January 2009 Archives

A California appellate court's decision on generic drug liability -- which the state Supreme Court declined to review last week -- upended 14 years of precedent, according to an article in Inside Counsel magazine.

The article, published before the Supreme Court's decision was made public, makes several interesting points about Conte v. Wyeth.

First, some background: The plaintiff in the case sued Wyeth for her injuries even though she took a generic version of a drug that Wyeth pioneered but didn't sell to her. The appeals court's decision is at odds with traditional tort liability, which holds that fundamentally manufacturers are responsible for their own products but not responsible for the products made by competitors.

From Inside Counsel:

• The appeals court decision departs from more than a decade of case law in other jurisdictions. The court, however, wrote that it was rooted in "common sense and California common law."

• Given the nature of the pharmaceutical market, in which it's not uncommon for generics to have 80% or 90% of the market share over time, such a specter could surely dampen pioneer companies' willingness to innovate, Mark Haddad, a partner in Sidley Austin and chair of the firm's appellate practice group, told the magazine.

• The case could have broad implications outside the pharmaceutical arena. "If there's a sufficient similarity between whatever product the consumer ultimately uses and whatever product the entity in question is making a statement about, the court could say it's foreseeable that statements about Product X could impact on the consumer's decision to buy or use Product Y," Haddad said.

The members of the Senate Judiciary Committee have been announced. Senator Ellen Corbett remains the chair and Senator Tom Harman the Vice-Chair. The committee makeup remains three Democrats and two Republicans, although three members have changed.

• Ellen Corbett (D-San Leandro) attended Chabot Community College, California State University Hayward, and graduated from University of California, Davis. She received her law degree from McGeorge School of Law in Sacramento.

• Tom Harman (R-Orange) graduated from Kansas State University and from Loyola of Los Angeles School of Law.

• Dean Florez (D-Shafter) is new to the Senate Judiciary Committee. He graduated from University of California, Los Angeles and has an MBA from Harvard. He is not a lawyer.

• Mark Leno (D-San Francisco) is new to the Senate Judiciary Committee. He graduated from the American College of Jerusalem. He is not a lawyer.

• Mimi Walters (R-Laguna Nigel) is new to the Senate Judiciary Committee. She graduated from University of California, Los Angeles. She is not a lawyer.

The Members of the Assembly Judiciary Committee have been announced. While some of the members have changed, the overall makeup remains seven Democrats and three Republicans.

The Chair is Mike Feuer (D-Los Angeles), who graduated from Harvard and Harvard Law School. Vice Chair is Van Tran (R-Costa Mesa), who graduated from UC Irvine and Hamlin University Law School.

Democrat Members:

• Julia Brownley (D-Santa Monica) is not a lawyer. She graduated from George Washington University and has an MBA from American University.

• Noreen Evans (D-Santa Rosa) graduated from California State University, Sacramento and McGeorge School of Law. She practiced civil law prior to entering government service.

• Dave Jones (D-Sacramento) graduated from DePauw University, and from Harvard Law School. The former Chair of the Judiciary Committee, Jones now chairs the Assembly Health Committee. He has also announced that he plans to run for state insurance commissioner in 2010.

• Paul Krekorian (D-Burbank) graduated from University of Southern California and UC Berkeley School of Law.

• Ted Lieu (D-Torrance) graduated from Stanford University and Georgetown Law School.

• Bill Monning (D-Monterey) graduated from UC Berkeley and University of San Francisco School of Law.

Republican Members:

• Steve Knight (R-Palmdale) is not a lawyer. He graduated from Palmdale High School.

• Jim Nielsen (R-Redding) is not a lawyer. He graduated from California State University, Fresno. In 1978, Nielsen was elected to his first of three terms in the State Senate, where he served as Senate Republican Leader from 1983-1987.

The Daily Journal's recent special section on up-and-coming lawyers had some good news for California defendants who've been encountering Paul Sizemore of the plaintiffs' firm Girardi & Keese. He's studying for the European Union's bar exam and may not be bringing lawsuits into California courtrooms as often.

The bad news: If he passes he'll be Girardi's second lawyer eligible to practice law in Europe, where many of the firm's favorite pharmaceutical targets have operatons, if not headquarters.

The Tortification of Europe continues.

Class action workplace litigation filings were up in 2008, as more companies laid workers off because of the economy -- and the trend is expected to continue this year.

That's the conclusion of a report by Chicago-based Seyfarth Shaw, according to a National Law Journal article (subscription required). The firm analyzed 2008 class action and collective-action workplace filings, rulings, and settlements in state and federal courts.

"It's a little bit of a perfect storm with the economy right now," said Gerald Maatman Jr., the Seyfarth Shaw partner who oversaw the report.

Maatman said he expects to see more laid-off workers filing age discrimination lawsuits, more workers filing Employee Retirement Income Securities Act (ERISA) lawsuits in hopes of recovering losses to their 401(k) plans, and more plaintiffs filing lawsuits to test out government regulation of workplace issues under the new Obama administration in 2009.

According to the report, the number of ERISA claims shot up in 2008 as plaintiffs sought recovery for losses to their 401(k) plans.

The report also found that more displaced workers filed age discrimination and Worker Adjustment and Retraining Notification lawsuits in 2008. Wage-and-hour litigation also rose. In 2008, that increase was most prevalent in California, Florida, Illinois, Massachusetts, New Jersey, New York, Pennsylvania and Texas.

A related item: An employment law update from law firm Fox Rothschild reminds readers of a California law, created in 2003, which prohibits an employer from ordering a mass layoff, relocation, or termination at a covered establishment unless the employer gives written notice of the order 60 days before it takes effect. The law is often referred to as "Cal-WARN."

There he was, California's notorious serial ADA lawsuit attorney Morse Mehrban, sitting in a corporate conference room with attorneys of the parent company of a restaurant chain he was suing for access-violating restrooms, when he excused himself for a bathroom break.

Two weeks later the lawyers got a summons.

"We couldn't believe it, he was suing us for the height of the mirror, in the bathroom in our own office, during depositions," Matthew H. Schwartz, who was then corporate counsel for the parent companies of Pollo Campero, Curacao and ADIR Restaurants, told the Daily Journal legal newspaper (subscription required).

The restaurant put up $1,000 for a settlement, but took Mehrban to court when he asked for $8,000 in attorney's fees. Los Angeles County Superior Court Judge Richard Rico rejected the fee, saying, "In light of all the circumstances I'm going to exercise my discretion to deny attorney's fees -- unless you can convince me otherwise."

Mehrban accepted the decision without protest. And he eventually dropped his complaint over the corporate restroom.

Mehrban, who graduated from Southwestern University School of Law and was admitted to the state bar in 1993, has with one plaintiff filed more than 100 lawsuits against Southern California businesses under the Americans with Disabilities Act.

Mehrban is also mentioned in this Los Angeles Times story, which was noted on the CJAC Blog earlier this year.

A southern California attorney who brought a class action against a clothes retailer will be paid $125,000 for his legal services -- in gift cards.

Yorba Linda attorney Neil B. Fineman brought a class action lawsuit against Windsor Fashions, alleging the company was committing routine violations of the Song-Beverly Credit Card Act, according to the Metropolitan News-Enterprise.

Per the settlement agreement, class members won't receive cash, only a $10 gift card. Los Angeles Superior Court Judge Brett Klein also provided that Fineman will be paid his fee with "12,500 ten-dollar Windsor Fashions gift cards."

The lawyer is to get 3,500 of those cards by next Monday and 750 of them on the third day of each month through January of next year. The named plaintiff, Jacqueline Cohen, will garner 250 of the gift cards as an "incentive reward" for leading the charge.

According to the paper, "What Fineman has done is to promote purchases at the defendants' stores."

The Civil Justice Association of California salutes the judge for his innovation. In many class action cases, the lawyers walk away with millions -- in real dollars, while the class members receive coupons.

These cases illustrate a central problem of class action lawsuits in California -- the pressure to settle cases, meritorious or not -- after the class has been certified. In California, only the plaintiff has the right to appeal the all-important class certification decision at the outset of a case. If both sides were allowed the same right to appeal the certification decision, there would be a greatly reduced opportunity to leverage a questionable class action lawsuit into a big settlement.

Today, the California Supreme Court announced its decision not to take up the case holding drug maker Wyeth liable for injuries to a patient who took a generic version of a drug that Wyeth pioneered but didn't sell to her.

When the lower court's decision Conte v. Wyeth was handed down last year, observers were astounded by its extension of product liability law. See the Drug and Device Law blog for criticisms of the decision. The CJAC blog also has a previous post on the case.

An appellate court dismissed Elizabeth Conte's claim against the generic manufacturer -- who made the product she actually took -- but allowed the case against Wyeth, saying:

"We hold that the common law duty to use due care owed by a name-brand prescription drug manufacturer when providing product warnings extends not only to consumers of its own product, but also to those whose doctors foreseeably rely on the name-brand manufacturer's product information when prescribing a medication, even if the prescription is filled with the generic version of the prescribed drug."

This conclusion is at odds with traditional tort liability, which holds that manufacturers are responsible for their own products but not responsible for the products made by competitors. Unfortunately, since the Supreme Court denied review in this case, Conte v. Wyeth will stand as new California law.

Yesterday, we brought you the story of how plaintiffs' lawyers already making bold demands of the new president.

But what might he do? For one take, we turn to an article in The Economist, January 17-23. The full article is worth reading; here is an excerpt:

"The new president is a lawyer from a party dominated by lawyers. His vice-president publicly thanked God last year that lawyers are such a problem for corporate America. When Mr. Obama was in the Senate, he once voted for a mild curb on jurisdiction-shopping by class-action lawyers, but otherwise tended to vote against tort reform. And Democrats in the new Congress are itching to reward the lawyers who donated so generously to their election campaigns ...

" ... On the plus side, Mr. Obama will probably never face another Democratic primary contest, so he no longer needs to outdo other Democrats in cosying up to the trial bar. And he seems to understand how to weigh the benefits of new rules against their costs. A good sign is his expected naming of Cass Sunstein, a Harvard law professor, to head the office within the White House that vets new regulations."

President Barack Obama was only sworn in a day ago, but the plaintiff's bar has already made bold demands on the new president, seeking broader liability rules, limits on arbitration, and a new final rule denying any attempt to preempt state tort law.

The trial lawyers' national lobbying group called on Obama to repeal a bevy of regulations that the organization claims limit corporate liability, according to Legal Newsline.

"Instead of coming up with proposals to benefit our economy, the trial lawyers' first proposal is a stimulus package for themselves -- legislation and calls for executive action aimed at creating more litigation and more legal fees," Lisa Rickard, president of the U.S. Chamber Institute for Legal Reform, told the newswire.

The new president of the California trial lawyers' lobbying group told the Daily Journal newspaper that she hopes to see federal judicial appointments and even Supreme Court appointments that will swing future decisions about federal pre-emption.

You could look long and hard and still not find it. That is, a better description of the racketeering side of class action litigation than provided by federal Judge Richard Posner in a tidy decision declaring "finito" (the judge's word) a long-running suit over the privacy of customer names.

"We are disheartened that the litigation by the information-sharing class has been allowed to drag on for eight years, when it had no merit -- and that as a matter of law, without need to take evidence. It is an example of the typical pathology of class action litigation, which is riven with conflicts of interest. ... The lawyers for the class could not concede the utter worthlessness of their claim because they wanted an award of attorneys' fees. The lawyers for [the defendant] were reluctant to argue the utter worthlessness of the claim because they were able to negotiate a settlement that cost their client virtually nothing -- provided they did not take such a strong stand that it jeopardized the class lawyers' shot at a generous award of attorneys' fees, and hence the settlement. And the objectors were motivated to exaggerate the value of the claim of the information-sharing class so that they could get a generous award of attorneys' fees."

The case from the Seventh Circuit of the U.S. Court of Appeals is Mav Mirfasihi v. Fleet Mortgage Corporation, 2008 WL 5401454 C.A.7 (Ill.), decided December 30, 2008. You can see it here.

Starting next week, several big retailers, including Macy's and Nordstrom, will distribute $175 million worth of free high-end cosmetics to shoppers who bought certain products as part of a class-action settlement alleging that the stores planned to fix prices, according to the Wall Street Journal's Law Blog.

Class members can pick up only one of the cosmetic products they purchased between May 29, 1994 and July 16, 2003 from high-end retailers as part of the settlement. UPDATE: A New York Times reporter checked out the scene on January 20.

Why aren't the lawyers paid in fancy lotions as well? Every year in California, there are many class actions where the class members receive coupons for discounted products (or, in this case, free products), but the lawyers receive millions of dollars. In this case, the attorneys requested $24 million and the defendants agreed to pay up to that amount. The products are available on a first-come, first-served basis, so class member have to get to a participating store as soon as possible after January 20, before the store runs out of products.

This case settled, but the defendant companies admitted no wrongdoing. Although this is a federal case, it is a good example of why California law regarding class actions needs to be changed. Once a class has been "certified," the case is allowed to proceed. Most defendants feel they must settle the case because of the potential exposure to the defendant organization and the large number of people in a class action lawsuit, after certification. This is why cases settle -- with the lawyers receiving millions and the class members receiving pennies (or Sarah Jessica Parker's Lovely shower gel, if they show up to Macy's in time).

California should change its class action law to allow defendants the right to appeal that all-important class certification decision. This change would lead to greater fairness in class action lawsuits.

Civil Justice Association of California 2008 Accomplishments.pdf

2008 Accomplishments Insert.pdf

The Civil Justice Association of California's annual Accomplishments report highlights the non-profit organization's many successes in 2008.

A detailed insert underscores the many accomplishments in CJAC's four programs: legislative, appellate, research, and communications.

In the courts, CJAC's Appellate Program weighed in with amicus briefs on several significant cases. The California Supreme Court sided with CJAC's arguments in a two notable cases, including a business dispute over a research/patent assignment contract involving $200 million in punitive damages; and a case which attempted to expand a property owners' liability for harm occurring on their property due to criminal activity of others.

In the state Legislature, CJAC's Legislative Program has had a 100% defensive win score during the last two legislative sessions. Every bill that CJAC opposed either died or was vetoed by the Governor. In other instances, provisions CJAC objected to via "oppose unless amended" messages were removed and CJAC adopted a neutral position.

The association also launched a new web site and blog, and continued its research on the massive campaign contributions made by contingency fee lawyers.

The association's separate Political Action Committee and Independent Expenditure Committees raised nearly $2.2 million in the 2008 election cycle to support pro-legal reform candidates across the state.

You see a car crash on the side of the road. You think the car might explode. You see a person inside. Should you remove the person? If you do, and inadvertently cause injury, can you be sued?

In California, the answer depends on if you are a medical professional or not. Medical Professionals -- doctors, nurses and emergency medical technicians -- are specifically protected under the Good Samaritan law in California's Health and Safety Code Section 1799.102.

But last month, the California Supreme Court said non-medical Good Samaritans are not protected from lawsuits if they inadvertently or negligently cause harm. In the case of Van Horn v. Watson, the court held that non-medical Good Samaritans are not entitled to liability protection when there is injury as a result of their actions. In that case, Lisa Torti moved Alexa Van Horn out of a car, thinking the car would explode and burn her. Alexa Van Horn alleges that the movement caused her subsequent paralysis.

A quick look at the situation would cause many to conclude (as the New York Times did) that the majority should have applied more common sense and less legal parsing. However, the liability immunity code section at issue is steeped in "medical" references that do back up the opinion. What was missing in the current law is "rescue and care" ("reasonably provided") language, which the Legislature can readily supply to subdue any ambiguity. This change would mesh with the existing common law rule which shields any person who acts with due care in coming to the aid of another.

The California Supreme Court's decision has already led to the introduction of three bills in the legislature. Democrat Mike Feuer, the incoming chair of the Assembly Judiciary Committee, introduced AB 83, a bill that declares the intent of the legislature to look at the case. Republican John Benoit introduced SB 39, which would extend the liability protection to non-medical Good Samaritans as well. And Anthony Adams, R-Hesperia, has authored a bill, AB 90 that would extend the same legal protection to any Good Samaritan offering "medical or non-medical" emergency care.

The New York Times has editorialized against the California Supreme Court decision, saying it was " a disturbingly narrow interpretation that could discourage future good Samaritans from providing help out of fear of being sued." The Times continues, "The implications of the ruling are disturbing. When people see an accident, the law should not discourage them from offering the best help they can. Now, however, Californians will have reason to hesitate. If they offer nonmedical help -- like pulling someone out of a burning house, or rescuing a drowning person -- they may be putting their life savings at risk."

Read California's Health and Safety Code Section 1799.102 by going to http://www.leginfo.ca.gov/. Click on "California Law," then check "Health and Safety Code" and search for section 1799.102.

One Florida county settled 189 playground lawsuits in five years. Another Indiana school district was sued after a boy slid down a slide head-first and broke his femur. A 2004 survey reported that 78% of middle and high school teachers have been subjected to legal threats from students "bristling with rights," columnist George F. Will wrote in "Running at Recess."

The column explores America's pervasive legal culture and points to a new book on public affairs, attorney and author Philip Howard's "Life Without Lawyers: Liberating Americans from Too Much Law."

As a result of fears over liability, warnings multiply: "The warning label on a five-inch fishing lure with a three-pronged hook says, 'Harmful if swallowed;' the label on a letter opener says, 'Safety goggle recommended,'" Will wrote.

"Lawsuits express the theory that anyone should be able to sue to assert that someone is culpable for even an idiotic action by the plaintiff, such as swallowing a fishing lure," he wrote. "... A predictable byproduct of this theory is brazen cynicism, encouraged by what Howard calls trial lawyers 'congregating at the intersection of human tragedy and human greed.'"

"State leaders reconciling California's public finances should be doing all they can to promote California's economic recovery," CJAC President John H. Sullivan wrote in an op-ed published in today's Daily Journal. "A start would be to send a powerful message that we genuinely welcome private investment in California employees and the production of goods and services."

Sullivan lays out several proposals that would help make California a more attractive place to do business. Here's a link to the newspaper (subscription only) and to the op-ed on the CJAC web site.

Sullivan also wrote an op-ed on the theme of California's economic recovery for Sacramento's Capitol Weekly paper.

Senate President Pro Tem Darrell Steinberg wants to cap at 15 the number of bills state legislators can introduce this year, in an effort to keep them focused on the budget.

"The emphasis this year needs to be less on bills and a whole lot more on fixing California's fiscal situation," he told the Sacramento Bee's Capitol Alert.

Currently there is no limit in either house on the number of bills a lawmaker can introduce in a single year. The Senate limits members to 50 bills over the two-year session, while the Assembly allows 40 bills over the two-year session.

Assembly Speaker Karen Bass hasn't signed on to the plan yet, according to the paper. Steinberg told the Bee it is not final, though he has discussed it with members of his caucus.

Asbestos lawsuits are on the rise in Los Angeles, a Madison County judge told his local paper, The (Madison, Ill.) Record.

Judge Daniel Stack told the Record that asbestos lawsuits are rising anywhere there is an active docket, but "Los Angeles is a place that's really starting to take off."

Meanwhile, the window of opportunity for sweeping federal tort reform has effectively been shut, and plaintiffs' attorneys successfully weathered the political storm designed to reign in frivolous lawsuits, the article stated.

According to the Record, the coming years are likely to bring a series of battles for tort reform at the state level, pushing asbestos cases into courts that are more appealing to plaintiffs' attorneys. Illinois and California remain prime spots for new cases and new settlements.

"California's new gold rush is asbestos litigation," said Mark A. Behrens, a Washington, D.C. attorney with Shook, Hardy & Bacon.

Large plaintiffs firms from around the company are setting up shop in California, like Waters & Krause of Texas, and SimmonsCooper of Madison County. Proliferate television, Internet and radio advertisements expand the assets of plaintiffs' firms with scores of new clients. Behrens said judges have already acknowledged the increasing burden from a vibrant and growing asbestos docket.

Many of the plaintiffs coming to California lack and meaningful connection to the state, he said. "In a 2006 sample of 1,047 asbestos plaintiffs for whom address information was available, over 300 -- or an astonishing 30% -- had addresses outside California."

Securities lawsuits spiked in 2008, thanks to the mortgage crisis, according to a new report from Stanford Law School and Cornerstone Research.

A total of 210 prospective securities class actions were filed last year -- a 19% increase over the previous year and more than 80% above the 2006 total, according to The Wall Street Journal Law Blog.

Almost half of the 2008 litigation activity, or 103 class actions, involved firms in the financial services sector. Many of those suits allege that financial firms overvalued their mortgage-related assets; others complain about the business practices of companies that issued subprime loans.

The report also found that class action filings dipped slightly in the second half of 2008, despite the precipitous market drops that occurred during that span.

What's in store for 2009? Joseph Grundfest, the director of Stanford Law School's Securities Class Action Clearinghouse, told the Journal: "I expect filings to drop in 2009 not because the severity of the credit crunch will go away, but because virtually all the major financial-services firms have already been sued. I think for first time in history, we have a pool of defendants that is fished out."

Though serial litigant Jarek Molski was barred by a federal judge from future litigation in the seven-county Central District of California, businesses are not necessarily safe from shakedown lawsuits. Plenty of other plaintiffs are following his lead, filing hundreds of lawsuits against businesses under the Americans with Disabilities Act.

Thomas Mundy is one of these. He told the Los Angeles Times that he filed more than 150 lawsuits in 18 months demanding damages from small businesses.

But Mundy isn't the only attorney making his living from ADA suits. Lynn Hubbard III of Chico estimates he has filed 1,500 suits over the past decade, settling out of court 95% of the time. The Irvine law firm of Azimy-Nathan has filed at least 400 suits on behalf of six disabled clients over the past five years.

According to the Times, "Suing for ADA noncompliance has become a cottage industry for dozens of disabled Californians who have taken on the role of freelance enforcers of an often ignored federal statute. They secure piecemeal correction of offending premises and often enrich themselves and their lawyers in the process."

"He (Mundy) might as well have had a gun and asked me for $1,000 when he came in," Paul Venetos, owner of Anaheim's Varsity Burgers, said of an April visit that led to a lawsuit over a condiments counter that was half an inch too high.

The Sacramento Bee also has a story on the ADA. It mentions Senate Bill 1608, which became law Thursday, and will improve disability access to public locations and reduce predatory lawsuits by lawyers taking advantage of complex access rules.

Imprisoned class action lawyer Bill Lerach, who was recently upgraded to a high-security suite after he attempted to give a guard football tickets, has fired high-power criminal defense attorney John Keker of San Francisco and retained Michael Lipman of the San Diego firm Coughlan, Semmer & Lipman.

Speculation is that the change was a result of Keker's apparent failure to get Lerach into an alcohol treatment program -- which is seen by some corporate convicts as a ticket to an early release. Lerach agreed to serve a maximum of 24 months in prison.

California has had a long, successful tradition of allowing parties to enter into contracts specifying that should any future dispute arise between them, the disagreement will be resolved through private, binding arbitration.

Californians use arbitration agreements in a variety of settings, including real estate transactions, automobile repairs, even fee disputes between lawyers and their clients. A provision approving such agreements between physicians and their patients is part of the landmark Medical Injury Compensation Reform Act of 1975 (MICRA).

In Washington, however, there's a movement to amend the Federal Arbitration Act to preclude parties from contracting for arbitration before a dispute arises. One bill heard in the last Congress, S. 1782 sponsored by Sen. Feingold (D-Wisconsin) would have prevented such clauses in employment, franchise, and "consumer" disputes. It is certainly likely that the issue will be approached again with the new Congress sworn in this month.

But what such attempts fail to appreciate is the benefit that all parties receive when arbitration has been agreed upon before a dispute has even taken place.

For example, when arbitration -- which allows parties to resolve disputes at significantly lower transaction costs than through court -- is factored into a business transaction, the cost of the goods or services can be reduced at the outset. Another benefit to pre-dispute arbitration agreements is that they promote a smooth, less emotional environment for a continued relationship. This is especially true in health-care relationships such as assisted living and health maintenance organizations.

Finally -- and Congress should pay attention to this -- it is no coincidence that the use of arbitration in California coincides with our judges' ability to control their civil trial calendars. Without the availability of this beginning-to-end alternative resolution system, overcrowding would again handicap the country's civil justice system -- with serious consequences to our national economy.

Preserving pre-dispute arbitration -- whether in California or nationwide -- promotes the public policy of giving citizens freedom of choice when dealing with others. Take away that choice, and we'll have nothing but uncertainty in return.

Gordon Ownby is general counsel of the Cooperative of American Physicians, Inc., www.cap-mpt.com, and can be contacted at gownby@cap-mpt.com.