The Gap Between Express and Implied Preemption Narrows In The Ninth Circuit

The Ninth Circuit Court of Appeals recently shrank universe of state law claims pertaining to Class III medical devices that remain untouched by Riegel express preemption or Buckman implied preemption. In Stengel v. Medtronic, Inc., the Court ruled that a state law failure-to-warn claim premised on FDA regulations was impliedly preempted by the Supreme Court’s decision in Buckman, because it was analytically indistinct from the “fraud-on-the-FDA” claim with which Buckman dealt. To wit, both claims revolved around allegations that the defendant misled the FDA, whether by commission (Buckman) or omission (Stengel). When considered in conjunction with Riegel’s express preemption of state law claims that add to or change the duties of Class III medical device manufacturers under the Medical Device Amendments to the Food, Drug, and Cosmetic Act (“FDCA”), the Ninth Circuit’s robust view of Buckman implied preemption leaves very little room for a plaintiff to state a cognizable state-law cause of action against the manufacturer of a medical device cleared through the FDA’s premarket approval (“PMA”) process. The Court recognized the sharpened dilemma it left potential plaintiffs, but identified state-law manufacturing defect actions as a category of claims that had passed through the Reigel/Buckman gauntlet unscathed, at least in the Seventh Circuit, because they paralleled federal duties (and thus skirted Riegel) without resting solely on the breach of duties created by federal regulation (which would run afoul of Buckman).

Stengel follows the Ninth Circuit’s opinion in PhotoMedex, in which the Court interpreted Buckman to preempt, not only claims in which the plaintiff attempts to enforce the FDCA (because that is the exclusive jurisdiction of the FDA), but any attempt by a plaintiff to prove that a medical device manufacturer violated the FDCA – in the absence of a determination of such a violation by the FDA itself. PhotoMedex, Inc. v. Irwin, 601 F.3d 919, 928 (9th Cir. 2010). Perhaps with PhotoMedex in mind, the Stengel plaintiffs attempted to distinguish Buckman by arguing that the FDA had already determined that Medtronic had violated FDA regulations, and thus they could prove their failure-to-warn claim without second-guessing the FDA’s decision-making. The Ninth Circuit demurred, noting that Buckman was concerned not only with preserving the FDA’s exclusive jurisdiction, but also with avoiding the “extraneous pull” that state-law claims would exert on the Congressionally-mandated FDCA scheme.

The Stengel opinion explicitly acknowledged that federal appellate courts were divided on the issue of whether state law failure-to-warn claims were preempted by Buckman. Interestingly, it aligned itself with the Eighth Circuit’s view, while spending a good amount of space explaining why the Fifth Circuit’s countervailing view was unpersuasive. Whether the Supreme Court takes note of the brewing circuit split, or the Ninth Circuit’s justification of its decision, remains to be seen.

6th Circuit Paging Ph.D. Jones?: Reliable Physician Causation Testimony Requires More Than Clinical Experience

In Thomas, Melau, and Anderson v. Novartis Pharms. Corp., the Sixth Circuit Court of Appeals recently affirmed a trio of cases prohibiting the testimony of treating physicians as specific causation experts. Though the appellate court’s opinion was not recommended for full-text publication, it nonetheless offers a salient reminder of a Daubert rule well-enunciated in the Sixth Circuit: A physician’s presumed expertise is in the diagnosis and treatment of disease, not necessarily in the scientifically reliable determination of its underlying cause.

Thomas involved three plaintiffs who filed separate lawsuits, but whose claims were heard by the Middle District of Tennessee pursuant to consolidated MDL proceedings. They alleged they developed biophosphonate-induced osteonecrosis of the jaw after taking Zometa and Aredia, drugs manufactured by Novartis for the prevention of bone maladies, typically in cancer patients. The plaintiffs retained general causation experts, but relied for proof of specific causation upon their non-retained treating physicians. Each plaintiff’s treating physician was excluded, but it is the exclusion rationale in Thomas that is of interest here.

The court began its analysis by noting that Thomas’ physician, Dr. Johnson, “appears to have used some form of a differential diagnosis, or differential etiology, which we have previously recognized is a proper basis for determining the cause of a medical condition when done properly.” Id. at 5. The propriety of such a method, however, depends upon the underlying expertise of the practitioner. The court acknowledged that Dr. Johnson was “unquestionably an experienced oral surgeon with many years of practice and training. He treated other patients with osteonecrosis of the jaw, and has read literature and attended conferences on osteonecrosis of the jaw.” Id. at 6. However, “[b]ecause Thomas relied on Dr. Johnson to give an expert opinion on the cause of his osteonecrosis of the jaw, it is not enough to show that Dr. Johnson can recognize and treat osteonecrosis of the jaw.” Id

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Indiana Supreme Court Reaffirms Economic Loss Rule

In late March, I blogged on an important new case from the Tenth Circuit reaffirming the economic loss rule.  Last week, the Indiana Supreme Court handed down a major decision in a construction case, reaffirming this important principle of business law.

According to the economic loss rule, where a plaintiff has suffered merely economic loss – frustrated commercial expectations – the plaintiff is limited to suing in contract. Tort suits are barred. Once a plaintiff is restricted to contract remedies, limitations on liability provided in the contract will generally be enforced, and punitive damages are unlikely to be available. The economic loss rule is an important (and controversial) tool in business litigation, particularly in the construction industry -- so much so that, as I reported in May, the American Law Institute will shortly be resuming its work on the Restatement (Third) of Torts: Economic Torts and Related Wrongs, collecting the law of the economic loss rule from across the country.

Indianapolis-Marion County Public Library v. Charlier Clark & Linard[pdf] arose from the construction of a new library and parking garage in downtown Indianapolis. The Library contracted with an architectural firm, which, in turn, subcontracted with various architectural and engineering firms.   The Library also contracted directly with the general contractor for the project. A number of construction and design defects were found in the parking garage, and the Library sued the architects, the general contractor, and the subcontractors in tort. The defendants successfully moved to dismiss, arguing that the economic loss rule barred the Library's tort claims.

The Supreme Court affirmed. The Court noted several policy justifications for the economic loss rule. 

First, liability for purely economic loss is more appropriately determined by commercial rather than tort law.

Second, tort law should not be permitted to impose liability on commercial actors which is so uncertain in time, class or amount that the defendant has no way of allocating risk before acting.

The Library argued that a range of exceptions to the economic loss rule applied. The Library claimed that because it purchased discrete products from each defendant -- blueprints, materials, inspection services, and so on -- it had suffered damage to property other than the subject of its contracts, making the economic loss rule inapplicable. The Court disagreed, holding that each of the defendants' products was integral to a whole: the "product" for purposes of applying the "damage to property other than the product" exception to the economic loss rule was a renovated and expanded library facility, not any individual defendant's contribution to the project.

The Library also claimed that the Court should not apply the economic loss rule where the alleged flaws in the product or service created an imminent danger of physical harm to members of the public. The Court declined to carve out such an exception to the rule.

The Library next argued that the economic loss rule should not be applied to design professionals, but the Court followed a decision from the Arizona Supreme Court earlier this year, holding that the economic loss rule applied equally in construction defect cases to contractors and design professionals. The Court emphasized the importance, as a matter of policy, of applying the economic loss rule to all participants in a major construction project:

When parties are connected through a chain of contracts, as in the construction context, courts should defer to the language of the contracts governing their relationship . . . Such a rule promotes private ordering by respecting a commonly understood allocation of risk even though the relevant term may or may not be in the contract.

Finally, the Library argued that the economic loss rule should not apply where the defendants allegedly provided false information to the plaintiff, or where the defendants provided a service, rather than a product.   The Supreme Court refused to create a new exception to the economic loss rule to govern either case.

Every few years, articles appear predicting the death of the economic loss rule. But with new decisions from two state Supreme Courts in only four months, reports of its death are once again exaggerated.