We recently reported here that a South Carolina family-owned tomato farm had sued the United States Food and Drug Administration (FDA) in South Carolina federal court in Beaufort, alleging that the agency was negligent in its issuing of a 2008 nationwide tomato recall.  Seaside Farm, Inc. v. United States, C.A. No. 9:11-cv-1199-CWH (D.S.C. May 2011).  The FDA issued that recall over fears that tomatoes were the source of salmonella contamination, though, ultimately, the outbreak was traced to a source other than tomatoes.  Well, another tomato farm has since joined in filing suit.

Law360.com reports that Williams Farms Produce Sales, Inc., which grows more than 500 acres of tomatoes in South Carolina and Florida every year, filed suit alleging that it lost $11 million as a result of the recall that later proved to be unnecessary.  The latest suit, which was filed less than one month after the Seaside Farm’s complaint, was filed in federal court in Charleston.  Williams Farms Produce Sales, Inc. v. United States, C.A. No. 2:2011-cv-1399 (D.S.C. June 2011).  Lexology.com reports hat the latest complaint includes causes of action of negligence, defamation, slander of title, product disparagement, unconstitutional taking, and violation of unfair trade practices law, for which the tomato grower seeks actual damages in excess of $11 million, special damages, compensatory damages, treble damages, attorneys’ fees, and costs.

These two lawsuits could be the firsts of many, and they certainly demonstrate that the amount of potential damages alleged against the FDA could be staggering.  MiamiHerald.com and FloridaFarmers.org have reported that Florida farmers estimated they lost $60 million as a result of the recall, and that national numbers could be $140 million or more.  They also report that previous attempts in 2008 to acquire voluntary compensation from the government to offset the losses failed, and as such, litigation was almost certain to follow.

A South Carolina family-owned tomato farm recently sued the United States Food and Drug Administration under the Federal Tort Claims Act  seeking to recoup damages it suffered from the 2008 nationwide tomato recall over fears of salmonella contamination.  Seaside Farm, Inc. of St. Helena Island filed suit in federal court in the U.S. District Court for the District of South Carolina.   The complaint alleges causes of action of negligence, violation of the takings clause, violations of the South Carolina Unfair Trade Practices Act, and defamation.  Seaside Farm, Inc. v. United States, C.A. No. 9:11-cv-1199-CWH (D.S.C. May 2011).

According to the complaint, Seaside Farm cooperated with and and assisted in all audits and inspections of its operation prior to the start of the tomato season in 2008 and passed all inspections.  Then, in June of 2008, “at the precise time when South Carolina tomatoes are coming to market, the FDA announced a national recall of all tomatoes in the U.S.” (See South Carolina news coverage of the 2008 recall here ).  The complaint goes on to say that the FDA “improperly assumed” that tomatoes were the source of the curent salmonella outbreak, though following the recall, the FDA ultimately conceded that tomatoes were not the source the salmonella contamination.  At that point, however, Seaside Farm says the damage was done.  It seeks compensation for loss of its property, in the form of its 2008 tomato crop, as well as other general and special damages.

The FDA Law Blog reports that though the FDA issued a nationwide warning in June of 2008 for consumers to refrain from eating tomatoes, later, certain types of peppers were identified as the likely culprit of the salmonella outbreak.  The FDA thus lifted its tomato ban, but not before significant damage was done.  There was significant fallout, with some predicting that litigation likely would most certainly ensue.   According to FDA Law Blog, statutory law directs the Government Accountability Office to submit a report to Congress that reviews “new or existing mechanisms available to compensate persons for general and specific recall-related costs when a recall is subsequently determined by the relevant agency to have been an error,” and that “considers models for farmer restitution implemented in other nations in cases of erroneous recalls.”  Such provisions may fall short of the expectations of small businesses like Seaside Farm, who took the brunt of the error.

Earlier this month, the State of South Carolina was awarded $327 million in damages from drugmaker Janssen Pharmaceutica, Inc., a Johnson & Johnson subsidiary, under the state’s Unfair Trade Practices Act for deceptive marketing of its anti-psychotic drug, Risperdal.  The suit alleged that the company had, for years, sent deceptive letters to doctors in which the company downplayed the links between Risperdal and diabetes.  As we previously reported here, South Carolina could have received upwards of $3 billion dollars from the suit, as the State Attorney General argued that every single prescription, sample box or “Dear Doctor” letter written since the 1990s could constitute a violation of the law worthy of a $5,000 penalty.

It was in April that the South Carolina jury found the drugmaker to be responsible.  Only recently did Spartanburg County’s Judge Roger Couch determine the amount that the company would be responsible for paying the state.  Charleston’s The Post and Courier reported that Judge Couch, in his order, wrote that Janssen knew that its drug was associated with health problems and that it intentionally hid those studies.  He said the company “systematically set about in a concerted effort to conceal that information and to manipulate the information available to the public for the purpose of protecting or improving its market share.”

The award reportedly marks the largest penalty for breaking the South Carolina Unfair Trade Practices Act and also represents the state’s largest award in a drug marketing case.  Bloomberg.com reports that on June 3, Janssen officially announced that it will appeal Judge Couch’s order.  It maintains that  company fully disclosed Risperdal’s health risks and that it properly marketed the anti-psychotic medicine.

As we previously reported, this South Carolina case is not the first of its kind.  A Pennsylvania case was dismissed in June, and another case in West Virginia was dropped in December.  A case in Pennsylvania, however, ended with a jury’s awarding of $257.7 million to the state for the drug company’s alleged offenses similar to those addressed in Judge Couch’s recent order.  As with the recent South Carolina verdict, Janssen has appealed the Pennsylvania verdict and maintains it acted properly.

We are pleased to announce that Selective Insurance Company of South Carolina was bold enough to write coverage for Phusion Projects, LLC, the company that formerly manufactured Four Loko as we once knew it.  Four Loko took all the hard work out of mixing alcohol and caffeine at the bar by combining the two in the  manufacturing process.  Yet Law 360 informs us Selective filed a DJ  action in Illinois to clarify that there are certain suits it will not defend, based on a defense that the policy was not in force when the “bodily injury” alleged in several lawsuits occurred.

There seems to be very little of interest (at least at first glance) in the declaratory judgment complaint other than what we have previously blogged about in a prior Four Loko related post.  Namely, Selective probably thought it was pretty safe (okay, somewhat safe) insuring this company since the beverage was merely a manufacturing of an aftermarket process.    Moreover, although a DJ is always a good idea, as it puts lawyers to work who were previously not occupied, it remains to be seen whether this DJ will be effective.  After all, Selective insured Phusion while it was manufacturing Four Loko and placing it in the stream of commerce.  The dates of bodily injury in these cases may not be determinative.  There certainly will have to be some scintillating discovery on dates of manufacture, lot numbers and dates of distribution before the lawyers reach the salacious details of surrounding the consumption of the Four Loko.

We don’t claim to be actuaries (Oh, that we had made that choice), but we would be interested to know from our legion of actuary readers how one would price products liability insurance for products such as Four Loko.  We imagine the underwriter would gather some documents and get some input from actuarial and legal departments and the following exchange takes place:

UW: So, what are the chances for a lawsuit coming into being here?  I mean, this seems to be a pretty safe product.  Caffeine.  Alcohol.  There’s some kind of tagline about “blackout in a can” that’s somewhat troubling though.

Actuarial: [Speaking unintelligible secret mathy language]

In-house Lawyer: [Wearing a polo shirt, chinos, and no socks] I would put our chances at being sued at greater than 90%.  Actuary, can you account for that in your pricing?

Actuarial: [Emitting a series of beeps]

In-house Lawyer: Don’t forget to account for the irresponsibility co-efficient of drunk young adults.

And eventually, a premium is settled upon that becomes a second-guessed business decision, and indirectly punishes innovation in the alcoholic energy drink market.  Perhaps this is a good thing.

South Carolina’s suit is the fourth case of its kind to go to court. We previously reported here on a similar case tried in Louisiana. In that case, the jury awarded a $257.7 million verdict against the drugmaker. The jury found that the company had sent 7,604 “Dear Doctor” letters and made a total of 27,542 sales calls in which its sales representatives claimed Risperdal was safer than competing antipsychotic drugs such as Eli Lilly’s Zyprexa and AstraZeneca’s Seroquel. The Louisiana jury assessed penalties of $7,250 for each violation. Of the other two cases, the Pennsylvania case was dismissed in June, and another case in West Virginia was dropped in December.

As reported by TheState.com, Janssen has appealed the Louisiana verdict, although representatives have reportedly not yet decided whether they will do the same with this latest South Carolina jury verdict. That likely will depend on the dollar number reached by the Spartanburg County judge. We’ll continue to follow this case and report on Judge Couch’s ruling.

Although though we were perplexed to see a federal court address the issue, we can’t say we disagree with today’s opinion from the U.S. District Court for the Western District of South Carolina, which found that the three Star Wars prequels were “unreasonably dangerous and defective” as a matter of law. See Kurtz v. George Lucas, Lucasfilm Ltd., and Indus. Light & Magic, No. 2011-1138-THX (W.D.S.C. April 1, 2011). After hearing cross motions for summary judgment, the court denied the Lucas Defendants’ motion for summary judgment and granted the Plaintiff’s motion finding no genuine issue of material fact as to the films’ defects.

The facts were these: In 2007, Plaintiff Danny Kurtz found himself at his local video store in Seneca, South Carolina browsing through the racks of new DVDs. His young seven year old son, Milo, pleaded with his father to buy him some action movies. Dutifully acquiescing to the request, Plaintiff bought him the prequels: 1999’s The Phantom Menace, 2002’s Attack of the Clones, and 2005’s Revenge of Sith. At the time of the purchase, neither the Plaintiff nor his son had seen the films. (“Somehow, I made it through the last decade without seeing those movies,” the Plaintiff testified at his deposition, although he later acknowledged his familiarity with the films’ generally poor reviews.). Although the purchase was “against his better judgment,” he relented only because of the joy he felt his child might experience in being introduced to the Star Wars universe, a delight the Plaintiff recalled from his own youth in the early 1980s. After a marathon weekend viewing of all three prequels, the Plaintiff and his son experienced nausea, confusion, light-headnesses, shortness of breath, tinnitus, and a “foreboding sense of ennui.”

Plaintiff brought suit individually and on behalf of his minor son against George Lucas and several corporations, asserting various tort theories, including negligence and strict products liability. Plaintiff also asserted a novel “tortious interference with childhood memory” cause of action on his own behalf, arguing that the release of the prequels had destroyed his ability to reminisce his own younger days and his youthful enjoyment of popular culture. (The alienation of affection claims of Plaintiff’s spouse, Carrie, were settled for an undisclosed sum.).

In their joint answer, the Lucas Defendants asserted the affirmative defenses of contributory negligence, assumption of risk, unclean hands, and equitable estoppel, essentially arguing that Plaintiff knew or should have known of the films’ lack of artistic merit and was thus barred from asserting any tort claims based upon his viewing of same. See In re: The Last Airbender, 523 F. Supp. 2d. 147 (N.D. Ga. 2010); In re: Ishtar Litig., 111 F.2d 102 (9th Cir. 1988).

In denying the defense motion for summary judgment, the court rejected the Defendants’ reliance on In re: Bob Dylan Live Performance Litig., 867 F.3d 539 (S.D.N.Y 2006), in which that court held that a once talented artist can devolve and become so well known in the community as a disappointment that damages are not recoverable as a matter of law. See also Shyamalan v. United States, 543 F.3d 129 (6th Cir. 2008). In distinguishing Dylan, the South Carolina court observed that while Bob Dylan’s decline had been gradual over a period of years, the decay of the Star Wars franchise was sudden and immediate (and preceded by nearly two decades of engendered good will prior to the prequels’ release in 1999).

The court then granted the Plaintiff’s motion for summary judgment, noting in a single paragraph order that the films were “unreasonably dangerous and defective as a matter of law.”

The case is also notable for a few other procedural rulings made by the court:

• The court quashed the Defendants’ deposition subpoena to actress Natalie Portman, who the court decided had “already suffered enough.”
• Finding the issue nonjusticiable and incapable of resolution by the judiciary, the court denied Plaintiff’s request to issue a declaration that Han Solo had, in fact, shot first.
• Earlier in the case, the court had dismissed Plaintiff’s state law Unfair Trade Practices Act claim which was premised upon the casting of Hayden Christensen as Anakin Skywalker in the second and third prequels. In so doing, the court noted that the Unfair Trade Practices Act claim was merely an attempt to assert an improper negligent casting cause of action, a claim which the South Carolina Supreme Court had only last year abrogated in the Watchmen litigation. See Moore v. Snyder, 572 S.E.2d 492, 652 S.C. 19 (2009).
• The court denied the Defendants’ request to consolidate the case with a similar North Carolina matter arising from a Charlotte family’s viewing of 2008’s Indiana Jones and the Kingdom of the Crystal Skull.