Hunton Business Tort Liability Report

Federal Preemption Under Clean Air Act is Basis for Products Liability Win in Southern District of New York

Hunton & Williams LLP — Fri, 11 Mar 2011 13:10:04 -0500

On February 16, 2011, federal District Judge Paul A. Crotty held that the Clean Air Act (“CAA”) preempted state common law product liability claims. The litigation, In re Jackson, et al., v. General Motors Corporation, et al., involved scores of current and former New York Metropolitan Transportation Authority workers’ alleged wrongful death and personal injury claims from exposure to diesel particulates and fumes. The defendants included both manufacturers of buses as well as diesel engines. Hunton & Williams served as counsel for one of the defendants, Northrop Grumman Corporation. The plaintiffs asserted claims for negligence, strict products liability and failure to warn of latent dangers of diesel exhaust. Defendants moved for judgment on the pleadings on all counts on the ground that the CAA preempted plaintiffs’ state law claims.

In a decision that will have significant ramifications on future product liability claims, Judge Crotty granted the defense’s motion in its entirety, including the failure to warn claims.

The motion centered on the issue of federal preemption under the CAA. Defendants argued that the comprehensive federal regulation of air pollution preempts any state statutory and common law that would effectively impose competing emissions standards. While the plaintiffs alleged that the CAA emissions standards were inadequate, the CAA stipulates that it is not up to the state of New York, or any other state, to establish its own set of emissions standards. Section 209(a) states:

No State or any political subdivision thereof shall adopt or attempt to enforce any standard relating to the control of emissions from new motor vehicles or new motor vehicle engines ....

Congress thus ensured that the state would not promulgate competing emissions standards — potentially leading to the chaos and uncertainly of fifty different emissions standards for one vehicle. Therefore, the law clearly bars states from promulgating their own such emissions standards.

Whether Section 209(a) also preempts state common law tort actions was not as clear-cut.

In analyzing a key phrase from Section 209(a) — “No State … shall adopt or attempt to enforce” — Judge Crotty held that state law tort actions qualify as attempts to adopt or enforce emissions standards, because state common law is ultimately intended to enforce duties. So a tort claim on these grounds is no different from a statute that prescribes actual emissions standards for purposes of the preemption analysis.

Regarding the plaintiffs’ claim that the defendants failed to warn of the dangers associated with diesel exhaust, Judge Crotty again ruled in favor of the defense. He found that the claims are preempted by CAA’s Section 209(a) stating that “vehicle manufacturers not be subject to fifty sets of requirements relating to emissions controls,” which would include warning label requirements.

This win was especially significant in light of the broader trend against federal preemption, best exemplified by Wyeth v. Levine, in which the U.S. Supreme Court held that state law failure to warn claims were not preempted by federal drug labeling regulations.

If you have any questions about this decision or other products liability litigation matters, please contact D. Alan Rudlin at (804) 788-8459 or arudlin@hunton.com or your Hunton & Williams LLP contact.

California's Green Chemistry Initiative Will Have Wide-Reaching Implications for Consumer Product Manufacturers

Hunton & Williams LLP — Thu, 09 Dec 2010 16:05:14 -0500

California’s Green Chemistry Initiative (“GCI”) is a groundbreaking and aggressive set of new California regulations that will be released on or before January 1, 2011. GCI is poised to significantly impact consumer products sold or made available for sale in California, regardless of where they are manufactured or produced. These proposed regulations create a process by which certain chemicals in products will be evaluated for their potential to cause harm. Manufacturers will be required to conduct an analysis of whether there are more environmentally friendly alternatives to the potentially harmful chemical. Manufacturers may be required to re-formulate products or the products may be banned, among other possible agency responses. California’s Department of Toxic Substances Control (“DTSC”) recently concluded a public hearing and subsequently revised its draft GCI regulations to, among other changes, limit the application of these regulations to three categories of products until 2015: children’s products, personal care products and household cleaning products. After 2015, however, all consumer products will be subject to the regulations. Given the size of California and its economy, and the fact that other states sometimes adopt California’s environmental regulations in one form or another, GCI has the potential to significantly impact many different industries in California and elsewhere.

Read the article, "Green Chemistry: California Regulators' Responses to Public Concerns"

Posted with the permission of Daily Journal Corp. (2010).

NY Times Panel Discussion on Outside Investment in Litigation

Hunton & Williams LLP — Wed, 17 Nov 2010 15:47:17 -0500

Over the weekend, the New York Times had an interesting story of a relatively recent phenomenon: private, third-party investors funding litigation. Not only does such a practice potentially create perverse incentives for litigants, but in some cases it can leave even a successful plaintiff worse off than if he or she never filed suit.

The Times is now hosting a panel discussion among several high-profile law professors on the subject. Given the tension between the need to provide injured plaintiffs an avenue for recovery and the pitfalls of encouraging the filing of meritless suits, this is a subject without easy answers. These panelists, though, will provide a good starting point for the conversation.

United States Supreme Court to Address "Stream-of-Commerce Theory" as Basis for Personal Jurisdiction over Foreign Manufacturers

Hunton & Williams LLP — Tue, 09 Nov 2010 11:49:16 -0500

In a case with significant implications for foreign manufacturers, J. McIntyre Machinery, Ltd. v. Nicastro, No. 09-1343, the United States Supreme Court recently granted certiorari to consider when the stream-of-commerce theory may be employed, consistent with Due Process, to provide personal jurisdiction over a manufacturer whose products are distributed to the U.S. market. In an opinion characterized as an unprecedented expansion of personal jurisdiction, a divided Supreme Court of New Jersey held that when a foreign manufacturer places an allegedly defective product in the stream of commerce through a distribution system that targets the United States market and is ultimately purchased by a New Jersey consumer, the manufacturer is subject to personal jurisdiction in New Jersey. This case affords the Supreme Court the opportunity to revisit its plurality decision in Asahi Metal Indus. Co. v. Sup. Court, 480 U.S. 102 (1987), which held that placement of a product in the stream of commerce, without more, is not an act purposefully directed at the forum state sufficient to support the exercise of personal jurisdiction over a foreign manufacturer.

J. McIntyre, a company incorporated in the United Kingdom, manufactures machinery that is purchased and sold by a United States distributor. Nicastro, an employee of a scrap metal company and New Jersey resident, lost four of his fingers as a result of an accident involving a metal cutting machine manufactured by J. McIntyre, and brought an action against the manufacturer in New Jersey state court. J. McIntyre argued that it did not have minimum contacts with New Jersey sufficient to justify the state’s exercise of personal jurisdiction. The trial court agreed. The New Jersey Court of Appeals, however, reversed the trial court’s decision and the New Jersey Supreme Court affirmed.

Relying exclusively on a stream-of-commerce theory, rather than a minimum contacts analysis, the New Jersey Supreme Court found significant that “our nation [is] a global economy driven by startling advances in the transportation of products and people and the instantaneous dissemination of information.” The court held that a foreign company’s participation in this “new reality” of a “global economy” that causes a defective product to be sold in New Jersey, resulting in harm to a New Jersey consumer, gives rise to personal jurisdiction.

J. McIntytre’s Petition for Certiorari to the United States Supreme Court argues that the New Jersey Supreme Court’s decision departs from the fundamental principle stated in International Shoe Co. v. Washington, 326 U.S. 310 (1945), and its progeny: a nonresident is not subject to personal jurisdiction unless he has purposefully established a connection with the forum state. Moreover, J. McIntyre argues, the concept of the “new global economy,” upon which the New Jersey court placed much emphasis, departs from the holding of Asahi and the well-established due process requirement of minimum contacts. While the ability to communicate and transfer information through electronic means may have accelerated in recent years, the channels through which goods are distributed are essentially no different than they were 50 years ago.

The Supreme Court’s opinion in this matter could have far-reaching implications for foreign manufacturers whose products find their way into the United States market through distributors or other channels.

Capuccitti -- Eleventh Circuit Panel Reversal Preserves CAFA Jurisdiction

Hunton & Williams LLP — Wed, 20 Oct 2010 16:02:20 -0500

An Eleventh Circuit Court of Appeals panel reversed its own July 19, 2010 ruling, previously reported here, noting that “[s]ubsequent reflection has led us to conclude that our interpretation was incorrect.” Cappuccitti v. DirectTV, Inc., No. 09-14107 (11th Cir. Oct. 15, 2010) (per curiam). This time, the panel held: “There is no requirement in a class action brought originally or on removal under [CAFA] that any individual plaintiff’s claim exceed $75,000.”

The opinion was prompted by petitions for rehearing en banc filed by the appellant and the appellee, remarkably on the same ground, namely that CFA does not require any single plaintiff to allege an amount in controversy in excess of the jurisdictional minimum set out in 28 U.S.C. § 1332(a). In the per curiam decision, the panel described the jurisdictional requirements of CAFA as a “statutory labyrinth.”

Originally, the Court held that a federal court does not have original jurisdiction over CAFA class actions unless the plaintiffs allege not only a $5 million aggregate amount in controversy, but also that at least one plaintiff has a claim that exceeds $75,000. Had that ruling stood, it would have nearly eliminated CAFA jurisdiction over class actions in the Eleventh Circuit. No doubt there was a collective sigh of relief resulting from the Court’s reversal.

The Court made clear that there is subject matter jurisdiction under CAFA for class actions that meet the following requirements: (i) a putative class of at least 100 members, 28 U.S.C. § 1332(d)(5); (ii) the aggregated claims of the individual class members “exceeds the sum or value of $5,000,000, exclusive of interest and costs,” id. § 1332(d)(6); and (iii) there is minimal diversity, i.e., at least one plaintiff and one defendant are citizens of different states, id. § 1332(d)(2)(A). The Court cautioned, however, that “additional jurisdictional requirements must exist” for a mass action under CAFA.

Plaintiff Suffers No Injury-In-Fact By Chemicals in Groundwater at Levels Below the "Maximum Contaminant Level"

Hunton & Williams LLP — Fri, 15 Oct 2010 14:41:03 -0500

A recurring issue in environmental cases is whether the presence of a pollutant in groundwater at levels below the “maximum contaminant level” for that pollutant is actionable. A recent decision out of the Northern District of Florida is of interest to defendants and potential defendants in such cases. Emerald Coast Utils. Auth. v. 3M Co., 2010 U.S. Dist. LEXIS 103000 (N.D. Fla. Sept. 29, 2010). The Court granted the defendants’ motion for summary judgment, finding that the plaintiff failed to establish injury-in-fact for purposes of Article III standing. The Court declined to apply a bright-line rule that a plaintiff cannot suffer injury should the chemicals at issue not exceed any federal or state maximum contaminant level. But the Court did find that the contamination levels did not exceed the maximum contaminant level and plaintiff failed to show that it had suffered any injury as a result of the presence of chemicals in its water supply.

Plaintiff Emerald Coast Utilities Authority (“ECUA”) supplies drinking water to residents and businesses in Escambia County, Florida. ECUA operates 32 wells that draw water from an aquifer that is near the ground surface and susceptible to contamination. ECUA contends that its wells are contaminated by perfluorooctanoic acid (“PFOA”) and perfluorooctane sulfonate (“PFOS”), toxic fluorochemical byproducts of the industrial activities of defendants 3M Company, E.I. DuPont De Nemours and Company and Solutia, Inc. (“Defendants”).

ECUA became aware of a potential issue in 2006 when outside parties contacted it concerning possible PFOA and PFOS exposure in the wells. Neither the United States Environmental Protection Agency (“EPA”) nor the Florida Department of Environmental Protection had a maximum contaminant level guideline for PFOA or PFOS. The EPA had, however, published a consent order establishing an action level for PFOA at 0.50 parts per billion (“ppb”). ECUA commissioned a study that found PFOA and PFOS in every sample of well water that was tested, but the highest reported level was 0.12 ppb. The average results were 0.00113 ppb for PFOA and 0.0037 ppb for PFOS. Two years later, the EPA issued provision health advisories setting it at 0.4 ppb for PFOA and 0.2 ppb for PFOS. ECUA filed its suit approximately 6 months later.

To support its allegation of injury, ECUA submitted declarations stating that the levels of PFOA and PFOS “constitute[d] an unwelcome impurity in the ECUA water supply,” that “ECUA has incurred expenses and will incur further expenses in the foreseeable future…include[ing] testing, monitoring, and filtration costs,” and that the levels of fluorochemicals may have a negative impact on ECUA’s public image. Moreover, ECUA’s expert testimony merely discussed the potential harmful effects of PFOA and PFOS on humans in general terms, far from establishing that the existing levels were harmful or dangerous.

The Emerald Coast Court concluded that summary judgment should be entered on all claims against the Defendants as ECUA failed to demonstrate an injury-in-fact for purposes of Article III standing.

The Emerald Coast opinion follows the line of cases such as Iberville Parish Waterworks Dist. No. 3 v. Novartis Crop Protection Inc., 45 F. Supp. 2d 934, 943 (S.D. Ala. 1999), aff’d without opinion, 204 F.3d 1122 (11th Cir. 1999) (dismissing trespass and nuisance claims because chemical levels were below regulatory standards); Thompson v. Southern Pacific Transp. Co., 809 F.2d 1167 (5th Cir. 1988) (exposure to chemical in drinking wells below the EPA-recommended maximum contaminant level was insufficient to establish causation); Brooks v. E.I. du Pont de Numours & Co., 944 F. Supp. 448 (E.D. N.C. 1996) (contamination that meets state groundwater quality standards is not actionable in tort); and Lamb v. Martin Marietta Energy Sys., Inc., 835 F. Supp. 959 (W.D. Ky. 1993) (concluding that de minimis levels of contamination were not sufficient for a nuisance cause of action).

Though the Emerald Coast opinion does not go so far as to establish a bright-line maximum contaminant level rule, the trajectory of case law is certainly advantageous to companies facing suits based on groundwater contamination in amounts that fall below federal or state guidelines.

Causation Hurdles Continue for Toxic Tort Plaintiffs In Texas

Hunton & Williams LLP — Fri, 10 Sep 2010 08:18:04 -0500

Just two short months ago we discussed the continuing causation hurdles mounting for Texas asbestos plaintiffs as a result of the Fort Worth Court of Appeals’ opinion in Smith v. Kelly-Moore Paint Company, Inc. The Dallas Court of Appeals recently joined the fray in Georgia-Pacific Corporation v. Bostic.

Timothy Bostic was diagnosed with mesothelioma in 2002 at the age of 40, and he died a year later. His survivors brought suit in 2003, alleging that he was exposed to Georgia-Pacific joint compound, among a number of other asbestos-containing products. The evidence showed that he was exposed to asbestos while accompanying and assisting his father with drywall work since the age of five. There was also evidence presented at trial showing that he had numerous other occupational, household and bystander exposures: his father’s welding work at Knox Glass (where asbestos and asbestos-containing products were used to insulate against heat); Timothy’s own janitorial and mechanical work at Knox Glass; Timothy’s work as a welder’s assistant for Palestine Contractors; Timothy’s own remodeling projects as an adult; and automobile mechanic work that both Timothy and his father had performed.

The case has had an unusual procedural history: an initial jury trial in 2005 returned a jury verdict of actual and punitive damages for Timothy’s survivors. But the trial judged ordered them to either elect a new trial on all issues or agree to remit a misallocated award of future lost wages and the award of punitive damages. They chose a new trial. A second jury also awarded more than $7 million in compensatory damages and more than $6 million in punitive damages. That jury found Georgia-Pacific 75% liable and Knox Glass 25% liable. Georgia-Pacific subsequently moved for a new trial. The motion was granted, but after a period of judicial shuffling and following a motion to vacate the order granting a new trial by the survivors, the verdict was reinstated and the survivors were awarded more than $6 million in compensatory damages and more than $4 million in punitives.

Georgia-Pacific appealed that final judgment, arguing that the evidence was legally insufficient to show that its asbestos-containing joint compound caused Timothy’s mesothelioma. The Court of Appeals agreed, finding that although there was extensive testimony from Timothy and his father Harold regarding their work and use of G-P joint compound, the evidence did not show that Georgia-Pacific’s conduct was a “cause-in-fact” of his mesothelioma. The critical finding was that the survivors’ expert could not opine that Timothy would not have developed mesothelioma had he not been exposed to G-P’s product. This was fatal to his case.

As in Smith, the Court emphasized that the survivors’ claims failed because they could not show “reasonable quantitative evidence” that his exposures to G-P products increased his risk of developing mesothelioma. The Court emphasized that Borg-Warner, Smith and Georgia-Pacific Corp. v. Stephens, 239 S.W.3d 304, 311, 314-15 (Tex. App. Houston [1st Dist.] 2007) mandate that a plaintiff show (1) frequency, regularity and proximity of exposure to the product, and (2) reasonable quantitative evidence that the exposure increased the risk of developing the asbestos-related injury, in order to prove substantial factor causation. The survivors attempted to rely on material practice simulation studies performed by a general causation expert to show the amounts of asbestos fibers released during mixing, sanding and sweeping of Georgia-Pacific’s asbestos-containing joint compound -- the products that Timothy would have used. But the expert acknowledged that such tests could not establish an exposure level or dose for Timothy because of the “many variables in the circumstances of a given work activity and location of the activity.” This was fatal to the survivors’ efforts to provide the necessary quantitative evidence, and so the Court concluded that the evidence was legally insufficient to establish Flores substantial-factor causation.

This holding is important because such re-enactments or simulation studies by experts of the type of work performed by asbestos plaintiffs can have a significant impact on juries. But Bostic should encourage defense lawyers to emphasize this high standard before a trial court allows such evidence goes before the jury, especially when the evidence fails to account for the many actual variables in the workplace. If these simulation studies are legally insufficient to provide quantitative evidence of exposure, then they are not much good for anything.

The Common Sense Approach to Determining Amount-In-Controversy

Hunton & Williams LLP — Tue, 31 Aug 2010 08:54:14 -0500

Decided one day apart, both Roe v. Michelin North America, Inc., No. 09-15141 (11th Cir. Aug. 5, 2010) and Berniard v. Dow Chemical Co., No. 10-30497 (5th Cir. Aug. 6, 2010), address whether, in the context of removal to federal court, defendants who relied solely on the nature of the allegations in the plaintiffs’ complaints—wherein the amount of damages was unspecified—had met their burden to establish the requisite amount in controversy. While the courts ultimately came to opposite conclusions based on the facts of each case, both decisions recognize the authority of federal district courts to independently evaluate a complaint’s allegations to determine the reasonable value of a claim for amount-in-controversy purposes where damages have not been specified.

In Roe, the plaintiff’s decedent was killed in an automobile crash when the tread on the vehicle’s tires allegedly separated, causing the vehicle to lose control. Roe originally filed his complaint in Alabama state court, seeking unspecified damages under Alabama’s Wrongful Death Act. Michelin removed the case to federal court on diversity grounds, arguing that it was apparent on the face of the complaint that the case satisfied the jurisdictional minimum. Roe moved to remand, claiming that Michelin had failed to prove by a preponderance of the evidence that the amount in controversy exceeded $75,000. The District Court for the Middle District of Alabama denied Roe’s motion, finding that the jurisdictional requirement was satisfied.

In affirming the district court decision, the Eleventh Circuit considered both the goal of the Alabama Wrongful Death Statute—namely, to prevent death and “preserve human life by making homicide expensive”—as well as the five factors that a jury is instructed to consider when calculating a damages award under the statute. Id. at 15. The court found that “[w]hen the value of Roe’s claims are analyzed with judicial experience and common sense, and in light of the five factors [], they likely exceed the $75,000 jurisdictional requirement.” Id. at 16.

The Roe court also emphasized that its “common sense” approach was necessary to protect the rights of defendants to remove cases to federal court. It warned against plaintiffs, skilled in a form of “artful pleading,” who could “defeat federal jurisdiction simply by drafting his pleadings in a way that did not specify an approximate value of the claims and thereafter provide the defendant with no details on the value of the claim,” thereby making federal jurisdiction “disappear.” Id. at 13 (internal quotations omitted). The court concluded that “[b]oth policy and precedent counsel against rewarding such obfuscating tactics.” Id.

Yet at first blush it appears that these same “obfuscating tactics” may have worked to the benefit of the plaintiffs in Berniard v. Dow Chemical Co., No. 10-30497 (5th Cir. Aug. 6, 2010).

In Berniard, a tank located at a Union Carbide facility experienced a sudden release of ehtyl acrylate, a potentially noxious chemical. As a result, the local department of emergency preparedness closed some roads and evacuated residents and business from an area stretching two miles eastward of the facility. Several class action suits were filed and were removed to the United States District Court for the Eastern District of Louisiana pursuant to the Class Action Fairness Act (“CAFA”). CAFA authorizes federal jurisdiction over class actions that allege (1) the class of plaintiffs would exceed more than 100 persons; (2) at least one member of the class is diverse in citizenship from at least one of the defendants; and (3) the aggregate quantum of damages suffered by members of the plaintiff class exceeds $5 million (exclusive of interest or costs). See 28 U.S.C. §1332(d)(2) and (5)(B).

Decided the day after Roe, Berniard upheld the federal district court’s decision that jurisdiction over the matter was lacking under CAFA due to defendants’ failure to show that the amount-in-controversy requirement had been met. In affirming the district court’s decision, the Fifth Circuit noted with apparent disdain the speed at which the plaintiffs’ attorneys filed petitions relating to the “sudden, isolated, and relatively limited” chemical release. Id. at 5. Nevertheless, the court ultimately found that, “[g]iven the generalized and conclusional nature of the allegations of the [ ] petitions and complaints, . . . we cannot say that . . . the Defendants-Appellants carried their burden of showing not only what the stakes of the litigation could be, but what they are in light of the plaintiffs’ demands.” Id. at 10.

While it may appear at first glance that the Berniard defendants were done in by the “artful pleading” tactics cautioned against in Roe, in reality the Berniard court’s decision upheld the same principle championed in the Roe opinion: the use of judicial experience and common sense to assist in determining the value of a plaintiff’s claims as pled in the complaint. The Berniard court acknowledged that the plaintiffs’ petitions were rife with allegations regarding the expansive geographical reach of the chemical dispersal, the large number of persons likely affected, the seriousness and extent of injuries, and the potential monetary value of the damages incurred by the affected parties, including compensatory damages and those for pain and suffering, future damages, and even punitive damages. But the Berniard court ultimately came to the conclusion that the plaintiffs’ state court petitions presented “an oxymoronic picture.” Id. at 11.

[Plaintiffs’ petitions] also contain minimizing allegations, such as the fact that the road closure and evacuation of residents . . . covered only a two-mile stretch to the east of the Taft facility, as well as implications and deductions that in reality the release was quickly contained, atmospherically diluted, and relatively minor and temporary in its deleterious effects, and that the incident was short-lived, with normalcy being restored in short order.

Id.
Thus, despite their facial incongruity, both Roe and Berniard can be read to support a court’s authority to make an independent assessment of the value of a plaintiff’s claim where damages are not specified in the complaint.

Adversaries Find Common Ground in Seeking En Banc Rehearing of Eleventh Circuit's Recent CAFA Decision

Hunton & Williams LLP — Thu, 19 Aug 2010 10:57:10 -0500

As previously reported here, in July the Eleventh Circuit Court of Appeals handed down a decision taking a novel approach to jurisdiction under the Class Action Fairness Act of 2005. In Cappuccitti v. DirecTV, Inc., the Court found that in addition to the requirements expressly set out in 28 U.S.C. § 1332(d), at least one member of a class must allege an individual amount in controversy in excess of $75,000 for original jurisdiction to exist under CAFA.

In an unusual occurrence, both the appellants and the appellees have now petitioned for rehearing en banc, on the same ground: that CAFA does not require any single plaintiff to allege an amount in controversy in excess of the jurisdictional minimum set out in 28 U.S.C. § 1332(a). As the plaintiff-appellees point out, the Court’s decision seems to conflate the requirements CAFA imposes on a class action with those CAFA imposes on a “mass action” as defined in 1332(d)(11). And as the defendant-appellant points out, the decision seems to conflict with both the legislative history and with precedent.

It remains to be seen whether the Court of Appeals will be swayed by the appellant’s and appellees’ rare show of unity in both requesting rehearing en banc on the same grounds. We will keep you posted on future developments.

Profits Before Public Interest? The California Supreme Court Opens The Door to Private Contingency Recovery in Public Nuisance Suits

Hunton & Williams LLP — Tue, 17 Aug 2010 09:37:17 -0500

Until recently, the rule in California seemed to be clear: private counsel representing a public entity in a public-nuisance action could not receive a contingent fee. The traditional rationale for this bar is that potentially lucrative contingent fee recoveries creates a built-in conflict between private attorneys and the public they represent in public suits. See, e.g., People ex rel. Clancy v. Superior Court, 39 Cal.3d 740 (1985) (barring contingency fees in public nuisance suits). In a controversial decision handed down last month by the California Supreme Court titled County of Santa Clara v. Superior Court, Chief Justice Ronald George both acknowledged the opportunity for conflict between private attorneys interested in maximizing contingency fees and the public’s interest in rational resolution and tempered the outright ban on contingency fees where, “neutral, conflict-free government attorneys retain the power to control and supervise the litigation.”

Prior to Santa Clara, the role of a private attorney in a public nuisance suit was likened to that of a public prosecutor in a criminal case, demanding the same standards of neutrality. This duty of neutrality arose from two fundamental aspects of the prosecutor’s role as a representative of the government: she must act with the impartiality required of a government actor and she must act evenhandedly so as not to abuse that vast power. Under the traditional rule, a public-nuisance abatement action fell into a class of noncriminal cases for which governmental neutrality was required. The action required balancing the interest of the people in ridding the city of a nuisance against the right of the property owner to use her property as she wished. Santa Clara departed from this rule in reasoning that a public nuisance case is not an “ordinary” civil action, in that a public-nuisance action must be prosecuted by a governmental entity on behalf of the public. In such factual circumstances, the Court held, an absolute bar on contingent-fee arrangements was unwarranted. However, the Court continued, even if a contingent-fee contract might be permissible, there still needed to be a safeguard against potential abuse of governmental power. Private counsel is still subject to a “heightened” standard of ethical conduct to guard against any conflict created by the contingency arrangement. The Court reasoned any conflict could be further avoided, “if neutral, conflict-free government attorneys retain the power to control and supervise the litigation.”

As additional safeguards, the Court imposed specific guidelines on any contingent-fee agreement between public entities and private counsel. Such agreements must provide: “(1) that the public-entity attorneys will retain complete control over the course and conduct of the case; (2) that government attorneys retain a veto power over any decisions made by outside counsel; and (3) that a government attorney with supervisory authority must be personally involved in overseeing the litigation.” These provisions are not intended to be exhaustive, and the unique circumstances of each case may require additional guidelines to mitigate the inherent conflicts of interest in a particular contingent-fee situation. They are, however, the minimum requirements that must be met in a contingent-fee agreement “to ensure that critical governmental authority is not improperly delegated to an attorney possessing a personal pecuniary interest in the case.”

It is also worth note that other jurisdictions have similarly been addressing the question of contingent-fee arrangements for private counsel representing public entities. The Court in Santa Clara generally agreed with the reasoning of the Supreme Court of Rhode Island in State of Rhode Island v. Lead Indus. Assn., Inc., 951 A. 2d 428 (2008), from which it adopted the slightly modified minimum requirements discussed above. The Louisiana Legislature, following the BP Deepwater Horizon disaster, considered a bill that would have authorized the attorney general to hire private counsel for the state on a contingency basis, but time ran out on the bill, which was strongly opposed by business interests. Finally, the Pennsylvania Supreme Court is currently considering a challenge to the contingency-fee contract between Governor Ed Rendell and his private counsel with respect to a case against Janssen Pharmaceuticals for off-label marketing of the drug Risperdal.

Whether you view such contingency arrangements as promoting better partnerships between the private sector and the public or as an unnecessary incentive for costly litigation, with the issue under close review in so many courts, it may not be long before the validity of contingency-fee arrangement with private counsel for public entities ends up before the United States Supreme Court.

Corporations Beware: To Preserve the Attorney-Client Privilege, Your In-House Counsel Must Be Active Members Of Their State Bar

Hunton & Williams LLP — Thu, 29 Jul 2010 14:08:29 -0500

The attorney-client privilege has long been held to apply to in-house counsel, just as it does to outside counsel. But in Gucci America, Inc. v. Guess?, Inc., 2010 U.S. Dist. LEXIS 65871 (S.D.N.Y. June 29, 2010), a copyright infringement case in federal court in New York, Gucci found out the hard way that if an in-house attorney is not an active member of the bar, his communications probably are not privileged.

During discovery Gucci withheld, based on the attorney-client privilege, a series of email communications from Jonathan Moss. Moss was a 1993 law school graduate who was admitted to the California bar later that year. Hired by Gucci in 2002, Moss steadily rose through the ranks. When he wrote the correspondence in question, he was Gucci’s top-ranking legal officer. During his deposition Moss admitted that, even though he was technically a member of the California bar, he had been an inactive member for three years. Following a thorough investigation, Gucci learned that Moss’ inactive status actually dated all the way back to 1996. Armed with that information, Guess immediately moved to compel Gucci to produce Moss’ communications. Guess argued that the attorney-client privilege does not apply unless the attorney is authorized, or reasonably believed to be authorized, to practice law in any state or nation.

The U.S. District Court for the Southern District of New York, applying federal common law, noted that an essential element of the attorney-client privilege is the participation by an “attorney,” which means someone who is not simply trained in the law, but actually authorized to engage in the practice of law. Under California bar rules, Moss had to be an active member to practice of law in the state: “No person shall practice unless the person is an active member of the State Bar.” Because he was not, the court concluded that Moss was not an attorney. Notwithstanding his inactive California status, Gucci argued that Moss’ communications still were privileged based on his membership in two federal districts in California, the Central District and Southern District. However, citing the membership requirements in those districts, both of which limited admission to “active” California bar members, the court found Gucci’s argument “unavailing.”

Might the Gucci court’s ruling have been different if Moss were a member of a different federal district? Unlike the California district court rules, the admission requirements in some federal districts do not specifically require an attorney to be an “active” member of a state bar. In the Northern District of Texas, for example, the eligibility rules do not use the word “active.” The same is true in the Eastern District of Virginia. On the other hand, in the Northern District of Georgia, the attorney must be an “active member.” Thus, had Moss been admitted in the Northern District of Texas or the Eastern District of Virginia, his emails might have been deemed privileged.

Although Moss was ineligible to practice in California or in the two federal districts where he held a membership, the court held that his communications would still be privileged so long as Gucci could demonstrate that it reasonably believed, at the time the communications were written, that Moss was authorized to practice law. Gucci argued that its belief was reasonable because Moss had represented that he was an attorney and had otherwise held himself out as one. But again, the court ruled against Gucci. The court observed that the reasonable belief standard requires a corporation to exercise minimal due diligence, which includes confirming that an in-house attorney is licensed in some jurisdiction, that the license held authorizes the lawyer to engage in the practice of law, and that the lawyer has not been suspended from practicing. Finding that Gucci made no effort during Moss’s eight years of employment to ascertain his qualifications, the court deemed Gucci’s belief unreasonable.

Gucci illustrates an important point: reasonable efforts must be taken by a company to ensure that in-house counsel actively maintain their bar status, and if the company does not do so it risks waiving the attorney-client privilege. It is not enough to simply assume that in-house counsel will actively maintain their bar status.

Cappuccitti -- Another Blow to CAFA Jurisdiction in the Eleventh Circuit

Hunton & Williams LLP — Tue, 27 Jul 2010 16:05:55 -0500

Last week a three-judge panel of the Eleventh Circuit issued Cappuccitti v. DirecTV, Inc., No. 09-14107 (11th Cir. July 19, 2010) (Tjoflat, J.), addressing the jurisdictional requirements for a putative class action filed in federal court or an “original CAFA action.” It held that in an original CAFA action, the plaintiffs must allege the $5 million aggregate amount in controversy and at least one plaintiff must allege an individual amount in controversy over $75,000. Though Cappuccitti is arguably limited by its facts to original CAFA actions, it suggests in dicta that its holding would extend to actions removed under CAFA. This would effectively eliminate CAFA jurisdiction over consumer class actions filed in the Eleventh Circuit.

The opinion noted that Congress’s goal in enacting CAFA was “to place more class actions in federal court” and to “expand federal jurisdiction over class actions.” But few putative consumer class actions involve individuals with claims exceeding $75,000, and most involve individual claims with a significantly lower amount in controversy. Cappuccitti notes that it stands alone among the Circuit Courts, stating: “No court of appeals case of which we are aware has expressly held that at least one plaintiff must meet the § 1332(a) amount in controversy requirement to maintain an original CAFA action.” And that is not without reason, since Cappuccitti’s holding goes beyond the plain language of 28 U.S.C. § 1332(d). Section 1332(d)(2), which establishes federal court jurisdiction over class actions, makes no mention of § 1332(a)’s $75,000 amount-in-controversy requirement. The only CAFA reference to § 1332(a) appears in § 1332(d)(11), which governs mass actions not class actions.

Cappuccitti follows Lowery v. Alabama Power Co., 483 F.3d 1184 (11th Cir. 2007) (Tjoflat, J.), which appeared to limit defendants’ ability to establish the $5 million aggregate amount in controversy necessary for CAFA removal when the plaintiff’s artfully-pled complaint omits information concerning the value of the class’s claims. Lowery suggested that the $5 million aggregate amount in controversy could be established only on the face of the complaint or by a “document received by the defendant from the plaintiff.” Last month, in Pretka v. Kolter City Plaza II, Inc., No. 10-11471 (11th Cir. June 8, 2010), the Eleventh Circuit addressed the confusion among the district courts caused by Lowery, explaining that “Defendants may introduce their own affidavits, declarations, or other documentation” to establish the requisite jurisdiction under CAFA.

As Judge Tjoflat noted in his dissent in Allapattah Services, Inc. v. Exxon Corp., 362 F.3d 739 (11th Cir. 2004), jurisdictional issues surrounding federal court class actions “raise[] fundamental questions concerning constitutional law, statutory interpretation, and the integrity of the judicial system.” See Exxon Mobil Corp. v. Allapattah Servs., Inc., 545 U.S. 564 (2006) (affirming Eleventh Circuit’s holding that federal courts may exercise supplemental jurisdiction over the claims of unnamed class members in diversity-based actions so long as one named plaintiff satisfies the amount-in-controversy requirement). Cappuccitti’s answer to these fundamental questions, for now, severely narrows CAFA jurisdiction in the Eleventh Circuit.

California Proposes Sweeping Regulations of Chemicals in Consumer Products

Hunton & Williams LLP — Mon, 26 Jul 2010 14:55:36 -0500

Effective as of September, 2008, Assembly Bill 1879 mandates that California’s Department of Toxic Substances Control (“DTSC”) issue regulations that could ban the sale of certain consumer products based on the chemicals used in those products. On June 23, 2010, the DTSC issued draft regulations pursuant to Assembly Bill 1879. Under the draft regulations, product manufacturers, importers and private labelers will be jointly and severally responsible for assessing the risks and possible alternatives for chemicals in their products. Both the production and the end-of-life management of certain products will be governed by the regulations once they become final. The regulations are scheduled to take effect on January 1, 2011.

The draft regulations identify certain “chemicals of concern” and require the DTSC to list any product that is or contains a “chemical of concern” as a “product under consideration.” The DTSC is further required to prioritize the list of “products under consideration” by taking into account each product’s projected sales, the volume of the product currently in use, the type and extent of consumer use that could result in adverse health impacts, and other enumerated factors. If the DTSC determines that a product is a “priority product,” the manufacturer of the product will be required to notify California retailers of such designation.

Furthermore, manufacturers of priority products are required to perform “alternative assessments” for the “chemicals of concern” contained in those products. Broadly speaking, the goal of the “alternative assessments” is to determine whether there are safer alternatives to the “chemical of concern” contained in the “priority product,” or to demonstrate to the DTSC that the concentration of the “chemical of concern” is de minimis. Notably, the DTSC can ban the sale of a “priority product” in California if it determines that an economically feasible, safer alternative to a “chemical of concern” is available — even if this determination is contrary to the manufacturer’s alternative assessment.

The draft regulations also require manufacturers of certain products to fund and/or implement end-of-life disposal programs for those products. For products that must be managed as a hazardous waste at the end of their useful life, manufacturers must establish, fund and maintain “take-back” programs. Such programs must include a “Product Stewardship Program” outlined on the manufacturer’s website, public education programs and cooperative measures with retailers in developing collection sites for recycling.

The breadth of requirements under the draft regulations could present significant hurdles for product manufacturers. Given the DTSC’s power to ban certain products under the draft regulations, manufacturers should consider now whether their products, as currently manufactured, contain “chemicals of concern.” Since 1986, a California law (known as Proposition 65), has required that consumers must receive a warning prior to exposure to products that contain chemicals listed by the state as known to cause cancer or birth defects or reproductive harm. It is likely unfeasible, however, to manufacture “California products” that comport with the regulations in addition to products that can be sold in unregulated markets. Thus, product manufacturers may face a Hobson’s choice of complying with the “Green Chemistry” regulations and the mandates of Proposition 65 or forgoing business in one of the largest economies in the world. Furthermore, the joint and several responsibility for compliance between manufacturers, importers and private labelers will likely require an unprecedented level of cooperation between those entities.

Hunton & Williams, LLP has experienced attorneys in California that can assist any product manufacturer in addressing the issues created by the draft regulations.

Virginia High Court And Legislature Tackle The Question Of Waiver Of Privilege By Inadvertent Disclosure

Hunton & Williams LLP — Tue, 13 Jul 2010 11:33:42 -0500

The question of when an inadvertent disclosure of material protected by the attorney-client privilege should constitute a waiver of the privilege is one that has troubled courts (to say nothing of parties) for probably as long as the privilege has existed. In recent years, there has been a concerted effort to set out in rules and statutes the principles governing waiver so that they can more easily be applied in a predictable fashion. In recent months, both Virginia’s General Assembly and its Supreme Court have taken up the issue – and seem not to have reached exactly the same conclusion.

In June the Supreme Court of Virginia decided Walton v. Mid-Atlantic Spine Specialists, P.C., No. 091009, 2010 Va. LEXIS 63 (Va. June 10, 2010), before this new rule took effect, holding that a party waived the attorney-client privilege when it took inadequate steps to prevent the disclosure of the client's confidential memo to his attorney, and waited too long to try to get the document back. The Court adopted the multifactor test from Lois Sportswear, U.S.A., Inc. v. Levi Strauss & Co., 104 F.R.D. 103, (S.D.N.Y 1985). Although “[n]one of these factors is independently dispositive,” they are: “(1) the reasonableness of the precautions to prevent inadvertent disclosures, (2) the time taken to rectify the error, (3) the scope of the discovery, (4) the extent of the disclosure, and (5) whether the party asserting the claim of privilege or protection for the communication has used its unavailability for misleading or otherwise improper or overreaching purposes in the litigation, making it unfair to allow the party to invoke confidentiality under the circumstances.”

Interestingly, Walton was handed down just a few weeks before a new Virginia law took effect governing waivers of the attorney-client privilege and work-product protection. Senate Bill 384, which amended Virginia Code § 8.01-420.7, was a recommendation of Virginia's Boyd-Graves Conference. The adoption of the law makes Virginia one of the first states to enact a counterpart to Federal Rule of Evidence 502. The key provisions of the new Virginia statute largely track the federal rule, clarifying the extent to which the disclosure of one protected communication operates as a waiver of the protection for other, undisclosed communications and setting out rules for waiver in the context of inadvertent disclosures or “claw-back” agreements.

The Court mentioned new Code § 8.01-427.7 in footnote 5, saying that its provisions "implement the standards articulated in this opinion . . . .” But Walton may well add a potentially mischievous judicial gloss. The fifth Walton factor – whether the party asserting the privilege claim is misusing the unavailability of the document – is not mentioned anywhere in the new statute or in Federal Rule of Evidence 502. This factor may well prove to be a source of more litigation down the road. Stay tuned.

Yet Another Causation Hurdle Emerges For Toxic Tort Plaintiffs In Texas

Hunton & Williams LLP — Wed, 07 Jul 2010 11:07:43 -0500

The last few years have been challenging, to put it mildly, for asbestos plaintiffs in Texas. A recent decision by the Fort Worth Court of Appeals in Smith v. Kelly-Moore Paint Company, Inc. certainly won’t make things any easier. If you have been following the recent developments, you are probably aware of the Texas Supreme Court’s Borg-Warner decision, in which the court clarified the causation test for asbestos plaintiffs. In that case, the Court explained that establishing causation requires a plaintiff to prove more than just exposure to an asbestos containing product. The Court stated that, as a starting point, a plaintiff must satisfy the Lohrmann test, showing frequent, regular, and proximate exposure to the defendant’s product. But the Court further held that in order to establish causation, a plaintiff also must (1) present expert testimony quantifying the dose of asbestos to which he or she was exposed, and (2) demonstrate, through the use of epidemiological studies, that such a dose was sufficient to cause the disease in question. Smith v. Kelly-Moore Paint Company, Inc. adds another causation hurdle.

The plaintiff in the Smith case was Dorman Smith, a drywall finisher between the mid-1950’s and the mid-1980’s. In 2005, he developed and died of mesothelioma. It was undisputed that Smith, during his employment, had been exposed to significant levels of chrysotile asbestos in Kelly-Moore’s joint compound products. His estate presented expert evidence quantifying the approximate dose of chrysotile asbestos fibers he was exposed to from the joint compound, and demonstrating that epidemiological studies showed that individuals exposed to an equivalent dose of a mixture of chrysotile and amphibole asbestos fibers had more than twice the risk of developing mesothelioma as did the general population (put another way, it was more likely than not that such a person’s disease was attributable to asbestos exposure).

But the Court noted an important distinction between Smith and the persons in the epidemiological studies: whereas Smith had been exposed only to chrysotile asbestos, the subjects of the studies had been exposed to a mixture of amosite, crocidolite, and chrysotile asbestos. That distinction was fatal to Smith’s claims, because not all asbestos fibers are the same. As the Texas Court of Appeals noted, chrysotile asbestos, like Smith was exposed to, is by far the least dangerous form of asbestos. According to the Court, without an epidemiological study evidencing an increased risk of developing mesothelioma from exposure to chrysotile-only asbestos, like that contained in Kelly-Moore’s product, Smith’s experts’ opinions lacked the “scientific foundation” necessary to be admissible. The plaintiff’s experts’ opinions lacked the necessary “fit” for the facts of the case, because they conflated the type of asbestos fibers to which Smith was allegedly exposed with the far more hazardous amphibole fibers at issue in the epidemiological studies relied upon.

Smith v. Kelly-Moore adds another significant causation hurdle for asbestos plaintiffs; they now have to show they were exposed to the same types, or same mixture of asbestos types, as the persons in the epidemiology study. It further demonstrates the willingness of Texas courts to require expert testimony to meet no less rigorous standards in asbestos cases as the courts would apply in other litigation. Indeed, defense lawyers in other toxic tort cases will almost certainly try and extend the ruling to non-asbestos cases and, at this point, it appears as though Smith’s reach might be extended.

Ohio Supreme Court Holds That Premises Owners Do Not Owe "Take Home" Duty in Asbestos Cases

Hunton & Williams LLP — Fri, 02 Jul 2010 09:33:34 -0500

As noted last week, state courts have continued to weigh in – and diverge – on the extent of a premises owner’s duty to protect off-site individuals from exposure to materials inadvertently carried off the premises by third parties (such as employees). As discussed in the earlier post, on June 10 the Illinois Fifth District Court of Appeals split with its sister district on the "take-home" duty issue. Interestingly, on the very same day, the Ohio Supreme Court, entered the fray, holding that premises owners do not owe a duty to household members of employees. Boley v. Goodyear Tire & Rubber Co., Slip Op. 210-Ohio-2550 (June 10, 2010).

In Boley, the plaintiff sued her husband's former employer after she was diagnosed with mesothelioma, which she claimed was caused by exposure to asbestos fibers brought home on the clothes of her husband from his work at the defendant's facility. Unlike nearly all other states, the Ohio legislature has adopted a statute expressly addressing the issue of “take-home” exposure. At issue on appeal was whether Ohio law "bars all tort liability against a premises owner for asbestos exposure originating from asbestos on the owner's property where the exposure occurred away from the owner's property."

The Ohio statute at issue, R.C. 2307.941(A), provides in pertinent part:

(A) The following apply to all tort actions for asbestos claims brought against a premises owner to recover damages or other relief for exposure to asbestos on the premises owner's property:

(1) A premises owner is not liable for any injury to any individual resulting from asbestos exposure unless that individual's alleged exposure occurred while the individual was at the premises owner's property.

In finding that a premises owner does not owe a duty to employees' household members who are never exposed to asbestos on the premises owner's property, the court reasoned that when the statute is read in its entirety, the legislative intent is clear -- the phrase "exposure to asbestos on the premises owner's property" in paragraph (A) refers to the location of the asbestos to which an individual is exposed, rather than the location of the exposure. Thus the court concluded that the Ohio statute applies to all tort actions for asbestos claims brought against premises owners relating to exposure originating from asbestos on the premises owner's property, and precludes a premises owner's liability for any asbestos exposure that does not occur at the owner's property.

Harbinger or Outlier? Florida Jury Awards $2.47 Million in First Chinese Drywall Trial

Hunton & Williams LLP — Tue, 29 Jun 2010 15:38:30 -0500

On June 18, 2010, a Florida family was awarded $2.47 million in the first Chinese drywall case to go to a jury. The jury found that Banner Supply, the drywall distributor was negligent in selling a defective product and violated the Florida Deceptive and Unfair Trade Practices Act. The verdict includes $492,000 in compensatory damages for remedying the problems in the plaintiffs’ home and $1.7 million for loss of enjoyment of the home, as well as diminished value due to stigma. In reaching its decision, the jury assigned 55% of the blame to named defendant Banner Supply, while finding manufacturer Knauf Plasterboard Tianjin 35% responsible and the importer and exporter of the drywall 5% responsible each.

This suit was similar to the thousands of claims pending across the United States alleging Chinese drywall emits sulfur fumes, which corrode metal, produce a noxious odor and are harmful to human health. Interestingly, the verdict came the same day that Knauf Plasterboard settled two cases pending in a Louisiana federal multidistrict litigation. Knauf Plasterboard agreed to pay for the removal and replacement of all drywall, electrical components and other systems in the damaged homes. The scope of this settlement was in line with United States District Judge Eldon E. Fallon’s findings regarding the remediation necessary for homes containing defective drywall. These developments follow a recent notice of appeal of a default judgment for seven Virginia homeowners in the amount of $2.6 million entered against Taishan Gypsum Company, a manufacturer owned by the Chinese government.

Although the Florida verdict may be an outlier based on bad facts -- there was evidence that Banner Supply had entered into a confidentiality agreement with Knauf to keep secret concerns about the drywall’s odors -- there is still cause for concern. This verdict demonstrates that American distributors, wholesalers and retailers of Chinese drywall are at risk of significant jury verdicts. In particular, suppliers may be exposed to “loss of enjoyment” damages that are disproportional to actual damages. Loss of enjoyment and diminished value damages may be likely in jurisdictions that require that homeowners disclose the past or current presence of Chinese drywall to any prospective buyers. Accordingly, American suppliers of Chinese drywall need to be prepared to face damages beyond home repair if the case is put before a jury.

Furthermore, the joint and several liability available in many jurisdictions against sellers of defective products makes American suppliers easy targets compared to Chinese manufacturers that could potentially evade execution of judgments.

Does an employer have a duty to warn workers' family members about asbestos? Illinois appellate courts disagree

Hunton & Williams LLP — Tue, 22 Jun 2010 10:22:48 -0500

The national debate on whether an employer owes a legal duty to warn employees' family members about asbestos continues. The Fifth District Illinois Court of Appeals ruled last week that employers have a legal duty to warn employees' family members about asbestos brought home on employees' work clothes. Simpkins v. CSX Corp., No. 07-L-62 (Ill. Ct. App. 5th June 10, 2010). Interestingly, the Fifth District failed even to mention its sister district's decision in Nelson v. Aurora Equip. Co., 391 Ill. App. 3d 1036, 909 N.E.2d 931 (Ill. App. Ct. 2d 2009), pet. for appeal denied, 233 Ill. 2d 564 (Sept. 30, 2009), in which the Third District Illinois Court of Appeals held that no duty is owed to an employee's household members. This split in the districts seems well teed-up for review by the Illinois Supreme Court.

In Simpkins, the plaintiff sued after she was diagnosed with mesothelioma, alleging she was exposed to asbestos dust brought home on her husband's clothes from his work for the railroad. The Madison County trial judge dismissed the plaintiff's complaint, finding that the railroad did not owe a duty to families of employees. On appeal, the Fifth District reversed, relying heavily on the Tennessee and New Jersey Supreme Courts’ decisions in Satterfield v. Breeding Insulation Co., 266 S.W.3d 347 (Tenn. 2008) and Olivo v. Owens-Illinois, Inc., 186 N.J. 394, 895 A.2d 1143 (2006). None of the decisions around the country which decide there was no such duty, however, were mentioned in the Simpkins opinion. See, e.g., (CSX Transp. Inc. v. Williams, 278 Ga. 888, 608 S.E.2d 208 (2005); Nelson v. Aurora Equip. Co., 391 Ill. App. 3d 1036, 909 N.E.2d 931 (2009), pet. for appeal denied, 233 Ill. 2d 564 (Sept. 30, 2009); In re New York City Asbestos Litig. (Holdamph v. AC & S, Inc.), 5 N.Y.3d 486, 840 N.E.2d 115 (2005); Riedel v. ICI Americas Inc., 968 A.2d 17 (2009); In re Certified Question from the Fourteenth Dist. Court of Appeals of Texas (Miller v. Ford Motor Co.), 479 Mich. 498, 740 N.W.2d 206 (2007); Adams v. Owens-Illinois, Inc., 119 Md. App. 395, 705 A.2d 58, 66 (1998); Martin v. Cincinnati Gas and Elec. Co., 561 F.3d 439 (6th Cir. 2009); Alcoa Inc. v. Behringer, 235 S.W.3d 456 (Tex. App. 2007); Van Fossen v. MidAmerican Energy Co., No. 06-1691, 2009 Iowa Sup. LEXIS 119 (Iowa Nov. 13, 2009).

In relying so heavily on the Tennessee Supreme Court's opinion in Satterfield, it appears the Fifth District has implicitly adopted the Restatement (Third) of Torts' broad view of a duty owed in tort. As other courts around the country have made clear, the Restatement (Third) of Torts has completely "redefined the concept of duty . . . [and has] create[d] duties in areas where [courts] have previously found no common law duty." Riedel v. ICI Americas Inc., 968 A.2d 17, 20 (Del. 2009). Satterfield adopted the Restatement (Third) of Torts' analysis of the distinction between misfeasance and nonfeasance, in which an act of omission in the absence of a special relationship (i.e., employer-employee, business invitor-invitee, etc.)—which is not actionable under the Restatement (Second) of Torts and common law—gives rise to a duty to warn or protect when the omission is alleged to have been an omission of misfeasance.

The Simpkins opinion, however, seems difficult to square with Marshall v. Burger King Corp., 222 Ill. 2d 422, 856 N.E.2d 1048 (2006), in which the Illinois Supreme Court held that the "touchstone" of a duty analysis is "to ask whether a plaintiff and a defendant stood in such a relationship to one another that the law imposed upon the defendant an obligation of reasonable conduct for the benefit of the plaintiff." Instead, the Simpkins court followed the New Jersey Supreme Court's decision in Olivo, which makes the inherently fact dependent issue of "foreseeability" the touchstone of the duty analysis.

We'll keep you updated as this case continues on appeal.

Two More Companies Seek The Bankruptcy Cure For Their Asbestos Litigation Affliction

Hunton & Williams LLP — Wed, 09 Jun 2010 08:20:08 -0500

Asbestos claims continue to send companies into the bankruptcy courts to shield themselves of the seemingly endless stream of cases. Two more companies, Garlock Sealing Technologies LLC and Bondex International, Inc. have filed for protection within the last two weeks, bringing the total number of bankruptcies attributable at least in part to asbestos claims to nearly 100. Garlock and Bondex have both filed for Chapter 11 bankruptcy protection to establish a 524(g) trust to resolve all current and future asbestos-related personal injury claims. The June 5 filing in Charlotte, North Carolina by Garlock Sealing Technologies, a subsidiary of EnPro Industries Inc., covers only Garlock operations in Palmyra, New York and Houston, Texas. Bondex International, Inc. and Specialty Products Holding Corp., two non-operating subsidiaries of RPM International Inc., filed for Chapter 11 protection on May 31 in Delaware.

According to a press release from EnPro Industries, Inc., “beginning in 2000, the top tier asbestos defendants . . . sought bankruptcy protection and stopped paying asbestos claims in the tort system. The bankruptcies of many additional producers of friable asbestos products followed. With over a billion dollars of annual settlement payments lost to bankruptcy, many Plaintiffs began identifying Garlock’s non-friable sealing products as a primary cause of their asbestos diseases while generally denying exposure to the friable products of companies in bankruptcy.” This sentiment was also voiced by Bondex in its bankruptcy filing and was attributed to causing an increase in the subsidiaries’ asbestos costs from approximately $8.2 million in 2000 to $60 to $82 million annually between 2005 and 2008.

Forget Ambulance Chasing: Are Social Networking Sites the New Source of Class Action Litigants?

Hunton & Williams LLP — Mon, 07 Jun 2010 15:04:06 -0500

One must have only followed the recent campaign to nominate Betty White as a host of Saturday Night Live to understand the power of social networking sites. After the former Golden Girl appeared in a popular Super Bowl ad, fans of hers began a massive “Facebook campaign” urging the producers of the show to book her as a host. It worked. And producers of TV shows are not the only ones that can be swayed by the power of these digital campaigns. In 2007, when Facebook was popular but small compared to the over 400 million estimated current users, a group of users convinced HSBC bank to reverse its plan to cancel interest-free overdraft protection for new college graduates.

Products manufacturers are especially vulnerable to the power of social networking sites because such sites provide consumers with an easy to access, central location to find other consumers who believe they have had similar experiences with products. Most recently, a group of Facebook users have launched a campaign aimed at Procter & Gamble’s Pampers Dry Max diapers. With Facebook pages such as “Bring back the Pampers Cruisers, Dump Dry Max!,” “Recall Pampers Dry Max Diapers!,” and “Pampers, Just Admit you made a mistake already!,” they claim that the diapers cause severe rashes, blisters and chemical burns and demand that Procter & Gamble recall its Dry Max diapers. These complaints have not just resulted in negative publicity for Procter & Gamble. First, the Consumer Products Safety Commission announced it was investigating complaints about Dry Max diapers in response to the campaign. Next, some of the users who participated in the Facebook campaign filed a proposed class action on May 11 in federal court in the Southern District of Ohio alleging various products liability claims against Procter & Gamble. The plaintiffs’ complaint references the large group of Facebook users (allegedly over 6,700 at the time of filing) who have voiced complaints about the Dry Max diapers. Three more putative class actions have been filed since then.

For its part, Procter & Gamble denies that its Dry Max diapers have caused the alleged injuries and has stated it has received few complaints about the diapers. But the Facebook campaign against it and the resulting lawsuit demonstrate what a potent tool social networking sites can be for consumers to voice complaints about products. And these sites provide something more—the type of instant validation that has the potential to convince consumers that their claim might have legal merit. All of this adds up to fertile ground for plaintiff’s lawyers to find potential litigants and organize them into a class action. Once a class action suit is filed, the social networking sites can quickly publicize the lawsuit to every consumer who has visited the campaign’s pages generating more buzz about a product’s alleged defectiveness and resulting in even more pressure on the product manufacturer.

For these reasons, product manufacturers and their counsel should carefully monitor social networking sites when complaints about a product begin to surface. While campaigns on social networking sites can quickly spin out of control, they also offer opportunities for product manufacturers to use the forum to address consumer complaints. By quickly addressing consumer complaints in an online forum, products manufacturers can go beyond the traditional responses of using call centers and direct mail to demonstrate to consumers the importance of their business and possibly deflect litigation.