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

Issue 15 - April 2024

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

Inside this issue:

“A bridge too far”: Alaskan Court Puts the Freeze on Opioid Nuisance Claim
Plaintiffs in Consolidated Complaint Bound by Bellwether Judgments in the Seventh Circuit
S.D.N.Y. Says Software’s Source Supports Section 230 Safe Harbor
Proposed New Federal Rule of Civil Procedure 16.1 Offers Tools for Effective MDL Management
EPA Finalizes Two Landmark Regulations for PFAS
EPA Designates Two PFAS as CERCLA Hazardous Substances
Increasing FDA Interest in Regulating Artificial Intelligence-Enabled Medical Products

Hot Topics

“A bridge too far”: Alaskan Court Puts the Freeze on Opioid Nuisance Claim

Previous editions of Re:Torts (It’s (Still) Important Enough to Get It Right; Opioid Public Nuisance Question) have covered decisions that addressed whether various states permit public nuisance claims in connection with the opioid epidemic. An Alaska state court recently addressed the issue, coming out against these unconventional theories.

Last month, an Alaskan Superior Court issued a judgment following its decision granting a motion to dismiss an opioid public nuisance claim in State of Alaska v. Walgreen Co., 3AN-22-06675 CI (Alaska Sup. Ct. Mar. 1, 2024). In dismissing the state’s public nuisance theory as a matter of law, the court held that there was “no traditional legal basis” for treating legal pharmaceutical sales as interfering with the public health. Id. at 8.

The state argued that the pharmacies’ conduct qualified as a public nuisance because there was a “significant interference with the public health, the public safety, the public peace, the public comfort or the public convenience,” which “unreasonably interfere[d] with a public right by creating a public health epidemic in Alaska.” Id. at 5. In response, the pharmacies argued the state’s interpretation of “public health” constituting a “public right” was too broad under traditional definitions of nuisance relating to “an indivisible resource shared by the public at large.” Id. The court agreed with the pharmacy defendants, holding that the state had not “described a public nuisance,” id. at 4, because it had not “identified a public right that has been violated,” id. at 6. Nor did the court find a “sufficient nexus” between the “alleged consequences to public health” and the private individualized matter of using legal prescription medication. Id. at 7.

Notably, the court looked beyond Alaskan law for guidance. For instance, the court observed that “no state statute defines any action similar to the distribution of a lawful substance as a nuisance.” Id. at 4. The court also noted that the alleged conduct “differ[ed] greatly” from common examples of a public nuisance in the Restatement of Torts which were not “even remotely similar to the act of distributing lawful medication.” Id. at 6. The court also cited the reasoning of the Illinois Supreme Court in City of Chicago v. Beretta U.S.A. Corp., 821 N.E.2d 1099 (Ill. 2004), “that the threat of misuse of an otherwise legal product is not a violation of a public right even if there has been damage to the public.” Id. at 7. Finally, the court explained that the logical conclusion of the state’s theory would transform “any claim that has negative impacts on public health” into a public nuisance—cautioning that this was “a bridge too far.” Id. at 8.

Takeaway: An Alaskan state court dismissed, as a matter of law, allegations that pharmacies created a public nuisance by selling opioids. This is an important data point as courts across the country continue to confront similar theories of liability that stretch the traditional notions of “public nuisance” claims.

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

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Plaintiffs in Consolidated Complaint Bound by Bellwether Judgments in the Seventh Circuit

Plaintiff tort lawyers often aggregate the claims of many individual plaintiffs into one large, consolidated complaint. This may be done to seek litigation leverage, avoid paying filings fees for each plaintiff, and achieve administrative convenience. But under a recent Seventh Circuit ruling, the plaintiffs who travel together in the same complaint may be bound by an adverse judgment for some of them: “A litigant’s shortcuts . . . can cut both ways.” Cannon v. Armstrong Containers Inc., 92 F.4th 688, 705 (7th Cir. 2024).

In Cannon, after granting summary judgment for defendants in a series of bellwether cases, the District Court for the Eastern District of Wisconsin dismissed the remaining 170 non-bellwether cases under law of the case and issue preclusion. Id. at 688-89.

The Seventh Circuit upheld the imposition of summary judgment for plaintiffs who were joined to the consolidated complaint, applying the law of the case. Id. at 701-702; see also id. at 701 n.6. The bellwether judgments properly applied to the other plaintiffs in the complaint because by bringing their claims together under a unified complaint, plaintiffs had agreed to proceed as a single “case.” Id. at 702. The court rejected the argument that the bellwether claims that advanced ahead of the others in litigation had been “functionally severed” from the rest. Id. at 702-03. Judgment applied even to the plaintiffs whose claims had not undergone discovery. Id.

But the court reversed dismissal on due process grounds as to the remaining plaintiffs who filed separate complaints—albeit with identical claims, theories, and counsel. Id. at 706. These plaintiffs proceeded under separate complaints: “[E]ven among tightly coordinated cases, separate cases brought together for pretrial proceedings retain their separate identities” absent explicit evidence to the contrary. Id. at 710 (citation omitted). The court explicitly endorsed Judge Batchelder’s dissent from In re E.I. du Pont Nemours & Co. C-8 Personal Injury Litigation explaining that “bellwether results are generally non-binding absent an agreement to the contrary between the parties.” Id. at 709 (quoting 54 F.4th 912, 938 (6th Cir. 2022)). Thus, the court found “insufficient evidence. . . in the [case management order] or elsewhere” that these plaintiffs consented to be bound by bellwether judgments. Id.

Takeaway: According to a recent Seventh Circuit holding, judgments against bellwether plaintiffs in a multi-plaintiff consolidated complaint can bind the other plaintiffs who proceed using the same complaint. The same judgment is not binding, however, on other plaintiffs who proceed in separate complaints and do not otherwise agree to be bound by the result of a bellwether case.

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S.D.N.Y. Says Software’s Source Supports Section 230 Safe Harbor

In United States v. EZ Lynk Sezc, et al., No. 21-cv-1986, the Southern District of New York was faced with a seemingly novel request from Defendants, the executives and owners of a car accessory manufacturer and the manufacturer itself: Apply Section 230 of the Communications Decency Act of 1996 and dismiss the United States government’s complaint under Section 203 of the Clean Air Act. The court complied.

In EZ Lynk, the United States brought an action alleging that Defendants were the manufacturers and sellers of a “defeat device” intended to disable vehicle emissions controls. EZ Lynk at 1. Defendants responded that the products they manufacture and provide are fundamentally neutral and that they should be immunized from the case under Section 230.

The relevant provision of Section 230 provides that “[n]o provider or user of an interactive computer service shall be treated as a publisher or speaker of any information provided by” another person. Defendants manufacture the “EZ Lynk System” which consists of: (1) a piece of hardware that directly plugs into the vehicle and requires software to enable it to do anything; (2) the “EZ Lynk Cloud,” “a cloud computing platform” that hosts third-party-created software used to reprogram vehicle computers which can be downloaded by purchasers of the system; and (3) the “Auto App Agent,” a smartphone app that provides the connective tissue between the hardware and the reprogramming software, enabling the user to upload the software to the vehicle via the hardware plugged into the vehicle. Id. at 4.

The government alleged that the purpose of the EZ Lynk System is to “defeat vehicles’ emissions controls” in contravention of the Clean Air Act. Id. at 6. Although the Court concluded that the government adequately alleged a violation of the Clean Air Act, it held Defendants were immune from liability under Section 230 of the Communications Decency Act. Defendants explained that their EZ Lynk Cloud was the type of service requiring immunity—namely, a service that hosts and distributes third-party software. The service at issue, the EZ Lynk Cloud, is an “interactive computer service.” Id. at 16. Users can access the EZ Lynk Cloud and download software from it. The software that provided the basis for the government’s allegations in this case was created by a third party. Id. However, the government’s claim “would treat” the manufacturers and sellers of the EZ Lynk Cloud “as the publisher . . . of that” piece of software” in contravention of Section 230’s immunity provisions. Id.

Plaintiffs also alleged that there was collaboration between Defendants and third party creators of the software, which included Facebook likes on users expressing their appreciation for the EZ Lynk System while obliquely referring to emissions controls evasion, and Defendants’ offering of technical support and assistance to purchasers in the use of their EZ Lynk System. The Court concluded that these did not rise to the level of direct and material contribution to the unlawful content, which would trigger an exception to Section 230 immunity. Id. at 21.

Takeaway: By its own terms, Section 230 is not limited only to social media companies and message boards. A recent SDNY decision confirms that Section 230 is a broad immunity provision for technology companies that provide interactive computer services where liability would require them to be treated as the publisher of content provided by third parties.

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MDL Minute

Proposed New Federal Rule of Civil Procedure 16.1 Offers Tools for Effective MDL Management

Following years of bench-bar efforts and an active, months-long public comment period, on April 9, the Judicial Conference Advisory Committee on Civil Rules proposed the adoption of Rule 16.1 to the Federal Rules of Civil Procedure. If accepted, Revised Proposed New Rule 16.1 (“Proposed Rule 16.1”) would be the first Federal Rule to specifically address MDLs. Currently, Rule 16 governs the issuance of scheduling orders and pretrial conferences in all federal cases; Proposed Rule 16.1 identifies separate considerations for an MDL Court. Pending its approval by the Committee on Rules of Practice and Procedure and the Judicial Conference, the new Rule is expected to take effect at the end of 2025.

Proposed Rule 16.1 recognizes the challenges presented by a modern MDL’s size and complexity and seeks to assist the court and the parties in developing effective management processes from the outset. Specifically, it directs that the MDL court “should schedule an initial case management conference to develop an initial plan for orderly pretrial activity in the MDL proceedings.” See Proposed Rule 16.1(a). Prior to the conference, the parties are to submit a joint report laying out their positions on certain procedural issues, including: the need for leadership counsel and processes for their appointment; a schedule for future conferences; and case filing logistics [and anticipated case volume]. See Proposed Rule 16.1(a) and (b)(1)-(2). The joint report should also set out the parties’ views on more substantive issues, including several that address concerns raised by MDL defendants. In particular, unless the MDL court orders otherwise, the Rule will require that the initial conference address how and when the parties will provide information about the factual bases for their claims and defenses. The Committee Note makes clear both that this provision was included in part to address concerns about MDL actions filed without proper vetting and that such early information exchange may proceed separate and apart from discovery. See Proposed Rule 16.1(b)(3)(B) & Committee Note.

The Rule also provides for an early discussion with the MDL court of potential pretrial motions and core factual and legal issues. Id. § at (b)(3)(D) & (G). This should support efforts to adopt early procedures to address threshold legal issues that cut across all or a substantial number of cases (e.g., jurisdiction, preemption, and general causation), the resolution of which may narrow or more clearly define the scope of the litigation.

While many of Proposed Rule 16.1’s procedures are already commonly used by experienced MDL judges and practitioners, their codification will ensure more widespread and uniform application of these practices in the early stages of an MDL. Proposed Rule 16.1’s terms are subject to modification by the court overseeing the MDL, which as the Committee Notes make clear, is intended to provide the court and the parties “flexibility” in tailoring these practices to the specific needs of a given MDL. See Committee Note at 1. Importantly too, the Note confirms that “[t]he Rules of Civil Procedure, including the pleading rules, continue to apply in all MDL proceedings.” Id. at 5.

Takeaway: Proposed Rule 16.1 seeks to strike the delicate balance between maintaining judicial flexibility and promoting greater uniformity and efficiency in the administration of MDLs. With its anticipated adoption in 2025, parties facing MDLs will have several important new tools in the Federal Rules to help “promote the just and efficient conduct” of such proceedings under the federal MDL statute. 28 U.S.C. § 1407(a).

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Environmental Edit

EPA Finalizes Two Landmark Regulations for PFAS

On April 10, EPA finalized the National Primary Drinking Water Regulation (“NPDWR”) for six per- and polyfluoroalkyl substances (“PFAS”) including perfluorooctanoic acid (“PFOA”) and perfluorooctane sulfonic acid (“PFOS”). This new regulation establishes the first federal Maximum Contaminant Levels (“MCLs”) for PFAS. Further, on April 19, EPA finalized the designation of PFOA and PFOS as hazardous substances under the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”). These two regulations are the culmination of a process lasting over a year during which EPA considered over 100,000 comments from a variety of stakeholders.

EPA’s drinking water regulation sets an MCL for both PFOA and PFOS at 4 parts per trillion (“ppt”). While certain laboratories can detect these compounds at concentrations below 4 ppt, Final Rule at 279, EPA estimates that this is the Practical Quantitation Level that “can be achieved across laboratories nationwide and [is] the most appropriate level[] for use in determining the lowest feasible level that can be implemented.” EPA, Monitoring and Reporting Fact Sheet, at 5. EPA also established an MCL based on a combination of certain other PFAS. Additionally, in a departure from the proposed rule (which did not set MCLs for other individual PFAS), the Final Rule establishes MCLs of 10 ppt for each of three individual PFAS.

The regulation requires public water systems to take various actions over the next few years. By 2027, public water systems must conduct initial monitoring for these PFAS. In a change from the proposed rule, public water systems now have 5 years, instead of 3 years, to comply with the MCLs. By 2029, public water systems must also notify the public of any exceedances. Public water systems are ultimately responsible for MCL compliance, yet the regulations will likely impact companies who use PFAS-containing materials and whose discharges reach these water systems. While EPA has made funding available to certain public water systems in disadvantaged or smaller communities, these water providers and others may still seek cost sharing from entities alleged to have contributed PFAS.

EPA’s designation of PFOA and PFOS as hazardous substances under CERCLA imposes reporting requirements on entities that release PFOA or PFOS greater than one pound within a 24-hour period. In addition, EPA can use CERCLA’s cost-shifting mechanisms to direct potentially responsible parties, including current and former owners and operators of affected sites, to investigate and remediate. This new designation creates another dimension of possible litigation risk for companies who have used PFAS.

Takeaway: EPA’s finalized MCLs and the designation of PFOA and PFOS as hazardous substances under CERCLA address another objective in its comprehensive PFAS Strategy Roadmap. Further regulatory activities are expected in the future, such as an agricultural risk assessment related to PFAS and fertilizer later this year.

Learn more about PFAS developments on Dechert’s PFAS website.

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EPA Designates Two PFAS as CERCLA Hazardous Substances

U.S. Environmental Protection Agency (“EPA”) has designated PFOA and PFOS as “Hazardous Substances” under CERCLA, signaling potential widespread industry impact due to the chemicals' historical and ongoing use.

Please see our OnPoint for further information.

Learn more about PFAS developments on Dechert’s PFAS website.

Regulatory Review

Increasing FDA Interest in Regulating Artificial Intelligence-Enabled Medical Products

The FDA will issue guidance related to the use of Artificial Intelligence (“AI”) in medical products as part of a coordinated approach to AI, the agency announced in a March white paper. The white paper follows an Executive Order issued last fall setting out an AI strategy across executive agencies, which itself followed prior Biden-Harris Administration interest in AI regulation. In issuing the white paper, FDA additionally indicated its focus on AI-related medical products would aim to mitigate bias, promote innovation, and regulate the full life cycle of the products.

In last month’s white paper, FDA also announced its plan to publish three additional guidance documents pertaining to AI and Machine Learning (“AI/ML”) in 2024. First, FDA says it will finalize guidance on marketing submission recommendations for AI/ML-enabled device software. Certain software functions that iteratively improve through AI/ML technology could, under the proposed guidance, be presented in a marketing submission to the Agency as a Predetermined Change Control Plan (“PCCP”). Following approval of PCCP, a device maker could implement certain AI/ML-informed modifications while the device is on the market without undergoing additional marketing approval that would otherwise be necessary. The Center for Devices and Radiological Health (“CDRH”), which is the arm of FDA responsible for regulating medical devices, will finalize such guidance this year.

Second, CDRH plans to issue draft guidance on lifecycle management and premarket submissions for AI/ML-enabled software functions. Outside stakeholders may provide CDRH input during the initial drafting process, as well as following publication of the draft guidance and before finalization of the guidance. Third, the Center for Drug Evaluation and Research plans to publish draft guidance on the use of AI in regulatory decision making for drugs and biologics later this year.

In its white paper, FDA announced its plan to prioritize “prevent[ing] and eliminat[ing] bias” as part of “efforts to advance health equity.” FDA further stated that it would support research that highlights the point in development at which bias is introduced into AI and that demonstrates how to address such bias. The Agency also set out a set of more general goals that are consistent with its regulation of non-AI/ML products and indicated that it will promote standards, best practices and tools to balance regulatory safety against support for innovation and regulate the full scope of the product life cycle.

Takeaway: The FDA’s white paper previewed forthcoming guidance documents that could allow for streamlined approval processes in certain AI/ML applications.

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