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.

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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.

Class Certification Denied 366 Patients Potentially Exposed to Hepatitis and HIV by a New Orleans Hospital

Group_Of_PeopleDespite the conventional wisdom that hundreds of plaintiffs suing for the same-type of injury are, by definition, entitled to a class action, the Louisiana Fourth Circuit Court of Appeal recently denied class certification to 366 individuals who claimed a hospital exposed them to HIV and hepatitis. See Doe v. University Healthcare Systems, L.L.C., Nos. 2013-1457-1466, 2014 WL 3360817 (La. App. 4 Cir. July 9, 2014).

In 2010, a Frilot client, Tulane Medical Center, determined its endoscopes were not cleaned and disinfected to the recommended standards for their reuse. An endoscope is a fiber-optic medical instrument used for diagnostic or therapeutic purposes in human organs. Because endoscopes enter body cavities and are repeatedly reused, the United States Center for Disease Control (“CDC”) mandates that they be subjected to high-level disinfection using chemical disinfectants.

Tulane Medical Center discovered that 366 patients underwent some type of endoscopic test in which the endoscope had not been sterilized in accordance with CDC standards. Tulane then notified each of these patients that the potential risk of infection was “minimal to nonexistent” and offered free screening for hepatitis and HIV, along with counseling.

Shortly after this notification was made, multiple class actions against Tulane and others were filed in Civil District Court for Orleans Parish, seeking certification of a class of the individuals (a) who underwent the endoscopic procedures, and sustained emotional distress from notification of potential exposure to infectious disease, but who did not actually contract an infectious disease, and (b) individuals with whom the class members had sexual relations. Plaintiffs’ Class counsel conceded that it was unnecessary to have a subclass of individuals who had actually contracted an infectious disease from the endoscopic procedures (presumably because few, if any, of the 366 persons exposed to the endoscopes contracted any infectious disease).

On July 9, 2014, the Louisiana Fourth Circuit Court of Appeal affirmed the trial court’s denial of class certification for the 366 individuals that received notice of the endoscope problems. Relying on Louisiana principles for class certification (based upon F.R.C.P. 23), the Court affirmed denial of class certification on two fundamental grounds:

• Plaintiffs failed to present sufficient evidence of numerosity. To satisfy the numerosity requirement for a class action, plaintiffs must establish that the members of the class are so numerous that joinder of individual plaintiffs in a single suit is impractical. Plaintiffs argued that the numerosity requirement was met and that joinder was impractical, solely on the basis that the proposed class was comprised of 366 litigants. The appellate court found that there was no presumption of numerosity, and that the undisputed evidence presented at the class certification hearing showed that only 20 of the 366 potential class members had actually filed lawsuits to assert their emotional distress claims.

• The plaintiffs failed to satisfy the predominance requirement, i.e., identifying a question common to the class―one where “the determination of its truth or falsity will resolve an issue that is central to the validity of each one of the claims in one stroke.” (quoting Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541, 180 L. Ed. 374 (2011)). The court held that the common questions involving proof of causation and emotional distress damages could only be answered on a highly individualized basis, requiring individual “mini-trials” about each plaintiff’s medical, mental, and sexual history, and other possible media for exposure to sexually transmitted diseases. Because causation could not be determined on a class-wide basis, but instead required “mini-trials” based upon plaintiff-specific inquiries, a class action was inappropriate, and plaintiffs failed to meet the “predominance” requirement under class action law.

Louisiana Courts are required to perform a “rigorous analysis” of the mandatory requirements for class certification, and arguably did just that in denying class certification in this case.

Texas Supreme Court Rejects the “Any Exposure” Theory to Prove Causation in a Mesothelioma Case

asbestosThe “any exposure” theory goes like this:

  • Every exposure to a single fiber of asbestos could cause mesothelioma;
  • Therefore, a plaintiff only needs to prove one fiber of asbestos from a defendant was inhaled by the plaintiff to prove the defendant caused the plaintiff’s mesothelioma.

On July 11, 2014, the Supreme Court of Texas rejected the “any exposure” theory of causation in mesothelioma cases. See Bostic v. Georgia-Pacific Corp., No. 10-0775, 2014 WL 3797159, *2-5 (Tex. July 11, 2014).

In Bostic, the deceased died of mesothelioma. His estate sued Georgia-Pacific and thirty-nine other defendants alleging they caused Mr. Bostic’s mesothelioma by exposing him to asbestos in the workplace and elsewhere over decades.

Plaintiffs alleged that as a child and teenager, Mr. Bostic was exposed to asbestos while using Georgia-Pacific drywall joint compound. All defendants except Georgia-Pacific settled before trial. The jury found that plaintiffs proved causation against Georgia-Pacific and awarded $6.8 million in compensatory damages and $4.8 million in punitive damages.

Georgia-Pacific argued on appeal that Plaintiffs’ evidence of causation against it was legally insufficient. The Texas Supreme Court agreed:

  • It ruled a plaintiff in a mesothelioma case loses if he only proves a defendant caused him “some exposure” or “any exposure”:

“With both asbestosis and mesothelioma, the likelihood of contracting the disease increases with the dose . . . and in today’s case, plaintiffs’ experts consistently testified that all asbestos-related diseases are dose-related.” Id. at *2.

  • The court rejected the “any exposure” theory based upon its reasoning that:

“If any exposure at all were sufficient to cause mesothelioma, everyone would suffer from it or at least be at risk of contracting the disease . . .” Id. at *3.

“More fundamentally, if we were to adopt a less demanding standard for mesothelioma cases and accept that any exposure to asbestos is sufficient to establish liability, the result essentially would not be just strict liability but absolute liability against any company whose asbestos-containing products crossed paths with the plaintiff throughout his entire lifetime.” Id.

“We fail to see how the [any exposure] theory can, as a matter of logic, exclude the higher than normal background levels [of asbestos] as the cause of plaintiffs’ disease, but accept that any exposure from an individual defendant, no matter how small, should be accepted as a cause in fact of the disease.” Id. at *5.

  • The Texas Supreme Court declined to require that plaintiffs prove “but for causation,” i.e., but for Bostic’s exposure to Georgia-Pacific’s drywall compound in his youth, he would not have contracted mesothelioma. The court explained that due to the nature of mesothelioma’s disease process, which can occur over decades and involve multiple sources of exposure, “but for” causation was too high a burden of proof for plaintiffs exposed to asbestos to carry. Id. at *5-*6.
  • Relying on toxic tort cases, the Bostic court concluded that “. . . [in] the absence of direct proof of causation, establishing causation in fact against the defendant in an asbestos-related disease case, requires scientifically reliable proof that the plaintiff’s exposure to the defendant’s product more than doubled his risk of contracting the disease. A more than doubling of the risk must be shown through reliable expert testimony that is based on epidemiological studies or similarly reliable scientific testimony.” Id. at *11

The Bostic case “raises the bar” that plaintiffs must clear to prove causation for mesothelioma cases in Texas. The decision also provides powerful persuasive authority for courts in other states wrestling with the “any exposure” or “every exposure” theory of causation in mesothelioma cases and the sufficiency of scientific evidence necessary to prove causation in asbestosis and mesothelioma cases.

Note: A Louisiana federal court interpreting Louisiana law rejected the “every exposure” theory in interpreting Louisiana law in Davidson v. Georgia Pacific, LLC, No. 12-1463, 2014 WL 3510268, at *3-6 (W.D.La. July 14, 2014).