As we previously reported here, harm covered by New Jersey’s Products Liability Act (“PLA“) may not be redressed through a claim under New Jersey’s Consumer Fraud Act (“CFA“). However, based on a recent opinion from the United States District of New Jersey, practitioners should be aware that there are no hard and fast rules for early dismissal when a plaintiff asserts claims under both the PLA and CFA. Shannon v. Howmedica Osteonics Corp., No. 09-4171, 2010 WL 1492857 (D.N.J. Apr. 14, 2010).

In Fellner, discussed in our Tuna A Day post, the United States District Court of New Jersey found that the mere fact that the plaintiff sought damages for the cost of the allegedly defective tuna did not negate the fact that her underlying claim was that the product was defective, which claim was covered by the PLA. Fellner v. Tri-Union Seafoods, LLC, No. 06-0688, 2010 WL 1490927 (D.N.J. Apr. 13, 2010). As a result, on defendant’s motion to dismiss, Judge Cavanaugh found that the plaintiff’s claim under the CFA was subsumed by the PLA and dismissed plaintiff’s CFA claims.

In a matter decided one day after Fellner, Judge Linares was not as easily convinced that the plaintiff’s CFA claim was subsumed by the PLA. In this matter, Dave Shannon (“Shannon”) brought an action against Howmedica Osteonics Corporation (“Howmedica“) asserting that a “tibial insert manufactured and sold by Howmedica and inserted into his knee prematurely failed.” Shannon brought claims under both the PLA and CFA. Howmedica moved to dismiss his CFA claim on the ground that it was subsumed by the PLA.

Howmedica argued that the “essential nature of Plaintiff’s CFA claim is a product liability action,” and that the “damages that he seeks in his CFA claim are recoverable under the PLA.” This is a similar argument to the one defendant made in Fellner, which the Fellner Court accepted. In response, while the Shannon court agreed that generally “where the essential nature of a claim is a products liability claim, all other claims are subsumed by the PLA claim,” it pointed out that it appeared that Shannon was seeking damages for the cost to replace the insert — damages that may not be covered under the PLA. Then, however, the Court acknowledged that Shannon may be seeking the same damages under both the PLA and CFA. The Court denied Howmedica’s motion to dismiss and allowed discovery to proceed. Judge Linares stated the following:

If, after discovery, it is clear that all of the harm for which Mr. Shannon seeks redress is covered by his PLA claim, then Howmedica may move for summary judgment on the CFA claim.

From this decision, it appears that claimants in New Jersey may still be able to survive a motion to dismiss when he or she brings both PLA claims and CFA claims where the damages alleged raise the question whether they are covered by the PLA, even where the essential nature of the claim is that a product is defective. As a result, we may see more and more claimants pleading damages similar to Shannon to at least make defendants litigate both PLA and CFA claims through discovery. It will be interesting if the United States District Court of New Jersey further clarifies this issue, providing more concrete rules when CFA claims are subsumed by the PLA.

Defendant moved to dismiss the action on the grounds that (1) Plaintiff’s claims under the New Jersey Consumer Fraud Act (“CFA“) were subsumed by her claims under the New Jersey Products Liability Act (“PLA“), (2) Plaintiff had failed to state her claims with sufficient particularity, (3) Defendant had no duty to warn, and (4) public policy considerations warranted dismissal of the action. The Court granted Tri-Union’s motion on the first ground, but denied on the other grounds.

On Tri-Union’s first ground, the Court agreed with Tri-Union that Fellner’s claims under the CFA are subsumed by the PLA because the mere fact that Fellner sought economic damages to reimburse her for the cost of the product, did not negate the fact that her underlying claim was that the tuna was defective. A contrary finding would nullify the intended purpose of the PLA to “unify products liability causes of action into a single claim.”

Tri-Union’s third ground for dismissal was that it had no duty to warn of the potential danger of mercury in its tuna products. Tri-Union first argued that the dangers of mercury are obvious, operating as a complete defense to a failure to warn action. The Court found that level of consumer knowledge was relevant but that this determination could not be made at this stage of the pleadings. Next, Tri-Union argued that Fellner misused the product by consuming the product in “abnormal” quantities and, therefore, the danger caused by such misuse was unforeseeable. The Court again found that while her consumption may be relevant, this determination could not be resolved on a motion to dismiss. Finally, the Court rejected Tri-Union’s argument that since mercury is naturally occurring, no warning was necessary. The Court stated that this was not a per rule.

The Court’s ruling merely dismissed Fellner’s claim under the CFA but allowed her claim under the PLA for failure to warn to move forward. Therefore, it would be in the jury’s hands whether the dangers of consuming approximately 4,380 cans of tuna was knowledge a typical consumer possesses and whether this level of consumption was an unforeseeable misuse.

Seroquel, with a reported $4.9 billion in sales in 2009, has been widely utilized for treatment of psychotic disorders such as bipolar disorder and schizophrenia. In the present case, the plaintiff was a 61-year-old Vietnam veteran who took the drug for treatment of posttraumatic stress disorder. He is one of thousands of users of the drug who allege that AstraZeneca causes diabetes and that the company failed to adequately warn patients of that risk.

Not surprisingly, the huge volume of litigation over the drug has resulted in “millions of pages” of discovery material. The New York Times reports that among those millions of pages were at least two seemingly explosive emails. The first of those, it reports, was a 1997 message from an AstraZeneca official in which he praised the work of the company’s physician for minimizing adverse conclusions regarding the drug in a “cursed” study. Specifically, he reportedly wrote: “Lisa has done a great ‘smoke-and-mirrors’ job!” The second of those emails was written in 1999, two years after the drug was approved for use in the United States. In it, the company’s publications manager reportedly wrote: “The larger issue is how do we face the outside world when they begin to criticize us for suppressing data.”

The procedural posture of this case would likely bore you and create a lot of extra reading to get the important lesson from this case across to you. That said, I will only briefly recite the basic underlying facts of this case. Dammann is a producer of raw foods, including vanilla beans. Dammann sold IFF vanilla beans, by written contract, for incorporation into IFF’s food and beverage flavoring. IFF incorporated Dammann’s beans into its vanilla extract only later to find out that the beans were contaminated with mercury. As a result, IFF filed claims against Dammann for breach of express warranty, breach of implied warranty, and product liability.

The Court found that there were two schools of thought resolving this question. The majority employs some variation of the following test:

On the other hand, the minority test differentiates between damage to the product itself and other property. The Court held that the New Jersey Supreme Court would likely join the majority and apply the economic loss doctrine to bar IFF’s claim. The Court reasoned this way because New Jersey precedent consistently held that “contract law [was] better suited to resolve disputes between parties where a plaintiff alleges direct and consequential losses that were within the contemplation of sophisticated business entities with equal bargaining power and that could have been the subject of their negotiations.” Further, the Court found that IFF alleged damages, including scrapping of contaminated finished flavoring, claims from customers, testing costs, plant cleaning costs, and lost profits were purely economic damages.

Practitioners should be aware of both the majority and minority rules on this issue and be on the look out to see if the New Jersey Supreme Court resolves this issue as the Third Circuit predicted it would rule in this matter.