Jurisdiction of Federal Court Determined by Distributor Liability Analysis

For defendants in products liability actions, the issue of distributor liability is a maddening, state-by-state patchwork of different rules and laws.  The same conduct by one distributor of a product across many states may make it liable for any injuries caused by the product in one state, yet immune from liability in another.  Not only can the role of the distributor be crucial from a liability perspective, but it often has jurisdictional implications as well.  This was the case in Martin v. Medtronic, Inc. and Saracare Corp., 5:11-CV-144/RS-CJK, 2011 WL 2473318 (N.D. Fla. June 22, 2011). The issue was the plaintiff’s motion to remand, i.e. whether the Northern District of Florida had jurisdiction to hear the case at all based on diversity of citizenship.  The plaintiff had sued Medtronic, Inc. and Saracare Corporation on products liability theories, including strict liability, after the death of her decedent allegedly caused by a defective insulin pump.

For diversity purposes, the plaintiff was considered to be a citizen of Florida; Medtronic was a citizen of Minnesota; and SaraCare a citizen of Florida.  No diversity, right?  For all of you with recent memories of law school (which are, alas, distant memories for us), you will understand that the correct answer is always, “Well, it depends!” (For all of you readers who do have recent recollections of law school, be forewarned:  This is also always the right answer in “real life” legal situations, as well). Whatever the case, the jurisdictional question hinged on whether or not SaraCare was a “sham defendant,” in which case the Court would not consider its citizenship for diversity purposes (meaning that there would be diversity after all).  And, since SaraCare was alleged to be a distributor of the insulin pump, the Court’s jurisdictional analysis focused on the potential liability of SaraCare as a distributor. As the Court summarized:

Generally, strict liability extends to those in the “distributive chain” including “retailers, wholesalers, an d distributors.” Strict liability is applicable to distributors of medical products. Strict liability, however, does not generally apply to doctors or hospitals that use a defective medical device incidental to their services.  Similarly, strict liability does not apply to pharmacists who simply dispense prescription drugs and play no role in their preparation.
In this case, SaraCare performed two functions:  first, it confirmed that the letter of necessity met the guidelines of the decedent’s insurance company for reimbursement, and second, it took the order for the pump and routed it to a Medtronic distributor.
The Court determined that SaraCare’s actions were more akin to a traditional distributor than a pharmacist and held that “because Plaintiff claims the pump malfunctioned, the traditional medical device line of strict liability cases governs.”  As such, the strict liability claims could be maintained against SaraCare, and it was determined not to be a sham defendant.  With SaraCare remaining in the case, no complete diversity existed, and the case was remanded to state court.

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