Category Archives: Product Liability

A Louisiana Federal Court Jury “Goes Wild” with Multi-Billion Dollar Award

Crowd_wildJAPANESE DRUG MANUFACTURER, TAKEDA, HIT WITH A $6 BILLION PUNITIVE DAMAGE AWARD BASED ON ALLEGED SPOLIATION AND CONCEALMENT OF EVIDENCE (AND THE PASSION AND PREJUDICE OF THE JURY).

In reliance on recent Supreme Court decisions, manufacturers may have thought that punitive damage awards hundreds of times the compensatory damages in a case were not supposed to happen anymore. But a jury in Lafayette, Louisiana thought differently on April 7, 2014 when it awarded punitive damages of $6 billion (or 6,100 times the compensatory award) against Takeda, a manufacturer of the drug Actos®, and $3 billion against Eli Lilly. In Re Actos (Pioglitazone) Products Liability Litigation, MDL No. 6:11-md-2299, Rec. Doc. 4108 (W.D.La..A. April 7, 2014).

Takeda Pharmaceutical Company, Ltd. (and related companies) and Eli Lilly & Company are defendants in multi-district litigation (“MDL”) in federal court related to the drug Actos®. This drug is used by diabetics in hopes that they achieve better cardiovascular outcomes. Takeda allegedly learned and then concealed internal 2004 studies showing there was a very high rate of bladder cancer associated with use of Actos®. This information did not come to light until 2011 when a French scientist wrote about his findings concerning the relationship between bladder cancer and the use of Actos®.

Two individual “Actos®” plaintiffs, Mr. and Mrs. Allan, proceeded to trial in April 2014 in the federal MDL proceedings in Lafayette, Louisiana. One of the principal issues in the trial was quantification of punitive damages against Takeda. Plaintiff introduced evidence that:

• Takeda hid its 2004 clinical trial data showing that Actos® causes bladder cancer;
• Takeda concealed statistical data showing an almost 200% increase in the number of bladder cancer adverse event reports from the use of Actos® (for over six years and $10 billion in sales of Actos®);
• Takeda failed to disclose epidemiological studies that showed an extremely high risk of bladder cancer from use of Actos®;
• Takeda engaged in the spoliation of the e-mail files of nine top -level Japanese executives, five company officers in Europe, and thirty-two U.S. officers, sales representatives and other employees;
• Takeda was involved in “ghost writing” of publications, including scientific documents, sent to the FDA to dispel the bladder cancer issue involving use of Actos®; and
• Takeda fired a doctor who refused to downgrade serious adverse event reports about the risk of bladder cancer from use of Actos®.
See Rec. In Re Actos (Pioglitazone) Products Liability Litigation, MDL No. 6:11-md-2299, Rec. Doc. 4423, Opposition of Plaintiffs to Motion for New Trial by Defendants. Takeda’s evidence and its denials of these claims were unconvincing to the jury, which awarded $6 billion in punitive damages against Takeda.

In post-trial briefs, Takeda argued that the punitive damage award should be reduced to the amount of the compensatory damage award of $1.475 million because:

• The punitive award was grossly excessive in violation of its constitutional rights to due process, as articulated in State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 416 (2003) and BMW of N. America v. Gore, 517 U.S. 559, 574 (1996);
• Takeda’s conduct was not reprehensible and therefore punitive damages are not permissible. In support of this argument, Takeda argued that Actos® is still on the market, the Actos® label contained FDA-approved warning information about bladder cancer, and the alleged spoliation of e-mails was “no harm, no foul” because Takeda had disclosed certain clinical trial data and epidemiological studies (and there was no evidence offered that the “spoliated” e-mails contained any relevant information.)

Note: Takeda apparently faced an “up-hill battle” with respect to spoliation of its employee
e-mails based upon the district court’s allowing an adverse inference instruction for the jury to use in considering the alleged destruction of e-mail evidence and the alleged failure of Takeda to abide by its internal litigation holds.

The MDL court has not set a date for decision on Takeda’s motion for new trial, but it will very likely reduce the “runaway” jury verdicts to comply with Constitutional standards limiting punitive damages to an amount equal or close to the amount of compensatory damages of $1.475 million.

Is the “Component Parts” Doctrine Extinct?

On July 9, 2014, the California Supreme Court granted writs in Ramos v. Brenntag Specialties, Inc.,gears 169 Cal. Rptr. 3d 513 (Cal. Ct. App. 2014), to determine if, as matter of law, the “component parts” doctrine is alive and well, or its time has passed. Under the “component parts” doctrine (and the related “bulk supplier” and “sophisticated buyer” defenses), manufacturers of a component part incorporated into an end product or suppliers of bulk, raw materials have limited exposure to liability. Because many times “what happens in California does not stay in California,” component manufacturers and suppliers of raw materials should closely follow the Ramos decision.

The plaintiff in Ramos worked as a machine operator in a metal product foundry. He worked with and around silica sand, limestone, marble, plaster, and zircon sand, all of which were melted and used in the manufacturing process where plaintiff worked. Plaintiff’s air-borne exposure to fumes from these raw materials labeled as “products” allegedly caused Plaintiff to sustain interstitial pulmonary fibrosis in his lungs.

The trial court granted a motion to dismiss the plaintiff’s complaint at the pleadings stage on the grounds that the facts alleged in his complaint were barred, as a matter of law, under California’s “bulk supplier,” “sophisticated buyer,” and “component parts” doctrines (collectively referred to as the “component parts” doctrine). The California Fourth Circuit reversed the trial court, see Ramos v. Brenntag Specialties, Inc., 169 Cal. Rptr. 3d 513 (Cal. Ct. App. 2014), holding that the plaintiff had stated product liability claims upon which relief could be granted.The Ramos circuit court distinguished and limited the application of the “component parts”, the “sophisticated buyer,” and the “bulk supplier” doctrines based upon the following reasoning:

  • The “component parts” doctrine only applies to harm caused by a “finished product” or “end product” into which the component manufacturer’s product has been incorporated. In contrast, the plaintiff, Ramos, alleged a direct injury from the intended use of the the component product or bulk material “product” ―not from any finished product. Therefore, the doctrine did not apply.
  • The court ruled that the plaintiff’s employer—a foundry that used raw materials (or “products”) for years—was not a “sophisticated buyer” because the plaintiff had not alleged the facts to satisfy the elements of the “sophisticated buyer” defense;
  • Even if the plaintiff’s employer were a “sophisticated buyer,” the “sophisticated buyer” defense does not shield the supplier of bulk materials from a defective warnings claim unless the supplier can show that it had reason to believe the worker using its “product” knew, or should have known, of the product’s hazards.
  • Finally, the Ramos court held that the “bulk supplier” doctrine did not apply to the claims by plaintiff that he had been injured by exposure to these bulk material “products” because the plaintiff had alleged that these raw materials were “specialized materials sold for use in the metal casting manufacturing process” and had not asserted that the materials were “basic raw materials.”

A decision by the California Supreme Court in Ramos ruling in favor of plaintiff may establish product liability exposures that component manufacturers and bulk suppliers never knew they had.