Friday Links

Certainly, in our time, we have seen some trial witnesses fare worse than Shep the Wonder Dog, the canine eyewitness depicted above on the cover of the comic book, Mr. District Attorney #53, published way back in 1956. (Click to enlarge the cover and see it in all its glory!). Shep’s tale must be damaging to the defendant, as the bailiff seems posed to pounce upon the accused, who appears to be rising in response to Shep’s expected testimony. You’d think they would at least wait to see how Shep fared on cross before beginning to worry. Is there an optional completeness objection based upon the fact that Shep’s board does not include all 26 letters, thereby limiting his testimony? Rumor has it that Shep was prepared to give an impermissible lay opinion: Evolution provided the defendant with opposable thumbs but not sufficient wits to outsmart a dog. (For a full summary of this issue, see here.).

The Virginian Pilot in Norfolk, Virginia offers this interesting account of how that state’s courts have dealt with one vexatious litigant (who happens to share the name of the main character on a popular NBC sitcom). Says one jurist: “Within the memory of the incumbent judges of this court, the court has so designated only four people over the past fifteen years [as vexatious litigants]. The petitioner is the most persistent and vexatious of the four.”

Just think. This is what they were saying about law school 72 years ago: “American legal education is blind, inept, factory-ridden, wasteful, defective, and empty . . . [I]t blinds, it stumbles, it conveyor belts, it wastes, it mutilates, and it empties.” Karl Llewellyn, On What Is Wrong With So-Called Legal Education, 35 Colum. L. Rev. 651, 653 (1938). Wow.

The South Carolina Bar has joined Facebook.

Only in a nineteenth century marital property case involving the enhancement value of mules would you find a gem like this: “[T]he erratic mule standeth apart, like patience on a monument, smiling at grief.” Stringfellow v. Sorrells, 18 S.W. 689, 689 (Tex. 1891) (quotations omitted). Back then, we suppose everyone knew without being told that the author of the opinion was referencing Shakespeare’s Twelfth Night.

Speaking of Texas, its state bar is sponsoring a contest of interest. Several writers here at Abnormal Use plan to someday write the great American novel, but we fear that such an enterprise might detract from our billable hours. Perhaps the State Bar of Texas has a solution, though, as it has announced what is surely the first 140 Character Novel Writing contest. Inspired by the popularity of Twitter, the competition is open to all lawyers licensed in any state in the United States. (That’s a lot of lawyers.). Check it out:

Ernest Hemingway reportedly considered his best work to be his most succinct — a six-word novel he came up with to settle a bar bet: “For sale: baby shoes, never worn.”

Our contest challenges lawyers to write a short form novel, Twitter-style, in 140 characters or less. All U.S.-licensed attorneys are encouraged to enter.

One grand prize winner will receive an Apple iPad. The grand prize winner and runners-up will receive special recognition at the State Bar of Texas Annual Meeting on June 10, 2010, at a breakfast presentation featuring LexBlog, Inc. CEO and Twitter expert Kevin O’Keefe (@kevinokeefe).

For details, see here. The contest is open until May 1.

Paxil and The Learned Intermediary Defense

The learned intermediary defense appears to be alive and well in the State of Georgia. For years it seems that drug companies have been able to rely on the venerable learned intermediary defense to avoid liability in personal injury cases brought by plaintiffs that have obtained their products through a physician prescription. The defense has recently come under scrutiny in light of the marketing attempts by drug companies that intended to inform the public about their products. The trial lawyers’ bar seems to be asserting that the advertisements by the drug companies are attempts to provide warnings to the public.

Last week the U.S. Court of Appeals for the Eleventh Circuit considered the defense. In Dietz v. Smithkline Beecham Corp., No. 09-10167, 2010 WL 744273 (11th Cir. March 5, 2010), the court upheld the trial court’s grant of summary judgment in favor of the defendant. In Dietz, the plaintiff brought a wrongful death claim in which the surviving spouse claimed that her husband’s suicide was proximately caused by his use of Paxil. Id.at *1. The plaintiff actually brought the claim under three theories: strict liability, negligence and breach of warranty. Id. The defendant raised the learned intermediary defense, an affirmative defense under Georgia law. Id.

The facts in Dietz were that the plaintiff’s husband had visited his family physician with “anxiety, depression, insomnia, and stress, but expressed that he had no suicidal ideation.” Id. His physician prescribed him to take Paxil as well as a sleep aid, Ambien. Id. Eight days after obtaining his prescription and after he began to take the drug, he committed suicide. Id.

The decedent’s family physician testified during a deposition that the decision to treat the decedent with Paxil was an appropriate decision and that even after reviewing the results of an updated prescription information sheet, there was nothing that about the new information that would have made him decide to not prescribe Paxil to the decedent. Id. *2. The Dietz court reviewed the long-standing doctrine of the learned intermediary defense:

[T]he manufacturer of a prescription drug … does not have a duty
to warn the patient of the dangers involved with the product, but instead has a
duty to warn the patient’s doctor, who acts as a learned intermediary between the
patient and the manufacturer. The rationale for the doctrine is that the
treating physician is in a better position to warn the patient than the
manufacturer, in that the decision to employ prescription medication …
involves professional assessment of medical risks in light of the physician’s
knowledge of a patient’s particular need and susceptibilities.

Id. at *1 (internal citations omitted). The court then went on to hold that the plaintiff could not establish that the defendant’s alleged failure to warn the physician about the increased risk of suicide associated with Paxil proximately caused the decedent’s death. Id. at *3. The court’s decision hinged upon the doctor’s testimony that even after reviewing the new prescription drug information sheet and the warnings mandated by the U.S. Food and Drug Administration, he still would have prescribed the drug. As such, the learned intermediary (decedent’s physician) had an adequate warning and the potential chain of causation proffered by plaintiff was severed.

Economy Affects Mafia?

In the 2000-2001 recession, there was a consolidation in the cement mixer industry, which I solely and subjectively theorize was due to a reduction in the amount of cement produced for nefarious uses. One wonders how the current “downturn” affects such businesses. Snitches may need to select alternative footwear.
Plaintiffs like David Ryan will likely have no cement mixer manufacturer to sue. Ryan v. Smith, 2010 WL 743946, No. 06-5866 (D.N.J. Mar. 4, 2010) centers around asset sales and their effects on successor liability. Ryan worked as a driver on a cement truck. He suffered injury on December 2, 2003 when the ladder on his 1988 Rex 770 cement mixer detached from the truck while occupied by Ryan. The Rex 770 was manufactured by Rexworks, Inc., and, prior to Ryan’s injury, the assets of Rexworks underwent two different sales. First, Rexworks sold its name and cement mixer designs, along with other assets to TEMCO pursuant to agreement. The Agreement provided that no liabilities outside those named in the agreement were assumed by TEMCO, and TEMCO took possession of the assets in June 2000. TEMCO asserted that it was mainly interested in a transmission manufactured by Rexworks, which had an excellent reputation in the industry, for incorporation in its own products. After a few months, TEMCO sold the assets of its cement mixer business to Oshkosh Truck Corporation, and, again, all liabilities of TEMCO were excluded from the asset purchase. On March 6, 2001, the date of the Oshkosh purchase, “the Rex product line was no longer being manufactured by anyone.” Id.

Ryan wanted someone to be liable for his ladder-based injury, and, obviously, TEMCO and Oshkosh didn’t agree to assume any liabilities. The District of New Jersey applied New Jersey’s substantive law:

The social policies underlying strict product liability are best served by extending strict liability to a successor corporation that acquires the business assets and continues to manufacture essentially the same line of products as its predecessor . . . .

Ramirez v. Amsted Indus., Inc., 431 A.2d 811, 825 (N.J. 1981). Even though TEMCO and Oshkosh continued to manufacture dump trucks, the Rex line of dump trucks was essentially discontinued. Ryan argued that the evidence showed that TEMCO had incorporated the use of the Rex transmission in its products, which was sufficient to show the continued manufacture of the product line. Had Ryan been injured by the transmission, this argument may have won the day, but Ryan was injured by the ladder, for which there was no evidence of continued manufacture.

Ryan was then forced to argue based on fairness and policy considerations. Ryan had no remedy absent successor liability. The trial court was not persuaded and stated that the product line test was dispositive. Summary judgment for the defendants was granted. Ryan is an interesting case in transactions of asset sales. Look for potential defendants to incorporate purchased products piecemeal, trying to toe the line in taking advantage of the purchased assets while extinguishing successor liability. Plaintiffs would do better to frame these types of issues in terms of being injured by a complicated piece of machinery as a whole, rather than injury occurring due to one particular part of the machinery. Ryan may have been more (or less) fortunate had he been injured by a more integral part of the mixer.

Varying Jury Verdicts in Latest Pfizer Litigation

A Philadelphia jury on February 22 ordered Pfizer’s Wyeth unit to pay $6 million in punitive damages and $3.45 million in compensatory damages to an Alabama woman who claimed she developed breast cancer as a result of taking the company’s hormone-replacement drug Prempro. Just two days later on February 24, in a case involving very similar facts, another Philadelphia jury found that Pfizer was not a cause of an Indiana woman’s breast cancer and Pfizer was not held liable for damages.

Prempro is a combination of Pfizer hormone medications Premarin and Provera and was used by more than six million women to treat symptoms of menopause before a 2002 Women’s Health Initiative study highlighted the drugs’ links to cancer. Prempro is still on the market, now with increased warnings reflecting results of the 2002 study. However, more than 8,000 lawsuits have been filed against Pfizer by former users of the drug since publication of the 2002 study.

As these two February cases demonstrate, results of the lawsuits have varied. Before this most recent victory for Pfizer on February 24, Business Week reports that Pfizer had lost seven out of the 10 Prempro cases to have gone before juries — the $9.45 million verdict in favor of the Alabama plaintiff had been Pfizer’s fifth loss in a row. However, the Philadelphia Inquirer also reports that two of the jury verdicts in favor of plaintiffs were reversed posttrial, and several other jury verdicts are being challenged by Pfizer on appeal. In addition, it reports that as of February 23, 2010, Pfizer had won five summary judgment motions in its Prempro litigation and 15 of its cases set for trial have been voluntarily dismissed by plaintiffs.

Because the outcomes of these suits and the juries’ interpretation of the facts appear to vary so greatly, it likely will only fuel plaintiffs’ and Pfizer’s fervor in arguing their cases at trial. Indeed, James A. Morris, an Austin, Texas lawyer who represented the family of the Indiana Prempro plaintiff who recently lost her battle against Pfizer, is quoted by the Philadelphia Inquirer as saying, “Nothing about today’s verdict changes the landscape of this litigation. We will continue to fight on in other cases.” Lawyers for Pfizer, on the other hand, have maintained that the company acted responsibly in conducting and supporting more than 180 studies on the benefits and risks of use of the drug. Pfizer has said it will appeal the Philadelphia jury’s recent $9.45 million verdict.

Peppermint Pattie: with or without insect larvae? Which would you choose?

Hopefully your answer to that question was without; however, for one consumer in Tennessee, she was a little too late to make that choice. Recently, the United States District Court of Tennessee was asked to decide whether the manufacturer, distributor, and retailer of a peppermint pattie was liable to a consumer who bit into candy which was infested with insect larvae. Gentry v. The Hershey Co., No. 2:08-0123, 2010 WL 457538 (M.D. Tenn. Feb. 3, 2010).

While Kim Gentry was shopping at Petco Animal Supplies, Inc., she picked up a York Peppermint Pattie that was for sale and bit into it. I know what you are all thinking: Yes, it is another issue that candy is sold at Petco and that people eat it in the store. After Ms. Gentry discovered that there was larvae inside the candy, she was treated for food poisoning. Since the event, she had undergone psychological counseling. Gentry filed a lawsuit against the manufacturer, The Hershey Company; the distributor, Liberty Distribution, L.L.C.; and the retailer, Petco, for strict liability, breach of implied and express warranties, negligence, and negligence se.

All three defendants filed motions for summary judgment. The Court considered Hershey’s and Liberty’s motions together, finding in favor of Hershey and Liberty on all causes of action. The Court found no evidence that the candy was in a defective condition or unreasonably dangerous when in the possession of Hershey or Liberty, relying on the opinions of all the experts in the case, which found that the pattie was contaminated while in the possession and control of Petco. Petco did not submit an expert to the contrary. Further, the Court stated that Liberty could rely upon the closed container doctrine because it received the pattie in a sealed corrugated cardboard box, stored it in a temperature-controlled environment, and had no ability to inspect the patties.

On Petco’s motion for summary judgment, the Court agreed with Petco on Gentry’s negligence per se claim as Gentry did not point to any statutory provision other than those under the Federal Food, Drug, and Cosmetic Act and Tennessee Food, Drug, and Cosmetic Act, which have been held to have no private action attached. The Court also found that Petco was not liable for strict liability because the applicable statute in Tennessee only permits a strict liability action against a seller when the seller is also the manufacturer or when the manufacturer cannot be located or is insolvent.

On the other hand, the Court found that it would allow Gentry’s breach of implied warranty claim to go to the jury reasoning that even though Gentry bit into the candy before she purchased it and even though Petco was primarily a merchant of animal food, nevertheless there was a “sale” and Petco was a “merchant.” Accordingly, Gentry’s claim fell within the applicable warranty statute. Finally, the Court found that there was an issue of fact with respect to Petco’s use of the sealed container doctrine as a defense to Gentry’s negligence claim. The Court found that there was a question whether Petco had a reasonable opportunity to inspect the candy before it was consumed by Gentry as the doctrine is not intended to protect a “seller from all liability to the consumer when the seller causes or allows the product to become adulterated.”

This case again shows the importance of expert testimony, as the use of expert testimony was instrumental in absolving Hershey and Liberty from strict product liability. As a result of this decision, Ms. Gentry will be able to present her case on implied warranty and negligence to a jury.

Friday Links

  • Northwestern University, at its YouTube account, has begun to post some interesting products liability related videos, including the clip above, which features Katherine R. Latimer of Hollingsworth, LLP discussing “Products Liability Law and Pharmaceuticals”at the Judicial Symposium on The Pharmaceutical Industry, held at Northwestern in May of 2009. Other clips from the conference can be found here, here, here, and here, while the school has also posted an interesting clip of Justice Ruth Bader Ginsberg’s September 2009 visit to the institution.
  • Findlaw’s Courtside blog posts this piece about the recent filing of a sudden acceleration lawsuit against Toyota and a Lexus dealer in California. The report includes a copy of the complaint as well as an excerpt of the 911 call at issue.
  • In this nice post, The Mac Lawyer alerts us to Tablet Legal, a new blog designed for lawyers using Apple’s new iPad. Last week, the new site’s author concluded that “less functionality in the Ipad is better for lawyers.” The associates writing the posts here at Abnormal Use have requested iPads from their supervising partners, but as of yet, they have received no response. Surely they must have missed that set of emails?
  • In a post that ran yesterday, The South Carolina Family Law Blog offers this helpful tip for locating individuals using social media. Says that site’s author: “[I]t is simply amazing sometimes to see the types of information people publish about themselves and their actions on these sites. However, in today’s web-laden society, it’s hard to know where to start looking sometimes to find all of a party’s networks.” Indeed.
  • We here at Abnormal Use have no meaningful preference in this weekend’s Academy Awards show. To be honest, we rarely get to the movies these days. But we, like most, are perplexed at the Academy’s decision to nominate ten films for Best Picture as opposed to the usual five. We recoiled in horror and grieved when Quentin Tarantino’s Pulp Fiction lost to Forrest Gump in March of 1995, but we remain unconvinced that Tarantino’s latest effort is worthy of such accolades. Surely Avatar will not prevail over the far, far better Up. Perhaps the Academy members wish to avoid the type of self congratulatory display James Cameron put forth in 1998 when he won for Titanic. Tune in Sunday to see.
  • Finally, if you’ll peruse our side bar, you’ll notice a new blogroll dedicated to South Carolina law blogs. Although our central mission at Abnormal Use is to discuss products liability cases, we do like to keep an eye on our local legal blogsophere. Take a look, and let us know if we’ve missed any South Carolina legal blogs of interest.

Florida Court Finds Exclusion of FDA Recall Harmless Error

Last week, a Florida appellate court affirmed a defense verdict in a products liability case despite finding that the trial court had erred by excluding evidence. The evidence that was excluded was that the U.S. Food and Drug Administration had later banned the substance at issue, ephedrine, some six years after the Plaintiff took it. In that case, Webster v. Body Dynamics, Inc., the appellate court found the exclusion constituted harmless error, in part because of the Plaintiff’s successful introduction of evidence indicating the risks of ephedrine through an FDA witness. See — So.3d —-, No. 1D08-5114, 2010 WL 624182 (Fla. Ct. App. Feb. 24, 2010) [PDF].

The Plaintiff, a twenty six year old university student at the time of the alleged injury, suffered a stroke in the summer of 1998. For four months prior to the stroke, he had been taking Super Mini/Mini Thin Natural pills, dietary supplements containing ephedrine alkaloids, which were later banned in 2004 by the FDA. The Plaintiff sued the manufacturer and the retail establishment at which he had purchased the pills. The defendants’ theory was, in part, that young men occasionally have strokes for unexplained reasons, and the appellate court noted that “[t]he jury apparently concluded this was one such case.” (Bolstering the defense theory was the fact that no ephedrine was found in the Plaintiff’s system at any time after the stroke.).

Both before and during trial, the judge refused to take judicial notice of the ban or otherwise permit evidence of it to be heard by the jury. The appellate court found that in excluding evidence of the ban the trial court “arguably” erred because such evidence can be introduced to establish that a later-recalled product was defective at the time of the litigated injury, even if that injury occurred before the recall. However, the court found that any error was harmless. In so doing, the court noted that the jury “may well have concluded that there was no convincing proof that ephedrine was in the plaintiff’s system when he suffered the stroke.” It also referenced the detailed testimony of Dr. Parisian, an FDA official who recounted the FDA’s pre-1998 public warnings on ephedrine and the substance’s risks, including the risk of adverse effects, such as strokes, in young people taking the substance. Dr. Parisian also testified that with each pill the Plaintiff had ingested more than three times the amount of ephedrine that she considered “unreasonably dangerous” in such supplements. Nevertheless, the appellate court rejected the the notion that Dr. Parisian should have been able to testify to the ban:

. . . Dr. Parisian’s testimony conveyed in great detail the health and safety concerns that underlay the FDA’s proposal to adulterate dietary supplements containing ephedrine alkaloids in excess of eight milligrams per pill, and ultimately led to the ban of dietary supplements (but not other over-the-counter medications) containing any ephedrine alkaloid at all. Dr. Parisian testified unequivocally that manufacturers continued to market dietary supplements containing ephedrine at levels not recognized as safe and effective by the FDA. She opined in no uncertain terms that the pills Mr. Webster allegedly consumed were “unreasonably dangerous.” The testimony that strokes had been associated with ephedrine use was uncontroverted.

Dr. Parisian’s testimony explained to the jury the reasoning behind the eventual ban of dietary supplements containing ephedrine, and the entire rationale eventually set forth in the text of the rule effecting the ban. The appellant has not demonstrated a reasonable probability that proof of the ban itself would have led to a different result.

See id. at *2 (Footnotes omitted).

The majority’s ruling drew a dissent from Justice Thomas, who argued that “[a] mandatory recall and ban is relevant evidence and demonstrates a product’s design defect, even where the recall and ban is issued after the date of the product’s manufacture.” Presumably, there’s still time for the Plaintiff to appeal this decision, so perhaps the Florida Supreme Court will address the issue.

Hey, Potential Tortfeasors: Do Business in Kentucky

Oh, Kentucky! I wax maudlin as the spring approaches, when the bluegrass begins to grow, and I am reminded of my love of fried chicken, mint juleps, and Billy Ray Cyrus. How wonderful art thou, great state of the Gray Squirrel and the greatest two minutes in sports! And even with all of these enticements to share a state of domicile with Rick Pitino, there is but one ultimate reason to make the move. Although Greenville is a fine place to live, if I were ever to maim or otherwise injure someone, I would hope to do so in Kentucky. I am surprised that the Kentucky Chamber of Commerce does not openly espouse its one year statute of limitations [PDF] on personal injury cases as a benefit of living, maiming, of doing business there. Unfortunately for Johnny Childress, he lived in Kentucky at the time of his injury, and his claim was dismissed because of it.

For reasons not clear in Childress v. Interstate Battery Systems of America, Inc., 2010 WL 600023, No. 1:09CV-54-M (W.D. Ky. Feb. 18, 2010), Mr. Childress did not bring suit within one year of his accident. On November 26, 2007, Mr. Childress drove home, exited his car, and “noticed the distinct odor of battery fumes emanating from his vehicle.” Id. Mr. Childress disconnected the battery, took the battery into his garage, and placed it on a workbench, where it exploded and sent shards of plastic and acid into Mr. Childress’ face and eyes. Childress, inexplicably, waited too late to file his products liability action, and, therefore, he had to assert a theory of recovery that would allow him to maintain his claim. He argued that his accident sounded in the Motor Vehicle Reparations Act, which allowed a two-year period to bring an action.

The two-year limitations period extends to those who were victims of a motor vehicle accident and whose injuries arose out of the use of a motor vehicle. Id. Because the blog adheres to the strictest of legal writing axioms, you already know what the court decided. Childress was not in his vehicle at the time of the explosion, and “it was the battery, not his vehicle, that was the sole cause of his injuries.” Id. Therefore, Childress was time-barred.

Maybe Childress had some bad facts in his claim that would have precluded a finding against the battery distributor, and he was trying to bring in his auto insurer. It’s unclear. But unfortunately for Mr. Childress, who at the very least had a real injury, and perhaps a valid claim, he can’t recover. Manufacturers take note and take advantage of Citizens United: Elect officials who support a one-year statute of limitations. Then I won’t have to move to Kentucky.

Plaintiffs’ Conspiracy Action Against Expert Witness who Allegedly Designed and Marketed Improved Product to Defendants Survives Motion to Strike

Arguably, a benefit of product liability litigation is that lawsuits demand that companies design products with greater safety measures and provide consumers with more pronounced, descriptive warnings. A guest speaker at my law school once told my class that engineers and automakers didn’t design many parts of the automobile — lawyers did. What he meant, of course, was that attorneys have filed suits against automakers when parts of a vehicle were allegedly unsafe or could have been designed with even greater safety measures in mind. This had, in turn, dictated the way that automakers designed that product from that point forward. The same guest speaker probably would not, however, have envisioned the alleged actions one California product liability attorney and his expert witness recently took in helping inspire this design process.

The California Court of Appeals recently refused to strike the plaintiffs’ complaint, where they filed suit against their attorneys and a consultant hired by their attorneys as an expert witness for negligence and conspiracy to commit fraud. Robles v. Chalilpoyil, —Cal.Rptr.3d—, (Cal. App. Jan. 27, 2010). The underlying action in Robles was a product liability claim initiated by the family of a man who burned to death when his wheelchair, which presumably was electric, ignited while he was occupying it. The family retained an attorney named Wills to represent them in their wrongful death action against the makers of the wheelchair.

According to the complaint, when the underlying case came up for trial, the family’s attorney requested a continuance on the basis that the plaintiffs’ expert witness had testified falsely in his deposition. The trial court thereby continued the trial to allow the attorneys to procure another expert witness. Before the new trial date, however, the attorney allegedly requested that each of the plaintiffs sign a waiver of any interest in a device that attorney Wills wanted to market to address the safety defects in the decedent’s wheelchair. Wills allegedly told the family members that the device would be designed and manufactured together with their former expert witness, based on research and information the expert witness had gathered in preparing for his expert testimony for trial.

After procuring each of the plaintiffs’ signatures and without retaining a new expert, the attorney “wrongfully pressured” the plaintiffs to settle the claim for $1 million. When several of the plaintiffs thereafter refused to accept the settlement proceeds, the Wills firm withdrew from the case and filed notice of lien for attorney fees.

The present case deals only with the issues of liability of the expert witness, as it was he who moved to strike allegations of the complaint as a SLAPP (Strategic Lawsuit Against Public Participation). According to the court, a SLAPP is a “meritless suit filed primarily to chill the defendant’s exercise of First Amendment rights.” The expert witness argued that his discussions with the attorney, during which the attorney solicited his agreement to allow his work product to be provided to the underlying defendants in the event of settlement, fell “comfortably” within the express terms of the anti-SLAPP statute. The California Court of Appeals disagreed, holding that such alleged discussions and agreements was not protected activity. It would not strike the plaintiffs’ complaint insofar as it alleged negligence and conspiracy to commit fraud against the former expert witness.

As noted, the court’s opinion deals with allegations of the complaint as alleged only against the expert witness. The attorney Wills, who represented the family in the underlying action, reportedly is the same person who was subsequently appointed to serve as a California Superior Court judge.

Product Liability Claim is Barred by the Economic Loss Doctrine

In New Jersey, where a sophisticated buyer enters into a contract with a sophisticated seller of an allegedly defective product that causes damage to the product itself as well as something other than the product, the buyer’s remedy against the seller may only be contractual. On February 5, 2010, the Third Circuit, in a diversity action, opined that the New Jersey Supreme Court would apply the economic loss doctrine, barring the product liability claims of a manufacturer of food and beverage items against the producer of the raw materials. Travelers Indemnity Co. v. Dammann & Co., No. 09-1225, 2010 WL 395915 (3d Cir. Feb. 5, 2010) [PDF].

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 New Jersey District Court reasoned that IFF’s product liability claim sounded in contract and therefore, the economic loss doctrine barred the application of the New Jersey Product Liability Act to IFF’s claim. IFF appealed. On appeal, the Third Circuit had to determine whether, under New Jersey law, the economic loss doctrine barred claims such as IFF’s claim. The Court stated that no New Jersey case had specifically decided the sort of claim IFF alleged, which involved a defective product, the vanilla bean, and damage to other property, IFF’s flavoring products contaminated with mercury.

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

Tort remedies are unavailable for property damage experienced by the owner where the damage was a foreseeable result of a defect at the time the parties contractually determined their respective exposure to risk, regardless whether the damage was to the goods themselves or to other property.

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.