On February 1, 2012, the California Court of Appeal for the Second Appellate District found that a supplier of raw materials cannot be held liable under theories of negligence and strict product liability for injuries claimed to arise from the use of such raw materials in the manufacture of finished goods. Maxton v. Western States Metals, 203 Cal.App.4th 81 (2012).

The plaintiff in Maxton alleged that from 1975 through 2007 he worked as a laborer where he used a number of metal products that included steel and aluminum ingots, sheets, rolls and tubes that were manufactured and supplied by defendants. Plaintiff also alleged that during the course of his and his co-workers’ use of these products in cutting, grinding, sandblasting, welding, brazing and other metal processes that he was exposed to and inhaled toxicologically significant amounts of toxic fumes and dusts that caused him to develop interstitial pulmonary fibrosis and other injuries.

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On May 8, 2012, United States District Court Judge Richard Seeborg dismissed a consumer class action lawsuit against Sony Computer Entertainment America, LLC and Activision Blizzard, Inc. The purported class action alleged Sony and Activision were acting in concert to sell advanced “Call of Duty” video games, which caused older versions of the Sony PlayStation 3 (“PS3”) videogame console to overheat during normal game play, rendering them permanently inoperable. Judge Seeborg dismissed the lawsuit without leave to amend after Plaintiff failed, in three attempts, to state valid claims against Sony and Activision for violation of California’s Unfair Competition Law (“UCL”) and Consumer Legal Remedies Act (“CLRA”).

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The United States Court of Appeals for the 7th Circuit on May 1 cleared the way for potential lawsuits involving a dryer manufactured and sold by Sears, overturning its own prior injunction barring such suits. In 2008, the 7th Circuit decertified a class of plaintiffs who claimed a dryer, marketed by Sears as consisting of stainless steel, actually contained an internal drum containing a small amount of ceramic-coated mild steel that could stain clothes. At that time, the 7th Circuit described the suit as being “near frivolous” and ordered all lower courts to bar future class actions arising from the same allegation. Thereafter, the United States Supreme Court vacated the 7th Circuit’s mandate to the lower courts and remanded for further consideration, citing its own ruling in Smith v. Bayer, wherein the Supreme Court held that “neither a proposed class action nor a rejected class action may bind nonparties.” In light of the Smith decision, the 7th Circuit determined that due to the decertification of the previous class, judgments issued concerning the initial plaintiff could not impact subsequent claims made by members of the decertified class.

For several decades, the lower courts have struggled with questions of when personal jurisdiction is constitutionally proper over foreign manufacturers with limited to essentially non-existent contacts with a forum state. Much of that confusion stems from the Supreme Court’s 1987 Asahi Metal Industry Co. decision. Asahi should have clarified the rule, but its 4-4 split has led to divergent views among the courts. In some courts, mere foreseeability that a product might end up in a state could result in jurisdiction, while other courts require more purposeful conduct directed at the state in question. The complexity of the issue has, if anything, increased over the years -- new ways of marketing and distributing products through the internet and other channels, probably unanticipated 25 years ago, and certainly unanticipated at the time of the Framing, are now commonplace.

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On March 23, 2012, the Georgia Supreme Court held that apportionment is appropriate in tort actions even when a plaintiff is at fault.  See McReynolds v. Krebs, No. S11G0638, 2012 WL 1034449 (Ga. Mar. 23, 2012).    In McReynolds, a driver of a Chevy Trailblazer sued another driver and General Motors when she was severely injured in a car accident.   Prior to trial, GM settled with the plaintiff.  The jury ultimately found for the plaintiff against the other driver and awarded her $1,246,000.42.  The liable driver appealed, alleging that the trial court erred in construing the Georgia apportionment statute (O.C.G.A. § 51-12-33) to bar her cross-claims against GM for contribution and setoff.  On appeal, the Court of Appeals held that the trial court correctly construed O.C.G.A. § 51-12-33.  The Supreme Court granted certiorari on the question of whether the Court of Appeals construed the apportionment statute appropriately.

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The CPSC and U.S. Customs are increasingly coordinating efforts to prevent unsafe products from entering the U.S. Earlier this month, the CPSC announced that CPSC port investigators and U.S. customs agents “prevented more than 647,000 units of about 240 different noncomplying products from reaching consumers between October 1, 2011 and December 31, 2011.” The report further stated that the most common products identified during the ports of entry screenings were “children’s products containing levels of lead exceeding the federal limits, toys and other articles with small parts that present a choking hazard for children younger than 3 years old, and toys and child care articles with banned phthalates.” A full copy of the report can be found on the CPSC’s website.

On April 11, 2012, the 9th U.S. Circuit Court of Appeals withdrew its September 20, 2011 opinion in Kolev v. Porsche Cars North America, an opinion in which the Court held that a used car buyer’s Magnuson-Moss Warranty Act (“MMWA”) claims were not subject to compulsory arbitration.

In Kolev, the plaintiff alleged that the car she purchased from the defendant dealership subsequently developed serious mechanical problems during the warranty period and that the dealership refused to honor her warranty claims. In addition to breach of implied and express warranties under MMWA, the plaintiff alleged breach of contract and unconscionability under California law. The dealership moved to compel arbitration pursuant to the mandatory arbitration provision of the plaintiff’s sales contract and the district court granted the motion. Following resolution of the plaintiff’s claims in favor of the dealership that were confirmed by the district court, the plaintiff appealed.

The Ninth Circuit reversed the district court’s decision. Finding that the MMWA was ambiguous as to whether pre-dispute mandatory binding arbitration was permissible under the statute, the Ninth Circuit held that FTC’s Rule 703 prohibiting enforcement of such provisions was a reasonable interpretation of the MMWA. Thus, the Ninth Circuit’s September 20, 2011 opinion held that pre-dispute arbitration clauses under the MMWA were not enforceable.

The April 11, 2012 decision withdraws this controversial ruling allowing the court to await the California Supreme Court’s ruling on a similar issue in Sanchez v. Valencia Holding Co. LLC, No. S199119.

Alston & Bird earned a victory Wednesday for McDonald's against the Center for Science in the Public Interest (“CSPI”), a nutrition advocacy group, after convincing a California judge to dismiss a putative class action in its entirety and without leave to amend. Plaintiff, who was represented by CSPI, alleged that McDonald's violated California’s consumer protection laws by using toys to market Happy Meals to children. According to the lawsuit, McDonald's use of toys allowed it to “get[] into the parents’ wallets via the kids’ minds,” which was allegedly unfair because children are not capable of understanding the persuasive intent of advertising.

In dismissing Plaintiff's claims based on alleged deception, the court noted that Plaintiff's attempt to rely on the "inherent deception" of her children by McDonald’s "is not recognizable as deception under California law" because the claim had nothing to do with “untruth, a half truth, or an omission by the defendant. It has to do with the cognitive deficiencies of the listeners. That’s not deception under California law.”

The Court also dismissed Plaintiff's claims based on the "unfair" prong of California's consumer protection laws due to a lack of standing, because Plaintiff received the benefit of her bargain. As the Court stated, "the parents get exactly what they think they're getting. Nothing less. As a matter of fact, the claim is they know exactly what they're getting and they don't want it." Ultimately, in dismissing all of Plaintiff's claims with prejudice, the Court recognized that Plaintiff's lawsuit was an inappropriate effort to use California consumer protection law to "get in the middle of raising children, of disciplining children, [and] of teaching children what the parent thinks is right or wrong...."

Citing a lack of scientific evidence, the United States Food & Drug Administration (“FDA”) decided that bisphenol A (“BPA”) will not be classified as a banned substance in imported and domestic food packaging. While the FDA stated that it was not issuing a final safety determination on BPA and that it is still studying its effects, it concluded that there is not enough scientific data to change its current food packaging rules. This ruling comes after the FDA entered a consent decree with the Natural Resources Defense Council in which it committed to ruling on whether BPA would be classified as a banned substance in food packaging.

BPA is an organic compound that is currently used in many metal food cans and plastic containers, but has come under recent scrutiny because of some studies suggesting a link between the chemical and an increased risk of cancer, early puberty, and reproductive toxicity, especially in children. In 2010 Canada declared BPA a toxic substance.

While the recent FDA decision indicates that food manufacturers can continue to use BPA in food packaging, the food industry should closely monitor scientific studies involving BPA and any subsequent guidance provided by the FDA.

On March 30, 2012, the Department of Justice and Range Resources jointly dismissed a Safe Drinking Water Act enforcement case that the DOJ brought against Range Resources in January 2011. The suit sought to enforce an Imminent and Substantial Endangerment Administrative Order that the Environmental Protection Agency (EPA) had issued in December 2010 pursuant to the Safe Drinking Water Act. The EPA order, which Range challenged, had alleged that gas wells drilled by Range were responsible for the presence of certain chemicals in two nearby private water wells.

Range filed a petition for review of the order in the Fifth Circuit Court of Appeals, arguing that EPA had not adequately investigated whether the company’s wells could be responsible for the contamination before issuing its order. The district court stayed the enforcement case pending the outcome of this appeal. The Fifth Circuit held oral argument in October 2011, but had not yet issued a decision when the parties filed the voluntary dismissal.

The House Committee on Energy and Commerce’s health subcommittee is in the process of examining the FDA’s regulation of the cosmetics industry.  Presently, the cosmetics industry is regulated by the FDA; however, cosmetics manufacturers are not required to submit adverse event reports or obtain pre-approval of ingredients prior to marketing a product.  Further, the FDA does not currently have the authority to force cosmetics manufacturers to issue a product recall.  According to U.S. Representative Ed Markey (D-Mass.), the majority of the unique chemicals used in cosmetic products have never been assessed for safety purposes by any government body. 

Lawmakers, with the support of many members of the cosmetics industry, are seeking new governing standards.  The lawmakers are requesting more stringent reporting standards, whereas the industry is seeking uniformity in regulation whereby it is governed under one set of standards, rather than differing standards issued by the individual states in which products are sold.  While the terms of any pending oversight are currently unknown, some new form of regulation should be on the horizon. 

The United States Food and Drug Administration (“FDA”) recently released a document intended to provide some guidance on how it analyzes the risks of medical devices during its pre-market approval process of them. The Director of the FDA’s Center for Devices and Radiological Health, Jeffrey Shuren, M.D., explained that the FDA expects this guidance to clarify the process for the industry, “which will provide manufacturers with greater predictability, consistency and transparency in FDA decision-making while allowing manufacturers and the FDA to use a common framework for benefit-risk determinations."

The document explains the principal factors considered by the FDA when making benefit-risk determinations for both pre-market approval and de novo classifications of medical devices. Not only does it describe how the FDA will measure the potential benefits and risks of a device, but it also provides examples of how the factors interrelate and how they may affect the FDA’s decisions. The FDA also revealed the worksheet it will use when making benefit-risk determinations, as well as several completed worksheets used to assess hypothetical examples.

There has been quite a bit of activity surrounding the matter of FDA approval of medical devices. Proposed legislation was recently introduced in Congress that is designed to dramatically shorten the approval process currently undertaken by the FDA. For more information on the proposal, click here.

February might be the shortest month of the year, but that did not stop the CPSC from announcing more recalls in February than any other month over the past six months — 35 recalls to be exact. In addition, February was the first time in the past six months that child/infant products were not the most frequently recalled product category. That distinction went to housewares, which had nine recalls last month. Over the past six months, housewares have averaged 2 – 4 recalls per month, making the nine recalls in February a significant increase in the monthly average for housewares recalls. Below is a table displaying the total number of recalls announced by the CPSC in each product category over the past six months. 

For additional information on current CPSC trends, click on the link to the CPSC Snapshot, our monthly review of consumer product recalls and civil penalties. 

Click here to view the Snapshot       Click here to subscribe

While the more traditional “financial reform” portions of last year’s Dodd-Frank Wall Street Reform and Consumer Protection Act received a great deal of attention, the Act also contains a key provision that will affect product manufacturers: Section 13(p), regarding disclosure of a company’s use of certain “conflict minerals” in its products. The Act requires the SEC to promulgate disclosure and reporting regulations on the use of certain minerals—including tantalum, tin, gold and tungsten—from the Democratic Republic of Congo and neighboring countries. These minerals are most commonly used in electronics manufacturing and jewelry, but any new rule could potentially impact US stock market-listed companies across a broad spectrum of industries. It is possible that public companies which simply use conflict minerals in packaging or promotional materials (or purchase packaging and promotional materials manufactured by another company which uses conflict minerals) could be subject to the rule.

The SEC’s efforts at rulemaking continue, despite the Act’s April 2011 deadline. And while the rules may not be finished until the middle of 2012, according to SEC Chairman Mary Schapiro, it is anticipated that a phase-in period will be part of the final rulemaking.

Two recent decisions by New York state trial courts further complicate the already uncertain atmosphere surrounding natural gas production in New York. In Anschutz Exploration Corp. v. Town of Dryden, No. 2011-0902 (Tompkins Cnty. Sup. Ct. Feb. 21, 2012), and Cooperstown Holstein Corp. v. Town of Middlefield (Otsego Cnty. Sup. Ct. Feb. 24, 2012), the courts rejected preemption challenges against local bans on natural gas production, which were apparently driven by perceived concerns over hydraulic fracturing.

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Earlier this week, the Food and Drug Administration published draft guidance for pharmaceutical manufacturers on the use of phthalates, dibutyl phthalate and di(2-ethylhexhy) phthalate, in drug and biologic products, including prescription and non-prescription products. Although not creating any legally enforceable responsibilities, the FDA draft guidance asserts that use of the phthalates in certain drug and biologic products increases the risk of negative effects on the human endocrine system. The FDA’s recommendations specifically suggest that the pharmaceutical industry should avoid the use of these phthalates as excipients (inactive substances used as carriers for active ingredients in medication). The draft guidance, however, does not address the use of these phthalates in other FDA-regulated products.

The Illinois General Assembly is trying to stay one step ahead of its states’ hydraulic fracturing boom, following the example of other states in rapidly developing shales. Four chemical disclosure bills have been introduced in the Illinois General Assembly this year. HB 5853 and SB 3534 would amend the Oil and Gas Act by requiring companies to disclose chemicals used in the hydraulic fracturing process. HB 3897 and SB 3280 also add similar disclosure requirements, as well as require testing of the steel well casings that protect the groundwater during drilling. Members of the Illinois Oil and Gas Association have stated their support for the bills because they provide transparency in the drilling process.

On Wednesday, February 29, 2012, the U.S. District Court for the District of Columbia ruled that the U.S. Food and Drug Administration’s new labeling requirements for cigarette advertising and packaging unconstitutionally compelled speech in violation of the First Amendment of the U.S. Constitution. R.J. Reynolds Tobacco Co. v. U.S. Food and Drug Admin., Case No. 1:11-cv-01482-RJL (D.D.C. February 29, 2012). A lawsuit filed by five leading U.S. tobacco companies alleged that the FDA was essentially unconstitutionally forcing the companies to become “unwilling mouthpieces” for the government’s “anti-smoking” campaign. The plaintiffs took specific issue with a mandate set out by the June 2009 Family Smoking Prevention and Tobacco Control Act—an Act that countenanced the FDA to “regulate the manufacture and sale of tobacco products”—, requiring that cigarette advertisements and packages include new written warnings and graphic images (such as images of cancerous lungs and tracheotomy holes).

In rejecting the FDA’s argument that it had a constitutionally compelling interest in educating the public about the dangers of smoking, the district court found that the images actually intended to dissuade consumers from smoking rather than provide them with information regarding the risks associated with smoking. Accordingly, the court granted the plaintiffs’ motion for summary judgment, ruling that the FDA had failed to carry its burden of demonstrating that it had a “compelling interest” and “narrowly tailored” means of achieving a “constitutionally permissible form of compelled commercial speech.” The court, therefore, held that the new warning images requirement violated the First Amendment by unconstitutionally compelling commercial speech.

On February 6, 2012, the California Court of Appeals for the First Appellate District (based in San Francisco) decertified a nationwide class of business banking officers and overturned a $15 million judgment that was entered following a bench trial. Duran v U.S Bank National Association, Case No. A125557 (CA Dist. 1 Ct. App., Feb. 6, 2012). Duran involved an employment class action brought under California's unfair competition law (Business & Professions. Code § 17200) on behalf of 260 business banking officers who claimed that they were misclassified and denied overtime pay against U.S Bank National Association (“USB”).

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On February 16, 2012, House Representative Brian Bilbray (Republican – California) introduced a bill that would prevent states from requiring drug and medical device manufacturers from undergoing state inspections that duplicate those already required by the Food and Drug Administration (FDA). H.R. 4056 is intended to clarify areas in the Federal Food, Drug and Cosmetics Act (FDCA) by expressly delineating what inspections are governed by the FDA, rather than state public health departments. The bill includes both facility inspections and product recalls.

Currently, California is the only state that requires life sciences companies to undergo both FDA and state inspections by the California Food and Drug Branch. H.R. 4056 is designed to protect drug and device makers nationwide from similar requirements. According to the congressman’s office, there are no discernible differences between California and the FDA’s drug and device inspections. Further, Representative Bilbray asserts that California’s duplicate inspections have cost the state many jobs in the life sciences sector.

The legislation would, however, still allow state officials to investigate complaints that drugs or devices pose a threat to public health and safety. State officials would still be able to inspect facilities after an FDA recall from an in-state facility. Additionally, the FDA would be able to ask state officials to conduct federal inspections, according to the bill.

Supporters of the bill hope that eliminating the redundant inspections will boost the industry’s sagging presence in California. H.R. 4056’s co-sponsors include Susan A. Davis (Democrat – California), and California republicans Mary Bono Mack, Ken Calvert, Jerry Lewis, Edward Royce and Duncan D. Hunter.