. 

How is Munn different from these scenarios?  Is a  random bug bite as foreseeable, if at all, as the kinds of risks discussed in the three scenarios above. According to Hotchkiss' summary judgment memorandum, the CDC reported that plaintiff was the first U.S. traveler ever to have reported TBE after traveling in China. Moreover, no U.S. traveler since plaintiff has developed the disease.  Therefore, how unreasonable was it for Hotchkiss not to take precautions against a risk of harm that arguably had such a slight likelihood of taking place?  Shouldn't plaintiffs have had to prove that the defendant was on prior notice of the existence of circumstances that could give rise to an injury? 

Plaintiffs' expert, Peter Tarlow once led a group of children, including his own son, on a  tour of Israel.  If a child on that Israel tour had been unexpectedly assaulted by someone holding anti-Zionist views, would Dr. Tarlow expect to be held responsible for any resultant injury because he was "on notice" of decades of endemic unrest in the region? 

Two strong CT trial lawyers squared off against each for this eight day trial--for the plaintiffs, Antonio Ponvert of Koskoff, Koskoff & Bieder, one of the New England plaintiff bar's preeminent  firms, and for the defendant, Penny Q. Seaman of Wiggin & Dana, one of Connecticut's oldest and most accomplished firms.  The bar should expect to see excellent post-trial briefing as events unfold.  

In a decision issued on March 7, 2013, the Supreme Court of Florida reaffirmed Florida’s commitment to adherence to the economic loss rule in product liability litigation. In Tiara Condominium Association, Inc. v. Marsh & McLennan Companies, Inc. etc., et al., No. SC10-1022, the high court provides a helpful discussion of the origin and development of the economic loss rule. In summary, the economic loss rule is described as “the fundamental boundary between contract law, which is designed to enforce the expectancy interests of the parties, and tort law, which imposes a duty of reasonable care and thereby encourages citizens to avoid causing physical harm to others.” Thus, economic loss has been defined by Florida courts as “damage for inadequate value, costs of repair and replacement of the defective product, or consequent loss of profits – without any claim of personal injury or damage to other property.” In other words, economic losses are “disappointed economic expectations,” which are protected by contract law, rather than tort law.

Despite the rule’s underpinnings in the product liability context, the economic loss rule has also been applied to circumstances when the parties are in contractual privity and one party seeks to recover damages in tort for damages arising in contract.

In a product liability context, the economic loss rule was developed to protect manufacturers from liability for economic damage caused by a defective product beyond those damages provided by warranty law.  In discussing the development of economic loss rule principles, the Florida Supreme Court analyzed the California Supreme Court’s holding in Seely v. White Motor Co., 403 P.2d 145 (Cal. 1965). In Seely, the California Supreme Court held that the doctrine of strict liability in tort did not supplant causes of action for breach of express warranty.

In that case, the court was confronted with a situation in which plaintiff sought recovery for economic loss resulting from his purchase of a truck that failed to perform according to expectations. The court concluded that the strict liability doctrine was not intended to undermine the warranty provisions of sales or contract law, but was designed to govern the wholly separate and distinct problem of physical injuries caused by defective products. In East River Steamship Corp. v. Transamerica Delaval, Inc., 476 U.S. 858 (1986), the U.S. Supreme Court adopted the reasoning of Seely when it considered the issue of economic loss resulting from defective products in the context of admiralty.

According to the Supreme Court, when the damage is to the product itself, “the injury suffered – the failure of the product to function properly – is the essence of a warranty action, through which a contracting party can seek to recoup the benefit of its bargain.” Recognizing that the extending strict product liability law to cover economic damages would result in “contract law… drowning in a sea of tort,” the Supreme Court held that “the manufacturer in a commercial relationship has no duty either under a negligence or a strict products liability theory to prevent a product from injuring itself.” Thus, from the outset, the focus of the economic loss rule was directed to damages resulting from defects in the product itself.

In a  Client Alert, dated July 5, 2011, Stites & Harbison lawyers John L. Tate and Cassidy R. Rosenthal wrote about the Kentucky Supreme Court’s adoption of the economic loss rule in Giddings & Lewis, Inc. v. Industrial Risk Insurers (6/18/11). The Court unanimously held that “a manufacturer in a commercial relationship has no duty under a negligence or strict products liability theory to prevent a product from injuring itself.” The Court wrote: “We believe the parties’ allocation of risk by contract should control without disturbance by the courts via product liability theories.”

As discussed by Mr. Tate and Ms. Rosenthal, in Giddings & Lewis, the manufacturer sold a sophisticated machining center to an industrial concern. The parties set forth their mutual obligations in a detailed commercial contract. After seven years of continuous operation, and after the contract’s express warranty expired, the machining center malfunctioned in a spectacular fashion – throwing chunks of steel weighing thousands of pounds across the factory floor. The costs to repair the machining center and to get the business up and running again were almost $3 million. After reimbursing the machine’s owner for its losses, a consortium of insurance companies asserted a subrogation claim against the machining center’s manufacturer. With the warranty expired, the insurance companies sued in negligence, strict liability, negligent misrepresentation, and fraudulent misrepresentation. What could be more tortious conduct that this?  

Applying the economic loss doctrine, the Kentucky Supreme Court agreed with Mr. Tate holding that the purchaser could not recover from the manufacturer under any tort theory. The consortium was limited to contractual remedies, all of which expired years earlier.

Despite such groundbreaking decisions, is the economic loss rule  under-utilized in products liability and commercial litigation today?  Of course, if personal injury results from an alleged defect, the rule does not apply. However, not infrequently, complaints alleging damages arising from a defective product that purportedly caused economic loss sound in negligence or strict products liability. Are defense lawyers seeking dismissal of these tort claims on the basis of the economic loss rule as often as they should?.
 

On February 11, 2013, the IADC conducted a lively, interactive panel discussing the risks and benefits of shale oil and gas extraction at the IADC Mid-Winter Meeting. The panel represented the spectrum of political, regulatory and scientific views on the issue and debated perceived potential risks to human health and the environment.

In addition to me,  the panel consisted of Blaine D. Edwards, Assistant General Counsel at Superior Energy Services, Inc.; Raymond G. Mullady, Jr., a partner at Blank Rome LLP in Washington, D.C.; and Niall A. Paul and Nathan D. Atkinson, partners at Spilman Thomas & Battle PLLC. Eric Lasker at  Hollingsworth LLP in Washington, D.C. assisted in the preparation and coordination of the event.

Ray Mullady presented his paper, “Defending Marcellus Shale Groundwater Contamination Claims: The Case Against Class Actions and Other Theories of Liability,” which he co-authored with other lawyers at his firm. I presented my paper titled, “Shale Oil and Gas Development: The Stakeholder Perspective.”

My paper concerning stakeholder perspectives was presented against the backdrop of the debate in New York concerning whether to permit fracking to occur. In researching this issue, I learned that some stakeholders representing county and municipal interests expressed deep concern regarding perceived secondary societal impacts of fracking, including diminution of property value; increased demands placed on community infrastructure, particularly roads; increased crime rates and rental prices associated with an influx of out-of-state workers; and the fragmentation of rural landscapes with pipelines, roads and staging areas. Surprisingly, for these stakeholders, these concerns outweighed environmental or health concerns.

These stakeholders express deeply held fears – whether rational or not – that gas exploration will be detrimental to their established way of life in rural upstate New York.
The natural gas industry possesses both the science and the practical know-how to be confident that fracking can be performed without causing the contamination of groundwater and surface water. However, social concerns raise questions beyond purely environmental issues. In a largely rural region that is unaccustomed to the perceived sprawling industrial impact of natural gas drilling, unlike other parts of the country, there is apprehension that adverse societal effects may outweigh the predicted economic benefits.

There are a number of tools an industry can utilize to address concerns over infrastructure impacts of hydrofracking. Better public relations to win over the hearts and minds of upstate New Yorkers is paramount.  Perhaps because public relations efforts have not been necessary in other areas of the country long accustomed to natural gas exploration, there may not have been a perceived need for PR in upstate New York.  

Explaining how horizontal drilling works is an important first step in reassuring folks that gas exploration will not bring about an end to their semi-agrarian way of life.  For example, there is a superb animation that explains how horizontal drilling works on the website of the Oklahoma Oil & Natural Gas Producers & Royalty Owners.  In the immediate vicinity of drilling operations, companies can provide, among other things, Value Assurance Programs (“VAPs”) to homeowners to protect them against diminution of property value as a result of their living in an area where industrial activity is taking place. As discussed in other articles on this blog, a VAP is a contractual commitment to the community that assures homeowners that the proposed activity will not result in loss of investment in their homes.  

Any day now, the blue ribbon panel appointed by NYS Health Commissioner, Dr. Nirav Shah, to assist in the NYSDOH's consideration of the health risks of fracking, will issue its report.  The panel experts – Lynn Goldman, dean of George Washington University’s School of Public Health and Health Services; John Adgate, chair of the Environmental and Occupational Health Department at the Colorado School of Public Health; and Richard Jackson, chair of the Department of Environmental Health Sciences at UCLA’s Fielding School of Public Health – are among the foremost experts in the country in their respective fields and in the field of health impact assessment. Environmental advocacy groups, including NRDC, were extremely pleased with these appointments. It is likely that the issuance of the panel's report will re-energize the hydrofracking debate.

To successfully assert a claim under New York General Business Law § 349 (h) or § 350, "a plaintiff must allege that a defendant has engaged in (1) consumer-oriented conduct that is (2) materially misleading and that (3) plaintiff suffered injury as a result of the allegedly deceptive act or practice" 

A claim is brought under GBL § 349 to allege misleading and deceptive trade practices and under GBL § 350 to allege false advertising.  Typically, these two sections are pled in tandem, both in single plaintiff cases and in class action litigation seeking relief from consumer fraud. 

In their NYLJ article (12/28/12) looking back at the significant New York State class action decisions that were handed down during 2012, authors Thomas A. Dickerson, Jeffrey A. Cohen (both Second Department judges) and Kenneth A. Manning devote special attention to the Court of Appeals decision in Koch v. Acker, Merrall & Condit, in which the court clarified that justifiable reliance is not an element of a GBL § 350 claim. Prior decisions had already done away with any reliance requirement on a GBL § 349 claim

The element of reliance had always seeming been an important defense weapon in deceptive trade practice class action litigation. In Koch, plaintiff alleged that the auction house described its wines as "extraordinary, " "absolutely stunning," and among the "greatest wines...ever experienced"  when, in fact, these wines were undeniably nothing of the kind. But the First Department made short shrift of plaintiff's claims.  The court gave considerable deference to the disclaimer language in the auction house's brochure which provided an "as is" disclaimer.

In addition to the "as is" caveat, the "Conditions of Sale/Purchaser's Agreement" made "no express or implied representation, warranty, or guarantee regarding the origin, physical condition, quality, rarity, authenticity, value or estimated value" of the wine.  Should not a  reasonable consumer, the appellate court reasoned, been alerted by these disclaimers, would not have relied, and thus would not have been misled, by defendant's alleged misrepresentations concerning the vintage and provenance of the wine it sells?  In this instance, according to Decanter.com, the plaintiff was Florida billionaire, William "Bill" Koch, who apparently believed that the auction house had sold him the proverbial "bill of goods".  If anyone was to read and understand the "fine print" in the disclaimer, surely a sophisticated investor like Mr. Koch would.

In answer, the  Court of Appeals held that the "as is" provision does not bar the claim (at least at the pleading stage) and does not establish a defense as a matter of law. 

As Messrs. Dickerson and  Cohen explained in an earlier NYLJ article (4/19/12), the Koch ruling may be a "game changer" in deceptive and misleading business practices class action litigation.  They cite a long series of prior appellate cases, which had established reliance as a basis for obtaining a recovery under GBL § 350, which clearly is no longer good law. In the past, New York courts were reluctant to certify GBL § 350 claims because they found that reliance was not subject to class wide proof. 

When the Appellate Division issued its decision, wine industry attorney Brian Pedigo in Irvine California expressed concern to Decanter.com that it would set bad precedent if all prospective bidders had to satisfy themselves by inspection rather than to trust in the auction house's represenations.  In pertinent part, he commented, "A regular Joe consumer is not going to fly overseas [or across the country] to inspect wine. A reasonable consumer will rely on the representation of the seller, and will not read or understand the fine print disclaimers".  An adverse decision for the auction house, he believed, would be "horrible for consumer trust in the online auction environment; it could possibly destroy this niche market sector".  Would  internet commerce be adversely affected if the e-consumer was not able to trust the e-seller?

The Court of Appeals apparently agreed with Mr. Pedigo that the risk of authenticity should not entirely shift to the consumer, regardless of whether the consumer is Joe consumer or Bill Koch. 

The claim against Acker Merrall is not Mr. Koch's only wine-related lawsuit.  He previously brought a RICO claim against Christie's, another auction house, after purchasing four bottles of wine that he believed were connected to Thomas Jefferson, but turned out were not really that old.  That Koch wine auction case ended up in the Second Circuit; but that's a story for another time. 

At the end of the day, Koch serves to harmonize GBL § 349 and GBL § 350; there is no reliance pleading requirement under either statute. 

However, all is far from lost for the defendants in these cases.  As discussed at the outset of this article, plaintiffs must prove  (1) consumer-oriented conduct that is (2) materially misleading and that (3) plaintiff suffered injury as a result of the allegedly deceptive act or practice".  Accordingly, although reliance need not be shown, the plaintiff must still prove causation.  Proof of causation remains plaintiff's critical hurdle in succeeding in these claims.  

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.
 

Well drafted contracts provide an effective means to mitigate tort liability. In particular, contractual risk allocation provisions can assist companies in better controlling their litigation disposing of claims when they arise.

In an article titled, “Minimizing Tort Liability with the Right Terms,” which appeared in Law360 on February 29, 2012, Shook Hardy & Bacon authors, Paul A. Williams,Charles C. Eblen andKristina L. Burmeister, discuss the importance of various contractual provisions in blunting tort liability.
To illustrate their point, the SH&B lawyers discuss the Third Circuit’s opinion in Greenspan v. ADT Security Servs., Nos. 10-2901, 10-202 (3d Cir., Sept. 20, 2011). The case involved property damage claims resulting from a fire at the plaintiffs’ Pennsylvania residence. The Plaintiffs sued ADT for breach of contract and negligence, claiming that ADT insufficiently repaired and monitored their fire alarm system.

On appeal, the Third Circuit agreed with ADT that the contract’s risk allocation provisions provided a valid defense against all of plaintiff’s claims, including gross negligence. The court ruled that plaintiff could recover in contract only, not tort, because the common law did not impose a separate tort duty to monitor an alarm system. By strictly enforcing the contractual risk allocation provisions in the contract, jurisprudence such as Greenspan provides business with the ability to mitigate tort risk and litigation costs through well drafted contracts.

Increasingly, plaintiffs are attempting to broaden what should be contractual disputes into tort litigation. Greenspan is a perfect example of this trend. In addition to a well drafted contract, defendants are often able to escape tort liability by invoking the economic loss rule. In practice, courts have generally applied the economic loss rule either when the loss claimed in tort is the subject matter of a contract between the parties, or when the plaintiff asserts product liability claims and the defect harmed the product only and not people or other property.

The SH&B article advises that an effective risk-allocation framework should contain the following provisions:

• Waiver of Subrogation;
• Limitation of Liability;
• Limitation of Action;
• Insurance Requirements; and
• Indemnity Clause

In drafting each of these provisions, it is necessary to be mindful of the legal requirements underlying each of these contractual terms. General contractual construction rules to keep in mind include:

1. An effective contract spells out the expectations to ensure that the waiver of subrogation provision is deemed a true waiver of subrogation and not merely an exculpatory provision;

 2. The waiver of subrogation provision should provide that the customer agrees to procure insurance for damages that might arise in connection with the performance of the contract and that the company be named as an additional insured;

 3. The customer should be required to waive all right of recovery beyond the proceeds of his insurance policy and agree that his insurer will not have a right of subrogation against the company;

 4. Each of these contractual provisions should be placed under separate headings in the contract so that they do not blend into and become obscured by other provisions in the contract;

5. Effective contracts should be signed by both parties and definitively indicate if the contract contains more than one page. The customer should sign or initial each page of the contract, or acknowledge that she has read and agrees to all terms and conditions of the contract on each page;

6. It is good practice for language disclaiming consequential damages or otherwise limiting recovery under warranty appear conspicuously in the contract, preferably in bolded caps; and

7. Indemnification provisions should explicitly state that the company has the right to select its own counsel to represent it in any action subject to the indemnification clause in the contract.

What’s Next?

Now that the company has a well drafted, legally binding contract with the customer, the company must take steps to ensure that it doesn’t misplace the contract. The SH&B authors point out that document management is essential to the defensive use of a contract in litigation. If the contract at issue cannot be found, it may be difficult to assert contractual offenses and may unnecessarily expose the company to significant liability.

 Or, as famed criminal defense lawyer, Johnnie Cochran, might have cautioned, “If you lose it, you can’t use it!”

We examined the Apparent Manufacturer Doctrine in an article last week where this theory of liability was discussed in the context of a Connecticut asbestos lawsuit.  The Apparent Manufacturer Doctrine operates to impose liability in some jurisdictions, where a trademark licensor may be held liable “by virtue of its substantial participation in design, manufacture or distribution of a product and its role in placing such dangerous product in the stream of commerce.”  Such was the basis for the imposition of liability on the defendant trademark licensor in Lou v. Otis Elevator Co., 77 Mass. App. CT 571.

In that case, a Massachusetts appellate court determined that there was no error in a jury instruction instructing that a non-seller trademark licensor who participates substantially in the design, manufacture or distribution of a licensee’s product may be held liable as an apparent manufacturer. In so holding, the appellate court rejected the defendant’s contention that the application of the Apparent Manufacturer Doctrine under these circumstances ignored the separate corporate identities of the various entities involved. Until this case was decided in 2010, Massachusetts cases have previously applied the Apparent Manufacturer Doctrine, but no reported Massachusetts courts had applied the Doctrine to a non-seller.  

Lou arose from an accident involving a four year old  visiting his grandparents in China. During an outing  to a department store, the child suffered a serious injury on an escalator sold by China Tianjin Otis Elevator Company, Ltd., under license from the U.S. corporation, Otis Elevator Company. After a lengthy jury trial in Massachusetts, the jury returned a verdict awarding $3,350,000 in damages plus prejudgment interest in the amount of $3,300,000.  

The Chinese manufacturer was a joint venture formed in 1984 between Otis and two Chinese entities. The purpose of the joint venture was to manufacture in China elevators and escalators pursuant to Otis design standards and bearing the Otis trademark. The evidence relied upon the Massachusetts appellate court demonstrates that the U.S. company provided: (a) engineering and product design drawings, data and information; (b) process, production, inflation, maintenance, testing and inspection methods; (c) quality standards; (d) factory and general management methods; and (e) other documents and information providing a broad range of technical and managerial support by the U.S. defendant.  

What the court's holding leaves unanswered is the extent to which the trademark licensor’s involvement may result in the imposition of liability. Is the same "laundry list" of factors identified by the Lou required in every case?  Are some factors more important than others?  Is there some “bright line” test that trademark licensors can apply to avoid their being targeted under the Apparent Manufacturer Doctrine? Certainly the severity of the plaintiff’s injury (and the sympathy such injury can engender with the jury) should not be the litmus test. Should a trademark licensor distance itself from its licensee’s product altogether to avoid liabilty? That is hardly a practical solution for American companies attempting to develop sales in foreign markets. 

The expansion of the Apparent Manufacturer Doctrine raises interesting “corporate veil-piercing” concerns.  Can an injured plaintiff reach a non-seller parent company merely by arguing that the parent company had substantial involvement in the subsidiary’s design and manufacture of the product?  What if the parent and subsidiary have similar names and logos? There is much latitude for mischief in these serious product liability cases. Presently, there does not appear to be much in the way of uniform jurisprudence in this area to guide trademark licensors. This is not helpful to American business.
 

Although by no means a “hell hole” jurisdiction, it is difficult for a peripheral asbestos defendant to obtain summary judgment in Bridgeport Superior Court in Connecticut. Once summary judgment is denied, many asbestos defendants with questionable liability will often settle out rather than risk the financial exposure of an adverse result in a mesothelioma jury trial.  It is helpful for a company to have a well thought out appellate strategy in mind before selecting a jury in that jurisdiction.  One recent asbestos trial did not turn out well for a trade association defendant.. 

On August 24, 2012, the Bridgeport Superior Court denied post-trial motions filed by Tile Council of North America (“Tile Council”) in Hannibal Saldibar v. A.O. Smith Corp. The Tile Council is a trade association that developed and patented an asbestos-containing formula for dry set mortar. This jury verdict raises the issue whether a trademark licensor may be held liable under a theory of strict liability as the “apparent manufacturer” despite having never manufactured or sold the product at issue.  The Apparent Manufacturer Doctrine seeks to hold the licensor vicariously liable for defective products manufactured by the licensee.

Over the past 50 years, trademark licensing has emerged as a preferred method of producing and marketing goods in the U.S.  According to David J. Franklyn, a professor at Northern Kentucky University, who wrote an article titled, "The Apparent Manufacturer Doctrine, Trademark Licensors and Third Restatement of Torts" in the Case Western Reserve Law Review, some $50 billion dollars of licensed goods are sold each year. 

The Bridgeport Superior Court’s decision is arguably a departure from the precedent established in Burkert v. Petrol Plus of Naugatuck, Inc., 216 Conn. 65 (1990), a well reasoned decision by the Supreme Court of Connecticut. The principal issue in Burkert was whether the distributor of an allegedly defective product, an automatic transmission fluid, was entitled to indemnification against GM, the licensor of a trademark under which the allegedly defective product was marketed. GM, the trademark licensor, did not participate in the production, marketing or distribution of the product.

In Burkert, the Connecticut Supreme Court made two significant rulings: (1) because GM did no more than allow others to use its Dexron® II trademark in the production, marketing and distribution of transmission fluid, absent any further involvement in the stream of commerce, GM could not be deemed a seller under Connecticut’s Product Liability Act; and (2) plaintiff could not rely upon Section 400 of the Restatement of Torts (Second) because that section applied only to those involved in the sale, lease, gift or loan of a product.

The Burkert court cited with approval the holdings of courts in other jurisdictions explicitly holding that liability against a trademark licensor under the Apparent Manufacturer Doctrine is appropriate only when the licensor is determined to have been significantly involved in the manufacturing, marketing or distribution of the defective product. Regardless of whether the plaintiff is proceeding on an “apparent manufacturer” or an “enterprise” theory of liability, the majority of cases emphasize the licensor’s degree of control and involvement exercised over design, manufacturer and sale.
 

The plaintiff in Saldibar may have raised sufficient factual issues to avoid summary judgment but arguably should not have prevailed on post-trial motions. In rejecting Tile Council’s argument that it was not a “product manufacturer” or “product seller” pursuant to the Connecticut Product Liability Act, the court found that the Tile Council was sufficiently involved in the distribution, marketing and manufacture of its products to “fall within the ambit of the product liability statute.” To add insult to injury, the trial court not only refused to set aside a $1,500,000 verdict in compensatory damages, plus $100,000 in loss of consortium damages, but also upheld an award of $800,000 in punitive damages based on the jury’s finding that Tile Council acted with “reckless disregard” for the safety of product users. Based upon this holding, a trademark licensor in Connecticut is potentially liable for punitive damages resulting from injuries caused by a product it neither manufactured nor sold.
 

Although the involvement of Tile Council may have been more extensive than that evidenced by GM, the trademark licensor in Burkert, it is questionable whether these factual distinctions warranted a finding of liability, let alone an award of punitive damages. In Saldibar, for example, the court relied upon testimony by a co-defendant, H.B. Fuller, that Tile Council had “developed a market for these products, based upon their formulas, based upon their trademark and hallmark, if you will, of an assurance that if you buy products that contain this logo, you can be sure that it did work.” There us absolutely no  probative value to this testimony.  On the other hand,  If the Plaintiff or Plaintiff's employer had provided testimony that he relied on the presence of the licensor’s logo for assurance that the product was safe, it may have raised a reliance issue. But The co-defendant’s testimony, cited by the trial court, is not relevant to the issue of reliance because it did not purchase the product.  Of more importance is that it does not appear Plaintiff was induced to purchase the asbestos-containing product because of the licensor's involvement. 

Arguably, the licensor should only be potentially liable (as a threshold matter) when it induces the consumer to purchase the product or where plaintiffs can prove that they reasonably relied on the trademark.

What was apparently fatal to Tile Council was the trial court's determination that Tile Council set forth detailed specifications governing “all aspects” of the product, including the percentage and grade of the asbestos fiber to be used. Moreover, in Saldibar, Tile Council drafted the product warnings that appeared on the product. On the basis of these facts, the trial court distinguished Saldibar from Burkert.

Saldibar raises some troubling concerns from a policy standpoint. Saldibar rewards conduct by a licensor that distances it from the ultimate consumer. If Tile Council was in the best position to recommend warnings for the product label, why should this activity alone become a basis for imposing vicarioius liability?  The issue in Saldibar was not whether the warnings were adequate to warn against the risks of asbestos use, but whether the warnings were sufficient to bring Tile Council under the ambit of the Connecticut Product Liability Act as a “apparent manufacturer.” There is no indication that Plaintiff ever read the warnings or that an alleged failure to warn was a proximate cause of plaintiff’s injury. As a practical matter, a plaintiff should be required to demonstrate that he saw the licensor’s logo and was induced to purchase the product on that basis. Whether there was detrimental reliance by the product purchaser was not an issue considered by the court.

In the absence of clear judicial guidelines, claims for intentional infliction of emotional distress would potentially become part and parcel of every civil litigation. There is little question that a business dispute can cause significant anxiety to the business people involved. However, what does it take for that anxiety to rise to the level of an actionable claim for intentional infliction of emotional distress?  In New York, the answer is "a great deal".

A commercial litigation provided an opportunity for Justice Cynthia S. Kern of New York County Supreme Court to review the required elements of a such a claim. In Steinhouse v. Lesser, 112196/10, NYLJ 1202567349247, at *1 (Sup., NY, Decided July 30, 2012), plaintiffs commenced an action to compel the defendants, two of the limited partners of a partnership, to sign an operating agreement which would convert their limited partnership to a limited liability company. When the action was brought, eighty-eight of the ninety partners, representing 98.68% of the equity of the partnership, had already signed to the conversion. The defendants were the last holdouts.

In their counterclaim for intentional infliction of emotional distress, the defendants argued that the plaintiffs had sent repeated letters and made repeated calls with requests or demands that the defendants sign the new operating agreement. In dismissing the counterclaim on summary judgment, Judge Kern held that defendants had failed to state a claim. Pursuant to Lau v. S&M Enterprises, 72 A.D.3d 497, 498 (1st Dep’t 2010), the elements for a claim of intentional infliction of emotional distress are “(1) extreme and outrageous conduct; (2) an intent to cause – or disregard of a substantial probability of causing – severe emotional distress; (3) a causal connection between the conduct and the injury; and (4) the resultant severe emotional distress.”

Based upon the facts presented in the court’s decision, the defendants’ counterclaim fell far short of meeting the requisite elements of such a claim.  However, it is certainly not inconceivable that a claim for intentional infliction of emotional distress might properly lie in a business dispute that was particularly acrimonious and personal.  But the bar is high.  How high is revealed by the New York State Court of Appeals in Howell v New York Post Co., 81 NY2d 115, 121 [1993)   

Howell arose against the backdrop of the Hedda Nussbaum story, which made tabloid headline news in 1988. Nussbaum was the “adoptive” mother of six-year-old Lisa Steinberg, whose November 1987 death from child abuse generated intense public interest. On September 1, 1988, a newspaper photographer trespassed onto the grounds of Four Winds Hospital, a private psychiatric facility in Westchester County. With a telephoto lens, the tabloid photographer took outdoor pictures of Nussbaum in the company of plaintiff Pamela J. Howell, another patient. After the photographs were taken, the hospital’s medical director telephoned the newspaper editor requesting that the paper not publish any patient photographs. It was imperative for Howell’s recovery that her hospitalization remained a secret from all but her immediate family. Despite the admonition of the hospital medical director, the newspaper published the photographs of Nussbaum, which included the plaintiff. Although plaintiff’s name was not mentioned, her face was readily discernible.

Alleging she experienced emotional distress and humiliation, plaintiff commenced an action against the newspaper, the photographer and two writers, seeking damages for alleged violations of the Civil Rights Law §§50 and 51. Even under these egregious facts, the Court of Appeals determined that plaintiff did not have a claim for intentional infliction of emotional distress. In part, the court determined that the newspaper’s publication of a newsworthy photograph fell within the contemplation of the “privileged-conduct” exception. The court reached this conclusion because it found there was a newsworthy relationship between the article and the photograph of the plaintiff in the company of Nussbaum. 

In light of the high bar, why is it that courts are occasionally willing to countenance intentional infliction claims in an environmental setting?  The may be a few explanations.  Although it is necessary to show "extreme and outrageous conduct", some judges have not fully considered whether the environmental contamination at issue poses a threat to human health or the environment.  In many instances, there may be exceedances of state regulatory levels for a particular contaminant in groundwater or soil, but far below the level that could cause actual harm. 

Thus, it is imperative that courts understand the difference between a level of contamination that may give rise to actual harm versus a level of contamination that may give rise to regulatory scrutiny, which is quite different..  In this era of sometimes sensationalized media reporting concerning environmental incidents, there is always the possibility that some excitable person will imagine that he or she has had some exposure to a harmful chemical and became emotionally distraught.  It is defense counsel's job to ensure that the court understands that the claimed exposure is often remote or, at best, fleeting, but hardly ever the result of "extreme and outrageous" conduct..  

How much leeway should courts give to plaintiffs seeking recovery for emotional distress? Should claimants be permitted to seek recovery for emotional distress over the loss of family heirlooms, photographs or other objects to which they are emotionally attached? How can a jury be expected to separate real from spurious claims? Particularly in toxic tort litigation, claims for emotional distress can generate exposure for defendants.  How do courts guarantee that these claims are genuine? 

Some states, including New Jersey, permit a claim for emotional distress by a plaintiff who witnesses the death of a family member. Portee v. Jaffee, 84 N.J. 88 (1980). There was little doubt that the emotional distress claim in Portee was genuine.  The case involved a mother who stood by helplessly as her seven year old son was crushed to death by an elevator door while crying out in pain and flailing his arms. Shortly thereafter, the distraught grieving mother attempted suicide by slitting her wrists.

Portee has been broadened over time to include intimate acquaintances, such as friends who live together. However, the Supreme Court of New Jersey recently refused to expand Portee to allow claims for emotional distress attendant to the loss of a beloved pet. The court was concerned that permitting such a claim would create an “ill-defined and amorphous cause of action that would elevate the loss of pets to a status that exceeds the loss of all but a few human beings.” The court observed that “not even all humans are engaged in a relationship that is sufficiently close to support such an award.”

The facts of McDougall v. Lamm, decided on July 31, 2012,  are poignant. Plaintiff Joyce McDougall was walking “Angel,” her maltipoo, a cross between a maltese and a poodle, when a large, mixed breed dog attacked it, grabbed it by the neck, shook it violently and dropped it dead to the ground. In her suit against the attacking dog’s owner, according to a report in the New York Law Journal on August 3, 2012, McDougall claimed that Angel had been her close companion for years and that the loss was especially hard for her since she and her husband had separated and her children had gone to college. Although the trial court awarded her $5,000 for the loss of the dog, the emotional distress count was dismissed on summary judgment. The Appellate Division affirmed.

Although the Supreme Court acknowledged that New Jersey law has treated pets differently than mere chattel in various situations (such as permitting a pet owner to recover not only the pet’s replacement cost but also for veterinary expenses), the high court drew the line on permitting recovery for emotional distress damages when pets are injured or killed. In ruling against McDougall, the court noted that, in some circumstances, a neighbor would not be permitted to seek damages for emotional distress after observing a next door neighbor’s child, with whom it had a close relationship, being torn apart by a wild animal. This would lead to the incongruous result that a plaintiff would be able to recover for emotional distress over the loss of a dog, but that a neighbor could not recover for the loss of a child with whom she shared an emotional attachment. Thus, in the end, the court left the Portee doctrine intact.

In the toxic tort context, across the Hudson River from New Jersey, New York litigants look to In re Methyl Tertiary Butyl Ether (“MTBE”) Products Liability Litigation, 379 F. Supp. 2d 349 (S.D.N.Y. 2005), which makes it clear that “damages are not recoverable for anxiety caused by property damage.” Recovery for emotional distress in New York requires Plaintiffs to establish that emotional distress arises from injury or fear of injury to the person.” The case General Accident Ins. Co. v. Black & Decker (U.S.), Inc., 266 A.D.2d 918, 918 (4th Dep’t 1999), stands for the proposition that “there is no cause of action for emotional distress caused by the destruction of one’s property…nor for emotional distress caused by the observation of damage to one’s property.”  In that case, the plaintiffs' children who observed their family home burn down from across the street, but were never themselves in any physical danger, were not permitted to seek damages for emotional distress. 

New York courts draw a line where someone is claiming emotional distress for mere loss of chattel. A related claim “fear of injury to the person,” requires proof that such fear has a rational basis. MTBE Products Liability Litigation, 379 F.Supp.2d at 430. Such a ‘rational basis’ requires “the clinically-demonstrable presence of a toxin in the plaintiff’s body, or some other indication of a toxin-induced disease.” Thus, in Conway v. Brooklyn Union Gas Co., 189 A.D.2d 851, 592 N.Y.S.2d 782 (2d Dep’t 1993), plaintiffs seeking damages for sleeplessness, anxiety, and fear of developing cancer because defendants did not remove asbestos from their home saw their claims dismissed on summary judgment because they could not offer evidence of asbestos contamination that might develop into cancer. In the absence of such proof, the plaintiffs were not able to “guarantee the genuineness of the claim.” Without such evidence of genuineness, New York courts typically dismiss such cases as speculative at the summary judgment phase of the proceedings.
 

We have written in the past concerning Value Assurance Plans (or “VAPs”), which should be considered as a significant component of a corporate response to homeowner concerns over property values due to environmental issues. Mass tort diminution of property value litigation often results when panic selling by homeowners drives down property values across an entire community due to the emergence of a perceived environmental risk. The liability exposure in these cases can be enormous.

In essence, a VAP is a contractual promise made to assure homeowners that the equity in their homes will be protected if they sell their homes and realize less than full value from the sale due to an environmental concern. The VAP is designed to reduce panic selling by assuring homeowners that their home equity will be protected if they stay in the community during an extensive remediation.  The world’s largest VAP has been operating successfully for several years in Port Hope, Ontario, which is located on the north shore of Lake Ontario. 

In the 1930’s, a radium manufacturing facility opened in Port Hope, Ontario, which generated uranium as a waste byproduct. After uranium’s critical role in the development of nuclear weapons became understood, the Port Hope operation was purchased by the Canadian government in 1942. Consistent with waste disposal practices at the time, waste from the uranium operation, which contained Radium-226, uranium, arsenic and other contaminants resulting from the refining process, was discarded around the former plant site; swept into Port Hope harbor; disposed of in local dump sites; or distributed throughout the community as fill.

On October 1, 2001, the Canadian government introduced the Port Hope Area Initiative  to address the remediation and long-term management of low-level radioactive waste in the Port Hope area. Because thousands of homeowners reside in and around the proposed waste management facilities, or along the route that would transport waste to the facilities, the Canadian government had the foresight to protect home values by establishing a VAP, which Canada refers to as a Property Value Protection Program or “PVP” The PVP was offered as part of the Port Hope Area Initiative to compensate property owners who suffered financial loss on the sale of their property, loss of rental income or mortgage renewal difficulties as a result of the plans or activities of the Initiative.

Under the PVP, eligible property owners may apply for compensation if they have realized any of three types of financial loss: (1) their property sold for less than its fair market value because of activities relating to the Initiative; (2) their rental property was unable to rent units for fair market value because of the Initiative; or (3) they had difficulty renewing a mortgage at fair market value as a result of the Initiative. The purpose of the PVP is to ensure that anyone selling a property in a defined area would not be financially disadvantaged by the activities of the Port Hope Area Initiative.

As a result of the PVP, real estate within the Port Hope Area Initiative has remained remarkably stable. There was no panic selling by homeowners rushing to get out the door before property values fell precipitously. During the first ten years of the program, some 83 claims were filed, resulting in payments of approximately $2,500,000. Given that some 5,800 properties could potentially be affected by the projects, the Program appears to have been very successful at reasonable cost

Studies have shown that Port Hope and environs is a safe place to live. The radiation levels in Port Hope are reportedly lower than in the average Ontario community and about the same as in Toronto. Nine years of independent public attitude surveys have shown that residents feel well informed and support the project. These surveys show that 80 per cent of residents are confident that the project can be done safely.

According to Judy Herod, who authored an Abstract titled, “Evolution of the Property Value Protection Program – A Study of How a Compensation Plan to Address Project – Related Diminution has Evolved to Meeting Changing Needs,”  since  inception, the PVP Program has continued to build stakeholder confidence by mitigating the risk of economic vulnerability of current and prospective property owners, thereby contributing to stability in the local real estate market. Ms. Herod is the highly regarded Acting Manager, Communications & Stakeholder Relations, for the Port Hope Area Initiative Management Office. 

To be successful, it is vital that a VAP (or PVP) does not take place in a vacuum. At Port Hope, some important early decisions defined the "zone of influence" that was key to establishing homeowner eligibility for the program; determined the scope of benefits that could be applied for; and devised conservative predictions for potential nuisance effects, such as increased noise, dust or traffic within zones established for each, specific remediation activity.  For example, it was estimated that approximately 80,000 to 90,000 trucks transporting waste would travel over the life of the project. 

Increasing awareness of the PVP Program and communicating its requirements to potential claimants were primary communications objections.  Key stakeholders include all owners with the PVP zone and professionals working in the real estate sector. To be successful, all VAPs must incorporate a strong communications component that serves to keep homeowners informed and maintains the transparency of the remediation process. 

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.

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In 2008, the parents of Sean Reeps, brought suit against BMW, Martin Motor Sales and Hassel Motors ("Hassel"), alleging that Sean's mother, Debra, was exposed to gasoline fumes in the family's BMW during her pregancy, which resulted in Sean being born with birth defects. The Complaint alleged causes of action in (1) negligence; (2) strict products liability; (3) breach of express warranty; and (4) breach of implied warranty (merchantability) . The timeline of events is as follows:

1991-In March and again in November, Reeps bring their 1989 BMW 525i to Hassel Motors, a licensed BMW dealer, to fix an exhaust odor inside the car.  Dealer fails to identiify an exhaust odor in March, but later identifies problem as a split fuel hose and repairs it under warranty.

1992-In May, Sean Reeps is born with birth defects, including cerebral palsy, which plaintiffs  attribute to Debra's  inhalation of gas fumes early in pregnancy.

1994-BMW recalls BMW525i vehicles due to safety defect that caused odor due to feed fuel hose. Car is no longer with plaintiffs at the time.

On summary judgment, BMW argued that plaintiff's claims were barred by the doctrine of spoliation because plaintiff could not establish a prima facie case without the car or the fuel hose to show the actual alleged defect.  BMW's expert testified by affidavit that the Reeps' leakage was caused by a split in the fuel hose, not by the defect that was the subject of the recall.  Thus, in the absence of the actual fuel hose, BMW argued, plaintiff could not demonstrate a defect. 

The trial court rejected BMW’s spoliation argument, holding that there was no evidence of “willful or contumacious conduct” by plaintiff in disposing of the car. Remarkably, the Reeps’ BMW was actually found, but clearly not in the same condition as it was in 1991 and, not surprisingly, without the original fuel hose. The trial court held that plaintiff was not “barred from pursuing his claim, but rather he will have the onerous trial burden of proving his case solely by circumstantial evidence.”

New York law requires that to establish a prima facie case for strict product liability or design defect, a plaintiff must show that the manufacturer marketed a product that was not reasonably safe in its design; that it was feasible to design the product in a safer manner; and that the defective design was a substantial factor in causing the plaintiff’s injury. When the product at issue is no longer available, and the plaintiff seeks to prove a manufacturing defect by circumstantial evidence, the plaintiff must not only establish that the product did not perform as intended, but must also exclude all other causes of failure not attributable to the manufacturer.

The trial court denied Hassel's motion for summary judgment. The gravamen for plaintiff’s claims against Hassel was that it was negligent in failing to find the split fuel hose when the Reeps first complained of fuel odor in March 1991. Plaintiffs argued that if Hassel had identified and repaired the problem, Mrs. Reeps would not have inhaled any fumes during her pregnancy. In denying the dealer’s motion for summary judgment, the court observed that there is a high bar for obtaining summary judgment in a negligence action. As the court noted, “Simply put, Hassel must prove that it was not negligent when it failed to find a source of the gas fumes complained of by the Reeps in March 1991. It has not done so.”

In its decision, dated April 5, 2012, the Appellate Division, First Department, weighed in on both the spoliation issue and the motion for summary judgment by Hassel. On the spoliation issue, the Appellate Division held that the defendants “failed to demonstrate that the parents disposed of the vehicle with knowledge of its potential evidentiary value.” Moreover, the court discussed the existence of other available evidence, including BMW’s Recall Bulletin and Hassel Motors-service records for the relevant period, which served to mitigate the loss of the vehicle. Basically, the court examined two of the key factors in evaluating spoliation sanctions – prejudice and intent – and determined that the movants had failed to establish either element in seeking sanctions.

As to plaintiff’s claims against Hassel, the Appellate Division held that the product liability and breach of implied and express warranty claims should be dismissed because the service provider did not design, manufacture, distribute or sell the vehicle. This holding may be the most important in the case because it clarifies that service providers, as opposed to product sellers, can not be held liable under strict product liability or breach of warranty theories of liability. Therefore, the only remaining claim against Hassel sounds in negligence, which may be difficult for plaintiff to establish at trial after a twenty year hiatus.

Apart from its other burdens, plaintiff will have to demonstrate general causation at trial, that is, whether exposure to chemical components in gasoline fumes have been associated in the scientific literature with the specific teratogenic effects alleged, including cerebral palsy. If plaintiff is able to prove general causation, he will then have to prove specific causation, that is, whether the dose of the purported teratogen was high enough, and lasted for a sufficient duration, to cause the specific birth defect.

The plaintiff attributes his injury to Debra Reeps’ inhalation of gas fumes during the first couple of months of her pregnancy between August 1991 and November 1991, when the problem with the vehicle was fixed. Are the alleged teratogenic effects associated with a toxic exposure early in pregnancy? How often did Debra Reeps ride in the automobile during those first couple of months? If the odor problem was significant, is it likely that the Reeps would not have returned their BMW 525i, which was under warranty, to the dealership before November? Because there is no expert deposition discovery under New York state practice, we will have to await trial to learn how these issues plays out.
 

When governmental or quasi-governmental agencies formulate a chemical risk assessment, it is part of their legitimate exercise of public health, policy-oriented regulation.  Regulators often develop risk assessments due to scientific uncertainty concerning the toxicity of a particular compound and utilize conservative risk models in the interest of protecting public health and the environment.  Thus, when a substance is labeled “possibly carcinogenic” or even “probably carcinogenic” by an agency, it may have little or no bearing on general and specific causation issues.

For this reason, risk assessments, and the assumptions that go into making them, have no legitimate place in toxic tort litigation.  Agency classifications and risk assessment certainly cannot legitimately be used by a toxic tort plaintiff to help establish his case-in-chief.  Agency classification and risk assessments are based upon standards that very significantly from the burdens of proof in a courtroom.  Thus, they are not legally relevant and pose a significant risk of confusion to jurors and prejudice to defendants. 

In a compelling article appearing in the Bloomberg BNA Toxics Law Reporter (February 3, 2012) titled, “When ‘Likely’ Does Not Mean ‘More Likely Than Not’: The Dangers of Allowing Government Chemical Classifications and Numeric Risk Assessments at Trial,” Mark P. Fitzsimmons and Leah M. Quadrino at Steptoe and Johnson, and Sneha Desai at BASF, describe how governmental agencies perform risk assessments and how the assumptions employed in reaching these risk assessments can easily mislead lay persons serving on juries in assuming that particular chemicals are carcinogenic to humans when, in fact, they may not be. 

Frequently, plaintiffs seek to introduce as evidence general and specific causation and increased risk.  The authors observe that the critical distinction between a regulatory classification of a chemical and the burden of proof required in court has been widely litigated.  Thus, in Gates v. Rohm and Haas Co., No. 10-108, 2011 U.S. App. LEXIS 17756, *33 (3d Cir. Aug. 25, 2011), the Third Circuit held that, “plaintiffs could not carry their burden of proof for a class of specific persons simply by citing regulatory standards for the population as a whole.” 

Similarly, other courts have excluded expert testimony for relying on regulatory ratings or standards in determining whether a plaintiff’s exposure to a substance above regulatory limits was sufficient to establish causation.  Baker v. Chevron USA Inc., 680 F.Supp. 2d. 865, 880 (S.D. Ohio 2010).  Defense counsel also must be vigilant against a court’s use of numeric risk assessment as a benchmark for determining increased risk.  The takeaway is that “probably” in a regulatory context does not mean “more probable than not” in a tort context.

The Bloomberg BNA Toxics Law Reporter reported this morning concerning an important new decision from the Supreme Court of California in O'Neil v. Crane Co., Cal., No. S177401, 1/12/12
In summary, California's high court reaffirmed the principle that a product manufacturer may not be held strictly liable or negligent for harm caused by another maker's product, except where the defendant has some direct responsibility for the harm.  In so holding, California refused to open the floodgates in the asbestos litigation to permit suits against manufacturers that never manufacturer or marketed asbestos-containing products.

Joining the majority of other jurisdictions that have considered the issue, California's highest court held that California law did not impose liability on manufacturers of shipboard valves and pumps used in conjunction with asbestos-containing parts made by others.  In this case, the high court reversed the California Court of Appeal, Second Appellate District, which ruled in favor of the family of Patrick O'Neil, a naval officer allegedly exposed to asbestos from 1965 to 1967. O'Neil died of mesothelioma, a disease caused by asbestos, at 62.                                                                                  
 “[A] product manufacturer generally may not be held strictly liable for harm caused by another manufacturer's product. The only exceptions to this rule arise when the defendant bears some direct responsibility for the harm,” Justice Carol A. Corrigan wrote for the court.

The court rejected the family's argument that Crane Co. and Warren Pumps LLC, which made valves and pumps used on the ship, should be held strictly liable because they foresaw that their products would be used with replacement asbestos parts. The rationale for the Court's holding is that  “[T]he foreseeability of harm, standing alone, is not a sufficient basis for imposing strict liability on the manufacturer of a nondefective product, or one whose arguably defective product does not actually cause harm.”   The Court left open the possibility for imposing liability for a non-manufacturer of asbestos in instances where it could be shown that “the defendant's own product contributed substantially to the harm” or “the defendant participated substantially in creating a harmful combined use of the products.”  However, that was clearly not the case here.

As to the plaintiff's negligence claims, the Court held that the defendants pump and valve companies owed no duty of care in the circumstances, based on “strong policy considerations.”
The companies' connection to O'Neil's injury was remote because they did not manufacture the asbestos-containing products; imposing a duty would be unlikely to prevent future harm; the Navy made its own purchasing choices and specifications; and consumers could potentially be harmed by too many product warnings, the court reasoned.

Increasingly, the plaintiff bar is seeking to impose strict product liabililty on manufacturers whose products did not cause the alleged harm.  This trend in asbestos cases is not dissimiliar from those pharmaceutical product  liability cases in which the plaintiffs seek to hold a brand name drug manufacturer liable, whose product was never taken by the injured party, for injuries allegedly caused by a generic manufacturer's product.  These lawsuits are offensive to longstanding product liability case law and policy and should be rejected by the courts. 

Guest Blogger M.C. Sungaila, one of California's most best known appellate advocates,  briefed and successfully argued the Molina appeal discussed here on behalf of Shell and Chevron. 

A California appeals court rejected the lenient increased risk causation standard used to establish causation in asbestos cases in a toxic tort case not involving asbestos.  The Second Appellate District of the California Court of Appeal in Los Angeles upheld a defense verdict last month, in  Molina v. Shell Oil Company et al, determining that the trial court correctly refused to charge the Rutherford “increased risk” instruction applicable in asbestos cases because the ability of a product to cause the type of harm suffered by the plaintiff was hotly contested.

After a five-week trial and four days of deliberations in the trial court, a jury concluded that William Molina – who suffered from a variety of cancers and other ailments -- was not entitled to damages for his alleged exposure to defendants’ solvents during his 17-year career at a Firestone tire plant. The jury found that neither the solvents’ design nor any warning associated with them was a substantial factor in causing Molina’s non-Hodgkins lymphoma (NHL). Molina appealed, claiming among other things that the causation instruction used in California's asbestos litigation should have been given to the jury.

The appeals court court stopped short, however, of holding that the more liberal  Rutherford causation standard can never apply outside the asbestos context. Nevertheless, the Court of Appeal addressed a question repeatedly posed to trial courts throughout the state over the last five years: should a more lenient causation standard adopted by the California Supreme Court in the asbestos context be extended to other types of toxic tort cases like benzene? The appellate court’s answer was a qualified "no".

Causation, of course, is an essential element of a tort action. California has definitively adopted the substantial factor test of the Restatement Second of Torts for cause-in-fact determinations. Implicit in the substantial factor causation standard in a toxic tort case is the requirement of proving both that a chemical can cause a particular adverse health effect and that it did cause that effect in the plaintiff.  In other words, proof of causation necessarily includes a threshold determination whether, in reasonable medical probability, a particular chemical is capable of causing in humans the type of harm suffered by the plaintiff (i.e., “general causation”).　 If the chemical does not possess that capacity, the chemical cannot have caused the particular plaintiff’s claimed harm.　 But if the chemical does have that capacity, then the causation inquiry shifts to whether the plaintiff’s exposure to the chemical in question was, in reasonable medical probability, a substantial factor in causing this particular plaintiff’s harm (i.e., “specific causation”).　Toxic tort causation also involves a threshold element of exposure. In order to determine whether an exposure is a possible contributing factor to a plaintiff’s injury, ‘[f]requency of exposure, regularity of exposure, and proximity of the . . . product to [the] plaintiff are certainly relevant.” (Lineaweaver v. Plant Insulation Co. (1995) 31 Cal.App.4th 1409, 1416.)

Molina contended that California Civil Jury Instruction (CACI) No. 435, a relaxed “increased risk” causation instruction, should have been given because of the difficulties of proving cancer causation. The defendants successfully urged that the increased risk instruction under Rutherford should not apply where, as in Molina’s case, the ability of a chemical to cause a particular type of cancer is hotly disputed and far from well-established.

In Rutherford v. Owens-Illinois, Inc. (1997) 16 Cal.4th 953, 960, at the end of the first phase of trial, the jury concluded that exposure to asbestos fibers proximately caused the decedent’s lung cancer and awarded damages. After this phase, several defendants settled. In a second phase of trial, the jury was asked to apportion damages and allocate fault to the remaining defendant, Owens-Illinois. Owens-Illinois objected to the use of an instruction in the second phase of trial which stated that, once the plaintiff had established both that he was exposed to defendants’ asbestos and that his injuries were legally caused by asbestos exposure generally, the burden then shifted to the defendant to establish that its product was not a legal cause of the plaintiff’s harm.

The California Supreme Court rejected the use of the burden-shifting instruction as too “fundamental” a departure from traditional substantial factor causation. However, the Court concluded that, rather than be required to “trace the unknowable path of a given asbestos fiber,” a “plaintiff[] may prove causation in [an] asbestos-related cancer case[] by demonstrating that the plaintiff’s exposure to defendant’s asbestos-containing product in reasonable medical probability [fn. omitted] was a substantial factor in contributing to the aggregate dose of asbestos the plaintiff or decedent inhaled or ingested, and hence to the risk of developing asbestos-related cancer, without the need to demonstrate that fibers from the defendant’s particular product were the ones, or among the ones, that actually produced the malignant growth.”

Thus, in Rutherford, “it was already determined what caused the plaintiff’s illness—asbestos. The only remaining issue before the Court was the proper standard for determining who manufactured or supplied the asbestos that caused the plaintiff’s illness.” (Loewen, Causation in Toxic Tort Cases: Has the Bar Been Lowered? (Spring 2003) 17 Nat. Res. & Env’t 228, 229 (hereafter Loewen).) As one commentator observed: “This is undoubtedly the reason that the Rutherford court consistently and repeatedly limited its holding to ‘asbestos-related cancer cases’: its language linking risk to cause was expressly limited to cases where it has been determined that the cancer was ‘asbestos-related.’” (Ibid.) Accordingly, Rutherford does not apply in a case like this, where the ability of the defendants’ products to cause the plaintiff’s type of cancer is hotly disputed.

In Molina’s case, defendants’ toxicology expert testified that solvents do not cause NHL.  While one plaintiffs’ expert asserted that solvents could cause NHL, another plaintiffs’ expert testified that the evidence of a causal link between benzene and NHL was “weak” and therefore he could not state to a reasonable degree of medical probability that benzene could cause NHL.  Moreover, one of plaintiffs’ experts admitted that NHL is frequently idiopathic or of unknown origin.

The Court of Appeal agreed that the trial court correctly refused the Rutherford “increased risk” instruction applicable in asbestos cases. Rutherford involved a very different situation: in that case, a jury had already determined that the asbestos had caused the plaintiff’s lung cancer. The only remaining question was which manufacturers were responsible. The cause of Mr. Molina’s NHL, however, was not established.  In fact, the capability of defendants’ products to cause Mr. Molina’s injury was one of the most critical and hotly disputed issues in the case.

On October 6, 2010, the Federal Trade Commission proposed revised “Green Guides”, the guidance provided to corporate marketers to help them avoid making misleading environmental claims. The Green Guides were first issued in 1992 and revised in 1996 and 1998. The proposed Guides issued last week are designed to significantly strengthen the FTC’s prior guidance and provide new guidance on marketing claims that were not commonly asserted in the 1990’s before the “Green Revolution”. Although the FTC is seeking public comments on the proposed revisions through December 10, 2010, the guidance issued last week is not likely to be significantly modified.

Based upon a review of the new Green Guides, there are some basic rules of the road that, if followed, will help companies avoid “Greenwashing” claims and the consumer class action suits which are likely to become increasingly common: (1) Avoid unqualified general environmental marketing claims that are difficult, if not impossible, to substantiate; (2) General claims of environmental benefit should be accompanied by qualifiers that are clear, specific and accurate; (3) When using a certification or a seal of approval to promote the green nature of a product, use clear and prominent language to clarify that the certification or seal relates to a particular environmental attribute, which the company can substantiate; (4) If the company is endorsing a product with its own seal of approval, use clear prominent and qualifying language to alert consumers that the company created the certifying program, not an independent third-party; and (5) If only a portion of the product is made with recycled or renewable material, clearly and prominently clarify which portion of the product is made from a recycled or renewable source.

Perhaps surprisingly, FTC’s consumer revealed research found that the public overestimates the significance of “Green” claims, which suggests that “greenwashing” is common and probably profitable. Despite consumers’ increasing cynicism, there must be some deep-seated need to believe that you are a buying an “eco-friendly” product. Going forward, companie seeking to comply with the new guidelines may want to rethink their marketing strategies and avoid making general claims of “environmental friendliness” and focus instead on advertising claims that can be are based on scientific research. 

The FTC’s Green Guides are largely devoid of regulatory jargon often found regulations and are easy to read and understand. The Green Guides provide helpful examples of which kind of claims are acceptable and which are not. Following the adoption of the Green Guides, should we expect that FTC will initiate a spate of enforcement actions to emphasize to industry that the new Green Guides should be taken seriously?  You bet!.

BNA Toxics Law Reporter reported this morning that a Rhode Island trial court in Providence rejected a  claim for medical monitoring by the mother of a child suffering from lead poisoning, in the absence of any physical manifestation of harm related to the diseases that plaintiff's expert contends the child is now at greater risk of developing.  Although the court found that the plaintiff had submitted sufficient medical evidence to permit her to sue for compensatory damages for her son's alleged cognitive deficits due to lead exposure, she failed to prove that her son manifested a sign or symptom of the diseases for which she believed medical monitoring was warranted.  In denying the claim, Judge Alice Bridget Gibney, in Miranda v. Dacruz, R.I. Super Ct., No. PC 04-2210, 10/26/09) held that, "This Court is not persuaded to open the damages flood gates to indefinite future monitoring". Judge Gibney distinguished the case before her from Donovan v.  Philip Morris USA, Inc., in which the Massachusetts Supreme Judicial Court ruled last month that a medical monitoring claim by long-term smokers related to the early detection of lung cancer could proceed.  In that case, Judge Gibney noted, plaintiffs exhibited sub-cellular or other physiological changes, which although not symptoms of a disease, are warning signs.  I believe Donovan sets a dangerous precedent.  The "damages flood gates" that concerned Judge Gibney are more likely to open if the burden of medical monitoring plaintiffs is reduced to demonstrating a sub-cellular or physiological change rather than an injury or disease.  Under this loosened standard, a sun tan, a skin blemish, a sneeze or elevated cholesterol could justify permitting a medical monitoring claim to proceed.

The plaintiff's bar continues to look for fresh targets in the asbestos litigation, utilizing increasingly creative theories of liability, as the original targets of plaintiffs' lawsuits have been largely forced into bankruptcy.  One of the new asbestos battlegrounds centers around the liability of parts manufacturers, such as pump and valve manufacturers, who never manufactured or sold asbestos-containing materials ("ACM").  Plaintiffs typically argue that these manufacturers may be liable for asbestos-containing products manufactured by different companies that they can reasonably anticipate will be used with their equipment.  However, in recent months, there have been a handful of appellate decisions suggesting that liability will not be extended to equipment manufacturers that neither sold nor included with their equipment ACM.  At the end of last year, the Supreme Court of Washington issued two decisions that rejected plaintiffs' claim that defendants should be held liable for failing to warn of the hazards of another manufacturer's product that is applied to or incorporated into the defendants' products.  The Supreme Court of Washington articulated a blanket rule that a duty to warn under common law negligence "is limited to those in the chain of distribution of the hazardous product."  The court also concluded that the defendants were not strictly liable for manufacturing a defective product because, not being product sellers or manufacturers, they could not translate their knowledge of the product's dangerous aspects into a cost of production against which liability insurance could be obtained.  Thus, the court held, it would be manifestly unfair to hold a defendant liable for another party's product. There is a good discussion of these cases, Simonetta v. Vlad Corp. and Braaten v. Saberhagen, in a Metropolitan Corporate Counsel article written by John E. Heintz and Justin F. Lavella at Kelly Drye & Warren LLP. A great deal was at stake on the appeal of these cases.  On February 25, 2009, The California Court of Appeal decided Taylor v. Elliot Turbomachinery Co. Inc  2009 WL 458543, and reached the same result as the Washington Court.  In rejecting plaintiffs' theory that the defendant should be liable for exposure to ACM in replacement parts sold and manufactured by other companies, the California court relied upon the California's "chain of distribution" line of cases that culminated in Cadio v. Owens-Illinois Inc. These cases recognize that "legal nightmares" would result if one company was held liable for the products of other companies.  There is a discussion of both the California and Washington decisions in a March 17, 2009 Law360 article  In an August 21, 2009 blog post by Michael J. Pietrykowski of Gordon & Rees, LLP, the DRI Blog reported that the California Supreme Court has declined to accept an appeal of Taylor v. Elliot Turbomachinery Co. Inc.  In the world of asbestos litigation, defense victories like these in Washington and California are hard fought and few and far between.

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.

People living near manufacturing plants increasingly seek judicial solutions to environmental issues.  In the wake of an environmental incident (such as a release of contaminants into the air or groundwater), fear and suspicion hinder constructive dialog and problem solving by manufacturers and their communities.  Environmental issues, as much as any other corporate concern, tend to have a ripple effect, often causing repercussions with far-reaching impact on company business.  An accidental release may result in adverse public relations, worker safety disputes, boycott of company products in the market place, adverse regulatory consequences and bad feeling in the community.  How a company responds to media attention at the outset has an important effect on how the community, including elected officials, health authorities, regulatory agencies and prospective jurors, react to the issues presented.  Accordingly, a company must plan in advance how it will respond to an environmental crisis and what steps it will take to minimize the fallout from such a crisis. 

A Value Assurance Plan should be considered as one significant component of a corporate response to homeowner concerns over property values.  A Value Assurance Plan, sometimes referred to as a "VAP", is a contractual promise to assure  homeowners that the equity in their homes will be protected if they sell their homes and realize less than full value from the sale due to an environmental concern in the community.  A VAP promises to compensate those homeowners who sell (or have sold) their homes by paying them the difference between the property's sale price and its fair market value prior to the discovery of possible contamination.  As part of the arrangement, the company may also offer to reimburse the closing costs and the moving expenses of residents who leave the community.  Often, the reassurance that a VAP provides is successful in preventing the panic selling (the rush to the door) that often strikes communities shortly after public disclosure of an environmental problem. 

To implement a Value Assurance Plan, a company needs  creative lawyering and a consultant who has a strong understanding of the economic dynamics driving the property diminution claims and who can accurately assess the potential exposure to the company of taking alternative courses of action, including taking no action at all.  Two such high qualified consultants are Jerry Dent  at Alvarez & Marsal in Birmingham, Alabama, and  Dwight Duncan at EconLit in Phoenix, Arizona. 

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.

Greenwashing” involves misleading consumers concerning the environmental benefits of a product or service. In the “Six Sins of Greenwashing,” TerraChoice a marketing firm, studied over one thousand consumer products and concluded that all but one made claims that were demonstrably false or misled consumers. TerraChoice found that eco-marketers were guilty of what it described as the “Six Sins of Greenwashing,” which include:

1. Sin of the Hidden Tradeoff
2. Sin of No Proof
3. Sin of Vagueness
4. Sin of Irrelevance
5. Sin of Fibbing
6. Sin of the Lesser of Two Evils

Are companies that mislead well-intentioned customers into making purchases that do not deliver their promise subjecting themselves to class action claims alleging deceptive trade practice and false advertising? More than ever before, sellers of consumer goods are committing the “Sin of Vagueness” (for example) by claiming that their products are “chemical free,” “non-toxic,” “all natural,” or “environmentally friendly.” If a purchaser is induced to purchase a pesticide product because it claimed in advertising to be “chemical free” or “non-toxic,” and becomes ill, would a product liability claim be less difficult to prosecute?  More significantly, will the “Six Sins of Greenwashing” give rise to false advertising and deceptive trade practice class action suits?  In the absence of regulation concerning eco-marketing, what standard will courts hold consumer product sellers to in evaluating these claims. In general, product sellers can obtain guidance from:  (1) standards established by multiple private certification groups; (2) “Green Guides” issued by the United States Federal Trade Commission; and (3) ISO 14021 and ISO 14024, which provide standards on how best to communicate environmental product information. Voluntary adherence to any of these standards or guidelines will certainly not preempt a class action, but may provide credible defenses to these claims.

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. 

Lost in the learned treatises written in the wake of the Rhode Island Supreme Court's decision in State of Rhode Island v. Lead Industries Association, Inc.  (July 1, 2008),  which properly held that manufacturers of lead pigment are not liable under a nuisance theory for the harm caused by the use of lead paint, is discussion of the significant loss of market capitalization and shareholder value to Sherwin Williams and other manufacturer defendants who have been defending these nuisance claims for the past several years.  Apparently, there is no mechanism in Rhode Island for a defendant to file an interlocutory appeal to challenge a trial court's denial of a defendant's motion to dismiss a complaint as a matter of law.  Had an interlocutory appeal been available to the lead pigment manufacturers, there is no doubt that the Rhode Island Supreme Court would have ended years ago the State Attorney General's misguided crusade to have the defendants pay billions of dollars to remediate lead contamination in an estimated 240,000 houses  and apartments, 12,969 seasonal housing units, 419 child care centers and 339 elementary schools.  Notions of basic fairness suggest that a defendant facing a potential liability of this magnitude should be able to obtain appellate review of the plaintiff's right to proceed before having to incur the cost and uncertainty of a court trial.  A defendant with less resources than the lead pigment manufacturers might have been forced into a premature settlement with the State or even sought bankruptcy protection prior to waiting out the lengthy appeals process.