Dechert Re:Torts - Key Developments in Product Liability and Mass Torts

Issue 7 - July 2023

Dechert Re:Torts is a monthly newsletter covering news and developments related to product liability and mass torts litigation.

In this issue:

“I am not a Chat!”
Delaware Supreme Court Mulls Over Medical Monitoring
Expanding Scope of Damages Available in Survivorship and Wrongful Death Actions
Pre-Packaged Problems: The “Expert Standard” for Corporations
EU Proposal Raises the Stakes for Product Liability
FDA Finalizes Guidance on Presenting Quantitative Efficacy and Risk Information in Direct-To-Consumer Promotion

Hot Topics

“I am not a Chat!”

Misused technology creates big problems. Attorneys all recall with dread a virtual hearing during the COVID pandemic when a lawyer accidentally left his feline Zoom filter on, prompting him to confirm to the court that “I’m not a cat!”

Two New York lawyers have similarly become infamous for poor implementation of new generative artificial intelligence (“AI”) technology, after filing a brief that cited non-existent cases. Those non-existent cases were produced by ChatGPT, without the lawyers independently verifying their existence or content. Judge P. Kevin Castel (S.D.N.Y.) recently sanctioned those lawyers, finding they “abandoned their responsibilities when they submitted non-existent judicial opinions with fake quotes and citations created by the artificial intelligence tool ChatGPT, then continued to stand by the fake opinions after judicial orders called their existence into question.”

This event highlighted concerns surrounding AI usage, and judges are beginning to respond by prohibiting or otherwise regulating the use of AI to draft court filings – i.e., “I am not a Chat!” For instance, Judge Donald W. Molloy (D. Mont.) issued an order instructing counsel that “[u]se of artificial intelligence automated drafting programs, such as ChatGPT, is prohibited.” So, too, Judge Brantley Starr (N.D. Tex.) issued an order requiring certification either that attorneys did not use generative AI tools or that anything “drafted by generative artificial intelligence will be checked for accuracy . . . by a human being.” Similar orders have come down from Judge Michael M. Baylson (E.D. Pa.) and Judge Stephen A. Vaden (U.S. CIT), among others. Lawyers should expect that courts will continue to clarify the appropriate use of generative AI.

While technology like ChatGPT may be new, existing rules provide relevant guidance for lawyers, including A.B.A. Rule 1.1 (Duty of Competence), A.B.A. Rule 1.6 (Duty of Confidentiality), and Fed. R. Civ. P. 11 (lawyers must certify, following reasonable inquiry, that “legal contentions are,” inter alia, “warranted by existing law”). Moreover, in February the A.B.A. adopted Resolution 604, which “addresses how attorneys . . . should assess issues of accountability, transparency and traceability in artificial intelligence.” The resolution concludes that “in the context of AI, human and enterprise accountability and human authority, oversight, and control are required and it is not appropriate to shift legal responsibility to a computer or an ‘algorithm’ rather than to responsible people and other legal entities.” AI and other new technologies are simply tools that might aid, rather than replace, human legal work.

Takeaway: Lawyers must exercise vigilance if using new generative AI technology for legal work and must ensure compliance with both the courts’ rules and their own professional ethical obligations. Doing so prevents “catastrophic” outcomes for their clients or their professional standing.

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Delaware Supreme Court Mulls Over Medical Monitoring

On June 14, the Delaware Supreme Court heard oral argument on whether Delaware law recognizes no-injury medical monitoring. This issue is before the court through a certified question from the U.S. Court of Appeals for the Third Circuit, after the District Court of Delaware held that such claims were not cognizable.

In the underlying case, the plaintiff and other members of a putative class claim that they have an increased risk of developing certain illnesses in the future based on alleged exposure to ethylene oxide from a manufacturing facility. However, the putative class will not include any individuals who currently have an illness or any other present physical injury allegedly caused by ethylene oxide. The defendant moved to dismiss, arguing that the mere risk of disease is not a compensable tort injury, and the district court agreed. After the plaintiff appealed to the Third Circuit, the panel found “no controlling precedent” in Delaware as to “whether an increased risk of illness, without present manifestation of a physical harm, qualifies as a cognizable injury.” Thus, the question was certified for the Supreme Court.

In the briefing and at oral argument, the plaintiff argued that exposure resulting in an increased risk of disease is a cognizable injury under Delaware law and analogized to various precedent outside of the exposure context. The defendant, however, argued that these precedents are inapposite to the question of allowing a tort claim for risk of future harm. The defendant also relied heavily on a prior Supreme Court opinion which cited approvingly to another state’s approach recognizing that the “requirement of a preceding physical injury prohibits plaintiffs from claiming that exposure to toxic substances . . . has created an increased risk of harm not yet manifested in a physical disease.” United States v. Anderson, 669 A.2d 73, 77 (Del. 1995). Furthermore, the defendant argued that permitting medical monitoring claims without proof of present physical injury would vastly expand Delaware’s tort law and could result in a flood of litigation.

Delaware is the most recent state faced with resolving this issue. In recent years, New Hampshire and Illinois both rejected no-injury medical monitoring in decisions from each state’s respective Supreme Court. This issue continues to be intensively debated, as further indicated by the ALI’s upcoming vote next year on whether to adopt no-injury medical monitoring in the Restatement Third of Torts.

Takeaway: The recent oral argument in the Delaware Supreme Court will help determine the state’s stance on this significant issue of tort law. The applicability and scope of medical monitoring continue to garner attention as more states are faced with confronting these questions.

Learn about Dechert's Product Liability and Mass Torts services.

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Expanding Scope of Damages Available in Survivorship and Wrongful Death Actions

In the past few years, lawmakers across several jurisdictions (Ohio, Illinois, California, and New York) have sought to expand the scope of the claims and remedies available to wrongful death and survivorship claimants. This may result in an increased number of lawsuits. Most notably, lawmakers in Illinois and California, jurisdictions with already massive numbers of pending civil actions, now permit additional categories of damages not otherwise available to such claimants.

In June 2023, both houses of the Illinois legislature passed House Bill 219, which would allow wrongful death claimants to seek punitive damages. HB219 awaits Governor J.B. Pritzker’s signature. Some Illinois businesses opposed the Bill on grounds that it would lead to more punitive damages awards. In response, supporters of the bill stressed that punitive damages awards are rare in Illinois state courts—noting that only 18 personal injury cases in the last decade have resulted in punitive damages awards greater than $10,000. Supporters of the bill also emphasized that only 3 percent of successful cases resulted in punitive damages awards. If passed, given the expanded scope of damages available, parties could see a rise in the number of wrongful death claims filed in Illinois state court. Similarly, the California legislature’s amendment to California Code of Civil Procedure section 377.34 went into effect last year. The bill allows survivorship plaintiffs—for the first time—to pursue non-economic damages for “pain, suffering, or disfigurement.” While this statute does not impact wrongful death actions, plaintiffs often bring survivorship and wrongful death actions in tandem where the claims arise out of the same incident. Thus, pain and suffering will now be at issue in certain cases with wrongful death claims. This additional relief may increase the number of survivorship claims pursued in California.

Takeaway: Defendants could see an uptick in civil litigation as state legislatures authorize additional categories of survivorship and wrongful death damages.

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Environmental Edit

Pre-Packaged Problems: The “Expert Standard” for Corporations

Recently, the Seventh Circuit Court of Appeals, applying Illinois law, reversed a lower court decision which found that The Edward Orton Jr. Ceramic Foundation (“Orton”) had no duty to warn its customers of risks associated with outsourced packaging materials when the plaintiff could not establish that Orton knew of the material’s asbestos content. Johnson v. Edward Orton, Jr. Ceramic Found., No. 22-1822 (7th Cir. 2023). This holding expands potential liability for companies over outsourced product components.

Between 1971 and 1984, ceramics teacher Bruce Johnson regularly worked with Orton’s pyrometric cones, which were packaged in vermiculite harvested from a Montana mine that also contained asbestos deposits. Id. at 3. In 2017, Mr. Johnson was diagnosed with mesothelioma, a cancer traditionally associated with asbestos exposure. Id. After her husband’s diagnosis, Deborah Johnson sued 11 art supply manufacturers, including Orton, alleging they contributed to her husband’s asbestos exposure. Id. at 4. Each defendant ultimately settled except Orton, which argued in part that it had no duty to warn its customers of hazards associated with its packaging when Orton did not manufacture the vermiculite. Id. at 4-5. The lower court agreed, granting Orton summary judgment. Id. at 5.

The Seventh Circuit reversed, ruling that Orton should be held to an “expert” standard regarding any risk to consumers attributable to its product components, including packaging. Id. at 2, 21. The court held this “expert” standard applies to all accessible information within “the present state of human knowledge” that could impact Orton’s production processes and components and did not limit Orton’s expected knowledge to its specific ceramics industry expertise. Id. at 20. Therefore, because Orton could have known of its vermiculite packaging’s asbestos content, it had a duty to warn its customers of associated risks even though Orton itself did not manufacture the packaging. Id. at 21.

Takeaway: Companies may be found liable for harm caused by outsourced component parts of their products, even when those companies have no direct knowledge of outsourced product composition or corresponding manufacturing processes.

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Regulatory Review

EU Proposal Raises the Stakes for Product Liability

The Council of the European Union established a framework for its upcoming negotiations with Parliament for new legislation to expand liability for defective products on June 14, 2023. The Council will begin negotiations with the European Parliament to develop the final amendment to the 1985 Product Liability Directive. A European Parliament plenary session is scheduled for October 2, 2023.

The proposed directive would alter product liability in key ways:

Lowering the burden of proof: Whereas current law puts the burden on the plaintiff to prove that a product was defective and caused damages, the new directive would presume defectiveness and causation where (1) damage is caused by an obvious malfunction, (2) a manufacturer fails to disclose required information or comply with safety requirements, (3) damage is typically consistent with the defect in question, (4) technical or scientific complexity causes “excessive difficulty” in proving liability or (5) defectiveness has previously been established in similar cases and the damage is typically caused by the same defect.
Expanding the definition of “product”: The proposal would revise the definition of “product” to include software, AI systems, digital manufacturing files to automate machinery or tools (e.g., 3D printers), and digital services that are integrated or allow the core functioning of a product (such as a system that controls the temperature of a smart fridge). Liability would also extend to anyone who has substantially modified the product outside the control of the original manufacturer, such as certain software updates.
Lengthening the statute of limitations period: Plaintiffs must generally bring an action within 10 years of the product’s sale, but under the new proposal, the limitations period would extend to 20 years for latent personal injuries.
Extending liability: The law extends liability along the chain of manufacturing and distribution for products made outside the EU. For example, an EU importer, authorized representative of the manufacturer, or fulfillment service provider could all be held liable for a defective product made by a non-EU manufacturer.
Expanding damages: The directive expands the definition of “damage” to include “medically recognized harm to mental health” and requires compensation for the loss or corruption of data and the cost of recovering such data.
Providing additional defenses: The law would provide additional defenses where a defendant did not put the product into circulation, the defect did not exist when the defendant put the product on the market, and where the state of technical knowledge at the time the product was placed on the market made it impossible to discover the defect.

Takeaway: The EU’s proposed product liability directive would substantially expand product liability, while offering some additional defenses.

Learn about Dechert's Product Liability and Mass Torts services.

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FDA Finalizes Guidance on Presenting Quantitative Efficacy and Risk Information in Direct-To-Consumer Promotion

On June 28, 2023, the FDA issued final guidance on “Presenting Quantitative Efficacy and Risk Information in Direct-to-Consumer (DTC) Promotional Labeling and Advertisements.” The guidance provides recommendations for how to present quantitative efficacy and risk information for prescription human drugs and biological products and prescription and over-the-counter animal drugs. “Quantitative efficacy and risk information” refers to information that numerically addresses the likelihood or magnitude of a drug’s efficacy or risks. The recommendations in the guidance apply across various media types (e.g., print, electronic, audiovisual).

FDA’s guidance includes the following recommendations:

Control groups: When a study includes a control group, companies that provide quantitative efficacy or risk information in DTC promotion should provide that information from both the treatment group and the control group, along with the comparator used in the control group.
Probability presentations: Probability presentations regarding efficacy or risk should convey the information in terms of absolute frequencies (e.g., 57 out of 100) or percentages (57%). If companies instead choose to present probabilities as relative frequencies (e.g., a 50% reduction in risk of stroke), they should be accompanied by the absolute probability measure (e.g., 1% of patients treated had a stroke, compared to 2% of patients in the control group), with equal prominence, to improve consumer comprehension.
Format and Emphasis: Presentations of quantitative efficacy or risk information should appear in the same numerical format throughout a promotional piece, and they should not minimize the severity of a risk (e.g., in DTC promotion describing how, in a clinical trial, only 2% of patients experienced bleeding that required hospitalization, the term “only” should be deleted so as not to minimize the serious nature of the risk).
Visual Aids: FDA recommends that companies select the visual aid design that best communicates the information being presented (e.g., a bar graph for comparisons between probabilities; a line graph for illustrating changes over time), explain the purpose of the visual aid, and define the elements displayed.

Takeaway: FDA hopes that, by following the recommendations in the final guidance, companies may more clearly convey information about the risks and benefits of their drugs.

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