On December 29, 2009, the Consumer Product Safety Commission (“CPSC”) announced its unanimous vote to impose a $1.25 million civil penalty on RC2 Corporation for selling products that contained lead that exceeded the allowable limits. Federal regulations governing lead levels in children’s products have been in effect since 1978. These regulations prohibit children’s products from containing more than 0.06 percent lead by weight in paint or surface coatings.

On September 26, 2007, RC2 Corporation recalled a number of toys in the Thomas & Friends Wooden Railway product line after it discovered that the surface paint contained lead in excess of the 0.06 percent limit. These toys were imported from China and distributed by RC2 Corporation for sale to individual consumers. This recall of more than 1.5 million toys “spawned numerous class-action lawsuits in state and federal courts, alleging the company marketed and advertised the toys nationwide as safe for kids.” 20 No. 12 ANPRODLLR 3. These actions were settled in 2008 for $30 million, “providing eligible class members with cash refunds or replacement toys.” Id.

This recall also led to the CPSC imposing a $1.25 million civil penalty on RC2. CPSC Commissioner Anne M. Northup recently commented [PDF] on the imposition of this civil penalty stating that “it is entirely appropriate for the agency to assess civil penalties against companies that mistakenly import products in violation of the federal safety standards.” Further, Northup stated this type of penalty is intended to serve as a “financial deterrent against companies taking a casual approach toward their product safety compliance responsibilities” and to “serve as a further reputational disincentive.” Interestingly, Northup also opined that the agency must clarify its application of the statutory definition of “knowing” in 15 U.S.C. § 2069(d) used by the agency to impose such penalties before the standard is challenged by manufacturers. Clarification of this term might be a fertile field for litigation.

Finally, as a result of this recall, Congress passed the Consumer Product Safety Improvement Act, which reduced the allowable lead limit to 0.009 percent. The aim of stricter regulations on lead levels was to protect the safety of children. However, it appears that Chinese manufacturers may have just found a replacement for lead—a known carcinogen, cadmium. The Associated Press reported on January 11, 2009 that Chinese manufacturers have been substituting cadmium for lead and that “U.S. product safety authorities say they are launching an investigation into the presence of the toxic metal cadmium in children’s jewelry imported from China after disclosure of lab tests showing that some pieces consisted primarily of the dangerous substance.” (See this site’s previous coverage of this issue here.). While the CPSC has not recalled an item with cadmium, the CPSC has already stated that it is “moving swiftly to deal with the replacement of lead with cadmium in certain children’s products imported from China.”

As with the highly publicized recall of the Thomas & Friends Wooden Railway project line, the public can expect that the anticipated recalls of cadmium containing products sold throughout the United States will spawn litigation by consumers, further regulation by the CPSC of the consumer market, and the imposition of large civil penalties on American retailers. American retailers should be aware of this shift to the use of cadmium and have measures in place to protect themselves, as it appears that Chinese manufacturers are continuing to expose American corporations to liability in the millions of dollars.

The Richmond Times Dispatch reports on a recent Plaintiff dropping his tobacco lawsuit against Phillip Morris in exchange for a mere $1,000 settlement. “Plaintiffs who bring such flawed cases need to consider the risk of having to pay the company’s legal fees and costs if they lose at trial,” said Murray Garnick, the senior vice president and associate general counsel of Altria Group, Inc., the parent company of Phillip Morris, according to the report. “The company is committed to trying to recover the fees and costs it incurs in defending these cases, as Florida law allows,” Garnick went on to say. (1/13/10).

Bad Lawyer NYC editorializes on a January 9 report from The Missoulian which reported that a Montana district judge denied “a motion by attorneys for Louisville Slugger to throw out a verdict that found the baseball bat company liable for the 2003 death of a baseball player during a game in Helena.” According to the news report, after the player died upon being struck by a baseball which was hit by an alumnium bat, “[his] parents sued the company in 2006, alleging that an “unreasonably dangerous” metal bat caused his death and Louisville Slugger failed to warn of the dangers.” Bad Lawyer NYC, who professes to ordinarily be sympathetic to Plaintiff’s claims, expresses his skepticism at the ruling. (1/11/10).

The California Punitive Damages Blog reports that the People’s Republic of China has now authorized punitive damages in products liability lawsuits. (1/11/10).

Cadmium, a transition metal with possible carcinogenic effects, has garnered a fair amount of press coverage of late, as it appears that foreign manufacturers are now using it instead of lead in the production of toys, including children’s jewelry. On January 11, 2010, Inez Tenenbaum, Chairman of the Consumer Products Safety Commission, issued a videotaped statement to be delivered to the Asia-Pacific Economic Cooperation Toy Safety Initiative/Dialogue in Hong Kong, in which she stressed that children’s products must be free of heavy metals. She also stated that voluntary efforts to ensure that children’s toys are free of cadmium might only be marginally effective. The CPSC reports that it continues to investigate this issue.

In a related news report , the Associated Press reports that New York Senator Charles Schumer (D – New York) intends to propose legislation in response to the reports of cadmium being found in toys manufactured in the People’s Republic of China. (See Senator Schumer’s January 13 press release on this topic here.). As quoted by the AP, Senator Schumer stated that his legislation, if passed, would “put an end to the use of cadmium in our children’s jewelry and toys once and for all . . . whether it’s made here or in China or anywhere else. It will just stop it cold.” The AP report also also referenced laboratory testing conducted by the news agency ” . . . on 103 pieces of low-priced children’s jewelry [which] found 12 items with cadmium content above 10 percent of the total weight. Some were as much as 90 percent cadmium.”

In a recent case, the Eighth Circuit illustrated the power that plaintiffs wield in a putative class action through Rule 20 of the Federal Rules of Civil Procedure. In In re Prempro Products Liability Litigation, No. 09-1205, 2010 WL 21090 (8th Cir. Jan. 6, 2010) [PDF], the Eighth Circuit reversed the district court’s denial of the plaintiffs’ motion to remand. The central issue in the case was a thorny issue of misjoinder, i.e., whether plaintiffs’ filing of omnibus-type cases can defeat a removal based on diversity jurisdiction.

Without getting into the intricacies of the procedural history, the crux of the problem is as follows: Unrelated plaintiffs in a group of hormone replacement therapy cases banded together to defeat diversity jurisdiction by combining their claims against multiple defendants in one case, ensuring that at least one plaintiff asserted a claim against a defendant with the same state citizenship. This approach differs from the “traditional” method of diversity destruction, fraudulent joinder, where a plaintiff joins a non-diverse defendant on a meritless claim.

Although the Eighth Circuit did not adopt a position on “fraudulent misjoinder,” its ultimate disposition was not sympathetic towards the defendants. It did not dispute the district court’s findings that the plaintiffs had taken different HRT drugs, made by different manufacturers, prescribed by different doctors in different states, for varying amounts of time causing various injuries. Instead, the Eighth Circuit noted that “[p]laintiffs‘ claims arise from a series of transactions between HRT pharmaceutical manufacturers and individuals that have used HRT drugs.” Id. “Furthermore, given the nature of the plaintiffs’ claims, this litigation is likely to contain common questions of law and fact.” Id. Note that even if there was a misjoinder, there is apparently some level of misjoinder that would still defeat diversity but would not approach the type of “egregious misjoinder” necessary to sustain federal subject matter jurisdiction.

Plaintiffs are structuring suits in the products liability realm to defeat complete diversity but are stopping short of reaching removal jurisdiction under the Class Action Fairness Act of 2005 (“CAFA“). Perhaps the defense bar should remain satisfied with CAFA for the time being. Cases go both ways, but a straight-forward reading of 28 U.S.C. 1446(b) seems to suggest that a court’s analysis of removal should be more akin to a Rule 12(b) motion as opposed to a summary judgment motion. The defense bar may need to balance the need to move its cases forward with the possibility of asking a federal court to gaze into the future, review discovery, define what a transaction or “series of transactions” is in the context of the particular matter, and determine whether any misjoinder is so egregious that federal jurisdiction is proper.

Last month, the South Carolina Supreme Court retreated from some exceptions it had previously carved out of the economic loss rule and strongly suggested the possibility that it will find no further exceptions to the rule. In Sapp & Smith v. Ford Motor Co., — S.E.2d —-, No. 26754 (S.C. Dec. 21, 2009), the Court began this new direction by noting that South Carolina continues to follow the economic loss rule in products liability cases:

‘The economic loss rule is a creation of the modern law of products liability. Under the rule, there is no tort liability for a product defect if the damage suffered by the plaintiff is only to the product itself.’ Kennedy v. Columbia Lumber & Mfg. Co., 299 S.C. 335, 341, 384 S.E.2d 730, 734 (1989). In other words, tort liability only lies where there is damage done to other property or personal injury.

Id. In the past, South Carolina courts have developed an exception to the rule for construction of residential homes. See Kennedy, 299 S.C. at 341, 384 S.E.2d at 734. Some of the reasons for the exception were: a home is typically the single largest investment of an individual, a home is a completely different type of manufactured good, and the sale of a home involves inherently unequal bargaining power between the parties. Two years ago, in Colleton Preparatory Acad,, Inc. v. Hoover Universal Inc., 379 S.C. 181, 666 S.E.2d 247 (2008), the court seemed to extend this exception to the construction of commercial buildings, as well.

In Sapp, the plaintiffs involved in the consolidated appeal had each purchased used Ford trucks. The trucks allegedly had a design defect with their cruise control mechanism, which in turn caused the trucks to catch fire. In each case, there was neither a personal injury claim nor a property damage claim (other than to the trucks themselves). Further, in each respective case, the plaintiffs lost at the trial court level due to the court’s application of the economic loss rule. On appeal, each plaintiff argued that the exception outlined in Colleton applied to their cases, and thus, their claims should not be barred by the economic loss rule. The court disagreed, holding that that the economic loss rule barred both plaintiffs’ claims.

The Sapp court went on to overrule the expansion of the exception initially created in Kennedy. In so doing, it expressly overruled Colleton to the extent it expanded the narrow exception to the economic loss rule beyond the residential builder context as pronounced by Kennedy.

David Bernstein at The Volokh Conspiracy posts the abstract to his recent article, “Getting to Causation in Toxic Tort Cases,” from the Brooklyn Law Review. He describes the piece as a “more or less practical guide for judges and attorneys to causation issues in toxic tort cases, not a philosophic treatise.” The abstract can be found here. (1/5/10).

Michael Ariens of the Marquette University Law School Faculty Blog finds that “the rise (and fall?) of mass tort litigation” is one of “the ten most important changes in the American legal profession since [he] entered law school” in 1979. For his rationale, see here. (1/2/10).

Jeffrey V. Mehalic at The West Virginia Business Litigation Blog writes about Smith v. United Salt Corp., a recent opinion from the U.S. District Court for the District of West Virginia, which found that Plaintiffs’ counsel could contact and conduct ex parte interviews of employees of the opposing party (the Plaintiff’s co-workers) so long as the employees who were contacted were not in a supervisory or managerial role. (12/31/09).

A Connecticut district court finds that the mere fact a medical device broke is insufficient to withstand summary judgment in a products liability action. On December 17, 2009, the United States District Court for the District of Connecticut in Koger v. Synthes North America, Inc., No. 3:07-CV-01158, 2009 WL 5110780 (D. Conn. Dec. 17, 2009), affirmed the rule that when the alleged defective product is outside of the ordinary consumer’s common knowledge, expert testimony establishing defective condition and causation is required.

Koger suffered a posterior pelvic fracture in a motorcycle accident. The fracture was repaired using “two Synthes fully-threaded cannulated screws.” Approximately two years later, an x-ray of Koger’s pelvic region showed that the two screws had broken. As a result, Koger filed suit against Synthes North America, Inc., the manufacturer of the screws, pursuant to the Connecticut Products Liability Act.

Synthes moved for summary judgment arguing that Koger lacked the necessary expert testimony to prove her claim. The district court agreed with Synthes. Connecticut courts apply the Restatement (Second) of Torts consumer expectation test for strict liability, but use a “modified consumer expectation test” for products not within the ordinary consumer’s common knowledge. The Koger Court found that the Synthes screws were outside the ordinary consumer’s common knowledge and subject to the “modified consumer expectation test.” Therefore, proof of the product’s defective condition and the causal link required expert testimony.

Koger submitted the opinion of a medical doctor that corrosion of the screws “could be the cause of the breakage.” However, Synthes submitted an expert opinion that provided that the screws broke due to nonunion of her pelvic area and not because they were defective. The Court found Koger’s evidence insufficient as it did not establish that it was “more probable than not that a defect caused the injury.”

In a final attempt to survive Synthes’ motion for summary judgment, Koger argued the “malfunction doctrine,” which provides that a defect can be inferred by circumstantial evidence. The Court rejected her argument stating that this case required complex medical and technical expert testimony to determine whether the product was defective and that Koger failed to provide such expert testimony.

This case highlights the rule that a broken product alone, absent any expert testimony as to defect and causation, is not enough to win a products liability action when the product is outside the knowledge of the common consumer. The Drug and Medical Device Blog recently provided an extensive review of precedent around the country reaching similar conclusions as the Koger Court that a broken device is not enough.

Apple wins, always. In Birdsong v. Apple, Inc., No. 08-16641, 2009 WL 5125776 (9th Cir. Dec. 30, 2009) [PDF], the Ninth Circuit affirmed the dismissal of a complaint alleging that Apple’s iPods are defective because it is possible to listen to music at an unsafe volume, and, therefore, they pose an “unreasonable risk of noise-induced hearing loss.”

The plaintiffs planned to represent a nationwide class of iPod users, but the Court rebuffed the plaintiffs’ two main arguments. First, the Court stated that the plaintiffs had alleged no facts that could support a breach of the implied warranty of merchantability. Second, plaintiffs had no standing to assert a claim under California’s unfair competition law.

The plaintiffs alleged that the iPod could be made safer, by the use of some noise-reduction technology or software that could relay the volume in decibels to the iPod user. Simply because a product could be used in a risky manner, however, is not enough to prevail on a warranty of merchantability claim. Put simply, the iPod performs exactly as intended, and there is no breach of the warranty of merchantability.

In addition, the plaintiffs’ claims under the unfair competition law were not supported by an injury, and, therefore, plaintiffs had no standing to assert their claims. First, the plaintiffs did not claim any actual hearing loss as a result of their iPod use, ostensibly because they were not, at any time, actually injured by their iPod. Neither did they assert that such harm was “actual or imminent.” The court observed as follows:

[T]he plaintiffs’ third amended complaint reveals the conjectural and hypothetical nature of the alleged injury as the plaintiffs merely assert that some iPods have the “capability” of producing unsafe levels of sound and that consumers “may” listen to their iPods at unsafe levels combined with an “ability” to listen for long periods of time.

Id. Finally, plaintiffs’ contention that the iPods’ lack of safety diminished their value to the plaintiffs could not satisfy the injury-in-fact requirement, and the Court noted the plaintiffs’ admission that “Apple provided a warning against listening to music at loud volumes.”

What remains to be seen is where a similar case could go if there were actual injury. Such an injury could support an unfair competition claim as well as additional negligence claims.

In December, the Supreme Court of Texas demonstrated that it will rigorously examine the basis for expert testimony in products liability cases. A plaintiff’s expert’s failure to test his hypothesis may be fatal to plaintiff’s claims. In Whirlpool Corp. v. Camacho, No. 08-0175, 2009 WL 4728004 (Tex. Dec. 11, 2009), the supreme court reversed a jury award of $14 million to a family who lost their home and their son in a fire that they alleged was caused by a defective dryer.

Santos and Margarita Camacho had purchased the used Whirlpool clothes dryer for use in their mobile home. Several months later, Margarita Camacho smelled smoke and saw fire “coming from the rear part of the dryer and from inside the dryer.” The fire destroyed the trailer home and killed the Camacho’s teenage son who was the only family member unable to escape.

At trial, the Camachos relied on the expert testimony of an electrical engineer who opined that the fire started when clothes in the dryer were ignited by clogged, smoldering lint particles. The Texas Supreme Court, noting that courts are to “rigorously examine” the manner by which an expert applies principles and methodology in reaching his conclusions, disregarded the engineer’s testimony. Citing the Texas version of Daubert, E.I. du Pont de Nemours & Co. v. Robinson, 923 S.W.2d 549, 556 (Tex. 1995), the court held that testing of machinery in products liability cases is highly significant in providing support for an expert’s conclusions:

Testing is not always required to support an expert’s opinion, but lack of relevant testing to the extent it was possible, either by the expert or others, is one factor that points toward a determination that an expert opinion is unreliable. . . . If testing of critical aspects of an expert’s testimony has not taken place either by the expert or others in the relevant scientific or expert community, then an explanation of why it has not is an important consideration in evaluating the expert opinions and determining whether they are substantively more than merely the expert’s conclusory, subjective opinion.

Id. (internal citations omitted).

Regardless of the expert witness’s level of experience in the applicable field, the court here held that the engineer’s failure to test his theories or to provide evidence of others’ testing was an important factor in its concluding that the engineer’s opinions were unreliable.

This Texas Supreme Court opinion shows that evidence of testing of the allegedly faulty machinery is imperative. Otherwise, as here, the expert’s opinions are “subjective, conclusory, and are not entitled to probative weight.”