Boulder Business Law Advisor

The Lance Armstrong saga continues (we've written on Lance HERE, HERE, HERE)... this week saw a class action lawsuit filed against Lance Armstrong and various publishers on behalf of California consumers who claim they were misled by Defendants' statements and purchased Defendant Armstrong's books based upon the false belief that they were true and honest works of nonfiction.

When I first heard about the class action, I immediately thought "Are you kidding me?  Sure, we'd all like to sue Oliver Stone for subjecting us to JFK in 10th grade history class but this? ... come on."

SO, is this class action against Lance Armstrong legit? Actually, it might be.

Stutzman, et al v Lance Armstrong, et al, filed January 22, 2013 in the US District Court for the Eastern District of California, alleges Lance Armstrong et al, made multiple misrepresentations contained in Lance Armstrong's books, IT'S NOT ABOUT THE BIKE: My JOURNEY BACK TO LIFE and EVERY SECOND COUNTS, and advertisements and marketing for the books (including the front and back cover and flyleafs media press kits, during television and newspaper interviews, on Internet websites and at personal appearances made by Armstrong) as true and honest works of nonfiction when, in fact, Defendants knew or should have known that these books were works of fiction. Further, the lawsuit claims Lance Armstrong et al advertised marketed and sold these books as a works of nonfiction.

The Plaintiffs allege they were misled by Lance Armstrong's and the other Defendants' statements and purchased Lance Armstrong's books based upon the false belief that they were true and honest works of nonfiction. In their 59-page Complaint, Plaintiffs cite to the exhaustive and growing body of evidence and recent admissions by Lance Armstrong himself to support the allegations of misrepresentation and fraud regarding Lance Armstrong’s use of banned substances (EPO, blood doping, testosterone) during his professional cycling career.

Knowing that the mere claim that his success was due to superior physical training, proper diet and an extraordinary spirit and drive to succeed was not enough to quell suspicions and rumors that he doped, Defendant Armstrong wrote lengthy passages in IT'S NOT ABOUT THE BIKE: My JOURNEY BACK TO LIFE that were intended to convince readers and consumers - including Plaintiffs and the members of the Class - that the rumors of Armstrong's doping were unfair and untrue because of the extensive drug-testing regime employed by the DCI and the organizers of the Tour de France... Complaint ¶ 20

In order to survive a motion to dismiss, the Plaintiffs will have to overcome the pleading requirements of Federal Rule of Civil Procedure 9(b) which requires state-law claims grounded in fraud to be plead with particularity and requires a plaintiff to plead with particularity the circumstances constituting the fraud while malice, intent, knowledge, and other conditions of a person's mind may be alleged generally. “Averments of fraud must be accompanied by the ‘who, what, when, where, and how’ of the misconduct charged.” Yess v. Ciba–Geigy Corp. USA; Villegas v. Wells Fargo Bank, N.A. (N.D. Cal. Sept. 17, 2012).

The Complaint almost certainly meets Rule 9(b)’s requirements as to Lance Armstrong. As to the other named Defendants however, the Plaintiffs may not get so far. This lawsuit was brought in a Federal Court in the Eastern District of California – a court within the jurisdiction of the 9^th Circuit. The United States Court of Appeals for the 9^th Circuit has held that a book publisher owed no duty to a car dealership owner for allegedly publishing errors concerning emission systems in automobiles. Sinai v. Mitchell Books (9th Cir.1993). In 2000, a New York court followed the 9^th Circuit’s lead and supported the proposition that publishers have no duty to investigate the accuracy of its books.

The Sinai court stated that absent an express warranty, publishers have no duty to investigate the accuracy of the contents of the books it publishes and concluded that such a duty could not be created because a publisher's right to publish free of fear of liability is guaranteed by the First Amendment and the overriding societal interest in the untrammeled dissemination of knowledge. While the Sinai case is 20 years old and may be revisited or distinguished at this point, it may be that the “deep pockets” of the publishers in the case might not be reachable by the Plaintiffs. Which would leave Lance Armstrong alone to pay any judgment.

This case will be interesting to watch in light of Lance Armstrong's recent admissions, alleged recent lies, and anticipated flood of lawsuits resulting therefrom.  If the case is permitted to move forward it will no doubt be because of Lance Armstrong's years of agressive lies and denials about his drug use during his cycling career.  The crux of the case is the contention that the Plaintiffs would not have purchased the books had the truth not been withheld by Lance Armstrong. 

The Boulder Business Lawyers at Laszlo & Associates, LLC provide legal counsel for businesses on a variety of business needs, including products liability, risk management, corporate protection, and legal compliance.

UPDATE: Judge Sam Sparks gave Lance Armstrong until midnight tonight, August 3, to file his response. The Court DENIED Armstrong's request for an extension until August 6. Read Lance v. USADA, et al. Order Granting Extension Until Aug 3, 2012 HERE.  The Court was mindful that USADA's Motion to Dismiss is a dispositive motion, and stated that due to the finality of such a ruling on the Motion, Armstrong should be afforded the opportunity to fully brief the issue.

###

[Our sister blog The Boulder Criminal Law Advisor] has been following and writing (HERE and HERE) about the Lance Armstrong v. USADA, et al. case since it was filed.  Yesterday, in Lance Armstrong v. USADA, et al., Mr. Armstrong's legal team filed a Consent Motion Extension for Extension of Time and Request for Further Extension of Time wherein he requested until August 6, 2012 to respond to USADA's Motion to Dismiss.  Armstrong's lawyers believed they had until August 6, 2012 to respond - USADA contends they had until August 2, 2012 and today filed its Response to Motion for Extension asking the Court to deny the Motion for Extension.  USADA supported its Response with exhibits of last minute emails between Sean Breen, one of Lance Armstrong's lawyers, and USADA attorney Bill Bock that show Breen was mistaken on the calculation of time.

So, when was the response due?  Did Armstrong's legal team screw up?  Let's go through the analysis.

USADA filed its Motion to Dismiss on July 19, 2012.  A motion to dismiss is a dispositive motion.  Under USDC WD Texas Local Rule CV-7(e)(2) which states: “A response to a dispositive motion shall be filed not later than 14 days after the filing of the motion,” Armstrong had 14 days to respond to USADA’s Motion.  USDC WD Texas Local Rule CV-6 states “In computing any time period in any civil case, the provisions of Federal Rule of Civil Procedure 6, as amended, shall be applied.” Thus, Per Fed. Civ. Rule 6(a)(1)(A) you must “exclude the day of the event that triggers the period;” – in this case, the 19^th of July.  Therefore, the 14 day time period started to run on the 20^th of July.  Per Fed. Civ. Rule 6(a)(1)(B), you “count every day, including intermediate Saturdays, Sundays,  and legal holidays…” so, counting 14 days puts us at a due date of August 2, 2012.

NOW here is where things get interesting… we’re not done adding time.  Fed. Civ. Rule 6(d) is called “Additional Time After Certain Kinds of Service.”  And, the Rule states: “When a party may or must act within a specified time after service and service is made under Rule 5(b)(2)(C), (D), (E), or (F), 3 days are added after the period would otherwise expire under Rule 6(a).”  What does this mean?  Let’s go to Fed. Civ. Rule 5.  Generally, Rule 5(a) required USADA to serve the Motion to Dismiss on Lance Armstrong – which it did, under 5(b)(E) by “sending it by electronic means if the person consented in writing—in which event service is complete upon transmission…” when it filed it's Motion with the Court on July 19^th. Confused yet? Don’t be.  Revisiting Rule 6(d) reminds us that because USADA made service under 5(b)(E), Lance Armstrong gets the addition time of three (3) days in which to respond.  Making his response due on Sunday, August 5, 2012 -- BUT, per Fed. Civ. Rule 6(a)(1)(C), which states: "... but if the last day is a Saturday, Sunday, or legal holiday, the period continues to run until the end of the next day that is not a Saturday, Sunday, or legal holiday," the response is due on Monday, August 6, 2012 -- essentially, papers aren't due on weekends or holidays.

So, Armstrong is good right?  WRONG.  Look again at USDC WD Texas Local Rule CV-7(e)(2) which states: “A response to a dispositive motion shall be filed not later than 14 days after the filing of the motion,” Armstrong had 14 days to respond to USADA’s Motion from the filing- not from the service. So Local CV-6 is inapplicable and therefore the above analysis is irrelevant.  Hate lawyers yet?  So, the entire analysis Armstrong's lawyers went through, while correct, did not apply in this case.

Not only is this terribly embarrassing for Armstrong's legal team, there is no question this a huge set back for Armstrong - the Court could very easily refuse to permit him to file a Response at all.  UPDATE: Court granted extension until Midnight August 3, 2012.

Moreover, this is a great lesson on the sheer importance of familiarizing yourself with the peculiarities of the Local Rules in each court in which you practice.  Such a miscalculation could expose Armstrong's lawyers to a claim of legal malpractice.  Missing a deadline is serious business - and its avoidable.  However, even the sharpest lawyers may accidentally miss deadlines - in this case, laziness was not to blame.  I am quite confident there was great attention paid to the above analysis.  But, they missed it.  It would be good practice to always forget about the extra three days under Fed. Civ. Rule 6 when calculating your due dates - if you have 7 days, file in 7 ... 14? file in 14 ... better safe than sorry.

The Boulder business lawyers at Laszlo & Associates, LLC provide legal counsel to businesses on a variety of business needs including products liability, risk management, corporate protection and legal compliance.  For more information on our Boulder criminal defense practice, visit our website at www.laszlolaw.com/civil.  Contact one of our Boulder attorneys if you are need of assistance.

A recent District of Colorado decision, A.H. ex rel. Hadijah, v. Evenflo, 2012 WL 1957302 (D. Col. May 31, 2012) (A.H. v. Evenflo.pdf), dealt with the issue of whether communications with a public relations firm are privileged under Colorado law.

For the most part, the involvement of a third party to otherwise attorney-client privileged communications destroys the privileged nature of those communications—beit an inadvertent or voluntary disclosure.  However, particularly in the context of high-profile litigation which receives much national attention, defendant companies routinely hire a public relations firm to assist in managing the defendant’s public image in the face of litigation, including assisting in any potential product recall efforts.

The issue of extending the attorney-client privilege to public relations firms and other third party consultants has received much attention over the past decade or so in the various courts of New York. The Southern District of New York court in In Re Copper Market Antitrust Litigation, 200 F.R.D. 213, an often cited case, applied the “functional equivalent” test for PR firms—meaning was the public relations firm the functional equivalent of an employee.  If so, then communications with the public relations firm were privileged.  This same district later took a slightly different approach and looked at who hired the public relations firm—the attorneys or the client—and/or what was the purpose behind hiring the public relations firm.  In In Re Grand Jury Subpoenas, 265 F.Supp.2d 321, the Southern District of New York held that “that (1) confidential communications (2) between lawyers and public relations consultants (3) hired by the lawyers to assist them in dealing with the media in cases such as this (4) that are made for the purpose of giving or receiving advice (5) directed at handling the client's legal problems are protected by the attorney-client privilege.”  (At the link is an interesting article reviewing the various treatments of third party consultants in the state of New York.) 

The District of Colorado had previously adopted the “functional equivalent” test as to “whether to extend the attorney-client privilege to third parties acting at the behest of a client or their attorney”, citing Horton v. U.S., 204 F.R.D. 670 (Colo. 2002). (The Supreme Court of Colorado also did so in Alliance Const. Solutions, Inc. v. Dept. of Corr., 54 P.3d 861. (Colo. 2002))  The Evenflo court cited to the “functional equivalent” test used by the Southern District of New York but it unclear whether this was in fact the test used by the Colorado district court:

(1) “whether the consultant had primary responsibility for a key corporate job,” (2) “whether there was a continuous and close working relationship between the consultant and the company's principals on matters critical to the company's position in litigation,” and (3) “whether the consultant is likely to possess information possessed by no one else at the company.

Turning to the communications at issue in Evenflo, the district court reviewed the nature of Evenflo's interactions with the public relations firm, Zeno Group.  Zeno was hired by Evenflo “to work with its counsel and provide advice regarding the recall/retrofit campaign.” Since Evenflo did not have an internal public relations department, Zeno served as a “functional equivalent” to an internal PR department.  Zeno prepared communications regarding the recall and prepared press releases and communications to the public, incorporating “input from Evenflo's officers, employees and counsel in the proposed communications.”  

According to the Evenflo court, the "...application of the attorney-client privilege [can] be extended to non-employees, however, the party asserting the privilege must make a detailed factual showing that the non-employee is the functional equivalent of an employee and that the information sought from the non-employee would be subject to the attorney-client privilege if he were an employee of the party.” Using this standard, the court found most of the communications to be privileged:

Based on the facts of this case, the Court finds that there is no principled reason to deny attorney-client protection to communications involving employees of Zeno Group with Evenflo's legal counsel that in camera review reveals were primarily or predominately of a legal character and therefore would be considered privileged attorney-client communications if Mr. Armstrong, Mr. Waterman, or Ms. Pellegrino were technically employees of Evenflo. Therefore, this court finds that communications involving the Zeno Group employees are entitled to the same attorney-client protection had the Zeno Group employees actually been Evenflo employees and the privilege has not been waived by their inclusion in several of the protected communications.

That being said, the court however did find that two documents were not protected by the attorney-client privilege—which offers some caution as to how far this “functional equivalent” test will be applied.  The first was an e-mail where no attorney was even included in the transmission.  As the court stated, even if an attorney had been involved with the drafting of the e-mail at some point, the communication did not contain “confidential matters communicated by or to the client in the course of gaining counsel, advice, or direction with respect to the client's rights or obligations.”  Regarding the second item referenced by the court, while the initial e-mail in a string of e-mails was found to be protected by the attorney-client privilege, the subsequent e-mails in the string were not privileged:

However, beyond the original message in the email, the communication merely forwards a series of communications which are not subject to attorney-client privilege. The attorney-client privilege only protects disclosure of communications; it does not protect disclosure of the underlying facts by those who communicated with the attorney.

As the court summed up simply: a party cannot conceal facts subject to discovery merely by revealing them to its lawyer.

The Boulder Business Lawyers at Laszlo & Associates, LLC provide legal counsel for businesses on a variety of business needs, including products liability, risk management, corporate protection, and legal compliance.  

I am a cyclist and avid Strava.com user (Strava.com allows cyclists to map and clock their times and speeds using GPS and upload them to its website.)  Just this past Sunday, I was on the road in 100 degree heat trying to beat a few of my segment “personal records” – one segment in particular I wanted big time.  I pushed myself, got to the top and thought “I can’t wait to get home, throw this ride on Strava and see how I did.”  Alas, I was off my best time by two seconds … next time.  Strava has motivated me to ride at times when my will power was susceptible to the thought of a cold beer.  However, I have often thought how Strava could (and almost undeniably does) “motivate” cyclists to ride aggressively in order to break records and rank on particular segments created by its members.   

Yesterday, the family of Kim Flint, a cyclist who died when he drifted into the other lane and hit a car while riding his bicycle around a curve brought a lawsuit against Strava, Inc. claiming the popular site was negligent in promoting and encouraging cyclists, like Mr. Flint, to compete on dangerous roads in order to gain standing on the website.

So, what, if any, responsibility does Strava have to its cycling members?  Well, there is the product itself: an online athletic data collection and social networking site.  But the data is based on a member’s activity, in this case cycling – bottom line is you have to cycle to capture data in order to upload data to the site.  So, a necessary component of Strava is cycling.  Strava is so popular because of its "segments" - portions of rides/routes Strava members create and then compete on.  Strava itself does not create these segments.  What Strava does is collect member data and organize and present it on leaderboards for each segment.

In May, 2010, Strava.com's Terms made no mention of associated risks of cycling.  Currently, Strava’s Terms reads as follows:

YOU EXPRESSLY AGREE THAT YOUR ATHLETIC ACTIVITIES, WHICH GENERATE THE CONTENT YOU POST OR SEEK TO POST ON THE SITE (INCLUDING BUT NOT LIMITED TO CYCLING) CARRY CERTAIN INHERENT AND SIGNIFICANT RISKS OF PROPERTY DAMAGE, BODILY INJURY OR DEATH AND THAT YOU VOLUNTARILY ASSUME ALL KNOWN AND UNKNOWN RISKS ASSOCIATED WITH THESE ACTIVITIES EVEN IF CAUSED IN WHOLE OR PART BY THE ACTION, INACTION OR NEGLIGENCE OF STRAVA OR BY THE ACTION, INACTION OR NEGLIGENCE OF OTHERS. YOU ALSO EXPRESSLY AGREE THAT STRAVA DOES NOT ASSUME RESPONSIBILITY FOR THE INSPECTION, SUPERVISION, PREPARATION, OR CONDUCT OF ANY RACE, CONTEST, GROUP RIDE OR EVENT THAT UTILIZES STRAVA’S SITE. www.strava.com June/2012

UPDATED: 6/19/2012 7:16pm Strava emailed its members with the following message:

Posted by Strava Admin on June 19th, 2012

We’ve updated our terms and conditions, and we’re doing everything we can to get the word out. You’ll also see a notice on your dashboard when you log in to strava.com.

What’s changed? We’ve grown a lot and have expanded our products and services since our terms were last updated. The updated terms clarify things related to our mobile apps, as well as real-world races and events that you might participate in that use Strava’s site.

That short description isn’t meant to be a substitute for the real deal, so please take the time to read the revised terms and conditions found at strava.com/terms. If you use one of our mobile apps, please download the latest version to access the updated terms from inside the app. Then, get back out there and go for a ride or a run.

Thanks,
The team at Strava

But does it matter that Mr. Flint did not expressly agree to assume the risks of cycling when he joined Strava.com?  Probably not.  Mr. Flint was an avid cyclist.  He would have known the associated and inherently dangerous risks of cycling - and more specifically, the risks of cycling at a high rate of speed down a steep grade that is traveled by cars.  Mr. Flint had ridden the particular “segment” before (indeed was riding for the sole purpose of regaining his position as the fastest rider on that segment) and would have known the risks inherent on the ride.

According to Frances Dinkelspiel of Berkeleyside News,  Mr. Flint had raced down South Park Road (the rode on which the collision occurred a few weeks later) on June 6, 2010 in 2 minutes and 7 seconds, reaching a top speed of 49.3 mph.  The speed limit on South Park Drive, which is a steep grade, is 30 miles per hour.  “49.3 mph, on a bike. How I find religion on Sunday morning,” “Set new personal records – Centennial, 3 Bears, some others, even a KOM (King of the Mountain) on south gate descent!” Mr. Flint wrote on June 6.

Under California law, primary assumption of risk arises where an individual voluntarily participates in an activity or sport involving certain inherent risks – in this case, cycling.  Cycling is an inherently dangerous sport.  For example, in order to obtain a cycling license from USA Cycling, a rider is required to sign an “Acknowledgment of risk, release of liability, indemnification agreement and covenant not to sue” which states: “I ACKNOWLEDGE THAT CYCLING IS AN INHERENTLY DANGEROUS SPORT…”

There is no doubt that Mr. Flint’s death is a sad event.  However, Mr. Flint’s death was precisely the type of injury he assumed the risk of encountering while cycling.  There is no question that Mr. Flint voluntarily chose to ride his bicycle - nor that he chose to ride in the manner he did.  It also seems quite clear that he knew of and accepted the risks associated with cycling – Mr. Flint was an avid cyclist, joined a website dedicated to cycling and rode to achieve cycling “records.”  He undoubtedly was aware of the fact that the streets on which he rode, whether “segments” or not, were full of hazards including moving cars.  This, along with what will come out in discovery; Strava should not have to prove much more to establish that Mr. Flint knew of and/or appreciated that a “serious injury” or death could result from his activity.

It is important that companies which promote or involve potentially or inherently dangerous activity be sure their terms of service or user agreements contain adequate warning and release language.  Like many other companies in the heath and fitness arena, Strava is a growing company with increased exposure - and with increased exposure come, well, increased exposure. While I am not sure what kind of legal budget or threshold for litigation the company has, especially in light of the fact it is currently involved in a patent lawsuit, I would look for Strava to vigorously defend this case to set an example for similar claims going forward.

The Boulder business lawyers at Laszlo & Associates, LLC provide legal counsel to businesses on a variety of business needs including products liability, risk management, corporate protection and legal compliance.

The title of this post might seem like an obvious statement but it is something worth reviewing from time to time...forest-for-the-trees and all.

Rodriguez v. Stryker Corp. was a recent pain pump decision delivered by the Sixth Circuit.  We previously wrote about another pain pump decision in Pritchett v. I-Flow Corp., involving the use of a “differential diagnosis” to establish general causation.  While also involving issues of causation, the opinion in Rodriguez also dealt with whether it was possible for Stryker to reasonably know that its pain pump could have caused the injury complained of in 2004.

In November 2004, the plaintiff, Andrew Rodriguez, had shoulder surgery in which a pain pump was implanted.  Through the pain pimp, the plaintiff received a local anesthetic, bupivacaine, to the shoulder joint.  While the plaintiff initially improved, his condition worsened until he discovered in 2008 that he longer had any cartilage in his shoulder—a condition called chondrolysis.  The plaintiff filed suit in 2008 alleging negligence, strict liability, and breach of warranty.  The district court concluded that Stryker could not have reasonably known in 2004 of the risk of pain pumps causing chondrolysis and thus Stryker had no duty to warn of what was unknowable at the time.

The Sixth Circuit began its inquiry by noting that under Tennessee law (similar to many states) a manufacturer must warn of known risks caused by its products or risks that should have been known through exercising reasonable care.  The court quickly determined, and the plaintiff did even attempt to claim to the contrary, that it was impossible for Stryker to know in 2004 that anesthetics injected by its pain pump could cause chodrolysis—“no reported case of chondrolysis linked to anesthetics appears until 2005.”  So the only way for the plaintiff to show that Stryker had a duty to warn was to establish that Stryker should have known of the chondrolysis risk.

Which brings us to the thirteen published articles submitted by plaintiff.  According to the court, 

none of the articles draws a connection between pain pumps and chondrolysis, leaving Rodriguez to argue something more inferential:  that the studies “document[ ] significant damage to articular cartilage after prolonged exposure to foreign solutions, including bupivacaine”….Even that is a stretch, however, given what the articles say.

After reviewing each article, the court determined: “[w]hen all is said and done, not one of Rodriguez’s thirteen articles shows that medical experts understood in 2004 that infusing a joint with bupivicaine for two days could cause irreversible cartilage damage.”  For this reason, “Stryker had no duty to understand what the relevant medical literature did not.”

Turning to the expert report, the court was similarly unconvinced that it provided evidence that Stryker had a duty to warn about chondrolysis in 2004.  According to the court, the plaintiff's expert report claimed that “general medical knowledge about articular cartilage, combined with the then-extant scientific literature, should have put Stryker on notice that this pain pump would harm cartilage.”  After stating the proposition that a court has a duty to inspect the reasoning of an expert, “including whether an expert’s sources support his conclusions,” the Sixth Circuit found the latter requirement lacking in the plaintiff’s expert report:

[The expert] relies on several articles published after Rodriguez’s surgery, which do not speak to what Stryker should have known months or years earlier based on expert knowledge at the time.  He also relies on articles published before Rodriguez’s surgery, but they are the same thirteen articles discussed above, and none of them supports the conclusion that Stryker reasonably should have known about the risk that its pumps could cause chondrolysis.  The thirteen articles, indeed, undermine the expert report because they show that medical experts did not understand the risks posed to cartilage by pain pumps in 2004, when Rodriguez had his surgery.

Neither the thirteen articles nor the expert report submitted by the plaintiff demonstrated that Stryker had a duty in 2004 to warn of the risk of chondrolysis.  Stacking inference upon inference does not establish a duty-to-warn.  Moreover, the district court need not have submitted this case to a jury “containing only a spark or glimmer of evidence that requires the finder-of-fact to make a leap of faith to find the defendant liable for the plaintiff’s injury.” Thus, the court held that the plaintiff failed to establish that Stryker had a duty to warn of the risk of chondrolysis caused by its pain pumps in 2004:

That is just the problem here.  Rodriguez asks a jury to find that because there were isolated instances over seventy years when evidence showed that a few foreign solutions caused temporary harm to joint cartilage, Stryker should have known (and warned) that using its pain pump in a joint with bupivicaine would cause permanent damage.  On this record, the theory requires two speculative leaps.  It requires the inference that evidence of harm resulting from other solutions meant that anesthetics would cause the same harm.  And it requires the inference that evidence of transient harm to joints meant that irreversible cartilage damage was likely.  Both are far too conjectural and too many steps removed from the problem that developed.  Just because ingesting one type of liquid over a period of time may cause a problem does not mean that ingesting another liquid will cause the same problem.  And just because cleaning a wound with rubbing alcohol causes temporary discomfort does not permit the inference that cleaning a wound more than once will produce permanent discomfort.  To conclude otherwise would establish a claim for hindsight negligence, not common law negligence.

The Boulder business lawyers at Laszlo & Associates, LLC provide legal counsel to businesses on a variety of business needs including products liability, risk management, corporate protection and legal compliance.

In 2003, Cervelo, the maker of high end road bicycles, voluntarily, and in conjunction with the U.S. Consumer Product Safety Commission, recalled 317 Wolf all carbon road bicycle forks.  In April 2012, a Massachusetts man riding on a bike fitted with the recalled forks crashed and died.  Police stated that the rider was on a Cervelo Soloist and that it appeared a "mechanical failure" causing the forks to separate from the bike led to the crash.  An investigation is currently underway, but let us assume, for purposes of this article, that the recalled Cervelo forks caused the accident and ultimately the man’s death.

Most punitive damage awards stem from evidence that the manufacturer knew or should have known about a post-sale problem but failed to take adequate remedial measures to prevent accidents.

In the Cervelo case, the recalled Cervelo forks were sold from April 2003 until July 2003 - with a recall announced July 31, 2003.  It would appear that Cervelo worked swiftly to recall the defective forks.  But with only 300 forks sold in such a short period of time, how was it that Cervelo was unable to reach all owners of the forks?  The bottom line is no one should have been riding on those forks.  In its latest Consumer Product Safety Commission Recall Handbook, the CPSC lists dozens of ways to inform consumers of a product hazard and recall.  Of note is the social media aspect, perhaps the most efficient way to reach your consumer:

The Commission encourages companies to be creative in developing ways to reach owners of recalled products and motivate them to respond ... As new or innovative methods of notice and means of communication become available, such as social media, the staff encourages their use. ...  use of a firm’s social media presence to notify consumers of the recall, including Facebook, Google +, YouTube, Twitter, Flickr, Pinterest, company blogger networks, and blog announcements.

Just this week, bike manufacturer Specialized issued a recall due to hazardous break levers. However, the company has not yet announced the recall on Twitter - where it has more than 60,000 followers.  Others have tweeted about the recall but nothing from the Specialized company itself (as of the writing of this blog post). This is such a missed opportunity - Specialized can immediately reach 60,000+ consumers who will immediately get the information it provides (not to mention there are more likely than not some affected consumers following on Twitter.)

In the Cervelo case, a question will certainly be asked whether Cervelo did everything it reasonably could have done to ensure all forks were replaced.  How did (if at all) Cervelo try to inform the man that his bike was one that had the defective forks? Twitter was not around in 2003, and it is doubtful the company had policies and procedures in place to notify customers via social media at that point. But times have changed.  It is 2012, and there is simply no excuse not to use social media to inform consumers of hazards and recalls associated with your products.  And keep in mind that many (if not most) of your jurors will use and understand Twitter, Facebook and the latest social media - and wonder why you did not use it to let them know they could get hurt.

The Boulder lawyers at Laszlo & Associates, LLC provide legal counsel to businesses on a variety of business needs including products liability, risk management, corporate protection and legal compliance.

In Moeller v. Garlock Sealing Technologies, LLC, (6^th Cir. Sept. 28, 2011), the Circuit court decided whether evidence presented by a Plaintiff regarding exposure to asbestos was sufficient to support a determination that the manufacturer's asbestos-containing gaskets were a substantial factor in bringing about the pipefitter's injuries and death.  The court held the evidence was insufficient.   In Moeller, Mr. Moeller, a pipefitter, worked with asbestos insulation from 1962 through 1975.  During the same period, Plaintiff worked with Garlock gaskets which contained asbestos.  Mr. Moeller died from mesothelioma in 2008, his widow sued numerous defendants including Garlock.  Under Kentucky state law, to prevail on a negligence claim, a plaintiff must prove that a defendant’s conduct was a substantial factor in bringing about the harm.  At trial, with respect to causation, Plaintiff presented the testimony of a doctor of internal medicine who opined that Plaintiff’s exposure to asbestos from Garlock gaskets, along with other exposures, contributed to Robert’s mesothelioma. 

The jury returned a verdict for Plaintiff in the amount of $516,094.  Defendant Garlock moved for judgment as a matter of law and for a new trial – both motions were denied.    Here, because Plaintiff’s experts admittedly never testified that Plaintiff’s exposure to Garlock gaskets was a substantial factor in causing his mesothelioma, the Sixth Circuit held that Plaintiff was unable to establish that exposure to Garlock gaskets in and of itself was a substantial factor in causing the mesothelioma.  Therefore, under Kentucky law, Plaintiff failed to prove her case and Garlock’s motion for judgment as a matter of law should not have been denied. 

This case reaffirms the recent theme the importance of good and thorough expert testimony.  Here, Plaintiff’s experts did not, as they were likely unable, to opine that Garlock’s gaskets were a substantial factor in causing Mr. Moeller’s mesothelioma.  With such evidence being so critical to the claim however, plaintiff’s counsel should have developed additional or alternative evidence regarding causation.    

The Supreme Court's recent decision in the Wal-Mart sex-descrimination suit demonstrates the importance of 'commonality' in class actions.  Not to mention that the decision is a good example of why MDLs, free from such 'roadblocks', are the new class actions.  Because MDLs are not regulated in the way class actions are, such a review for lack of commonality reasonably would never occur.

The plaintiffs' case against Wal-Mart was based on an alleged pattern of descrimination in the form of paying women workers less than thier male counterparts and providing them fewer opportunities.  In the end, the allegations were not enough to permit the three named plaintiffs to represent a class of 1.6 million.

Merely showing that Wal-Mart's policy of descrimination has produced an overall sex-based disparity does not suffice. - Justice Scalia. 

While opening a bottle of wine recently, I struggled with a cork that was just plain stuck.  After some serious effort with the Pulltap, Ah-So and just short of using my 9 iron, I got the thing open.  But not without the thought of what might have been had the bottle burst and glass went flying.  Who would be to blame? Not me of course...but who? The winery? The bottle maker?  The cork supplier?  Turns out, in all likelihood, it would have been my fault.  

In Rabon-Willimack v. Robert Mondavi Corp. a bartender injured her hand after breaking a bottle of Robert Mondavi Woodbridge while opening the wine.  The bartender alleged causes of action sounding in strict products liability, breach of warranty and negligence.  In the end, the bartender could not prove her case as the Defendants successfully argued that there was no manufacturing defect and no flaw in the design as the “bottle fractured due to excessive force applied to the top of the bottle with a two-pronged fulcrum of a waiter’s metal corkscrew.”  Nor was the court persuaded that Robert Mondavi had a duty to warn of the risks created by the use or misuse of another manufacturer’s products or of the danger of applying pressure to a glass bottle with a mental object while holding the bottle in one’s hands.  The court concluded that the expert's opinions were nothing more than specultaion:

As the expert's opinion was not supported by foundational facts, such as the results of actual testing of the bottle, a deviation from industry standards, or statistics showing the frequency of consumer complaints or injuries resulting from the alleged product defect, it lacked sufficient probative value to raise a triable issue of fact as to whether the subject bottle was not reasonably safe in its design.  Rabon-Willimack v. Robert Mondavi Corp., 73 A.D.3d 1007, 1009, 905 N.Y.S.2d 190, 193 (N.Y. App. Div. 2010).

So, be careful when opening your wine, but more important, be extra careful when choosing your expert. 

In keeping with our discussion on class certifications (see below), of note is the recent decision of the 11th Circuit vacating an order certifying a class this past Friday.  In Fitzpatrick v. Gen. Mills, Inc., the class consisted of consumers who purchased YoPlus yogurt.  The products liability case alleged that General Mills violated the Florida Deceptive and Unfair Trade Practices Act (FDUTPA) by making false and misleading claims about the digestive health benefits of its YoPlus yogurt.  The District Court certified the class and held that recovery under FDUTPA does not hinge on whether a particular plaintiff actually relied on General Mills' claims about YoPlus' alleged health benefits, but rather, whether the deceptive conduct would deceive an objective reasonable consumer.

The District court concluded its order by defining the class as "all persons who purchased YoPlus in the State of Florida to obtain its claimed digestive health benefit."  Noticeably perplexed by the District court, the 11th Circuit concluded the definition of the class certified was in conflict with the District Court's sound analysis and threw into question what class it actually intended to certify.

The 11th Circuit stated simply that "the district court's analysis in its Order on Motion for Class Certification is sound and in accord with federal and state law. The reasoning reflected therein is well within the parameters of Rule 23's requirements for certification of a class. And, if the definition of the class had been in accord with the legal analysis, we would have readily affirmed." Fitzpatrick v. Gen. Mills, Inc., 10-11064, 2011 WL 1103005 (11th Cir. Mar. 25, 2011). 

While this products liability case appears to revolve around a technicality, it is important to consider the distinction here between the District court's analysis grounded in one definition of the would-be class and the conclusion that greatly limited the class by contradicting its own analysis.  It seems a foregone conclusion that the District court will simply redefine the class in accordance with its analysis and the 11th Circuit's guidance.

On Tuesday, The Supreme Court Ruled 9-0 in favor of the investors in Matrixx Initiatives v. Siracusano (09-1156), March 22, 2011. 

We all may remember well the countless television and radio advertisements for Zicam cold remedy.  But when reports began to surface that some users of the Zicam cold remedy (now a discontinued product) had lost their sense of smell, the manufacturer, Matrixx Initiatives, Inc., saw shares of its stock lose value. In an effort to stem the tide of negative publicity, Matrixx issued statements defending its popular cold medicine by first dismissing the incidence of the loss of sense of smell as exceedingly rare and then taking the additional bold step of proclaiming that there was no scientific basis for linking Zicam to the complained of side effect.

Investors brought class action against Matrixx Initiatives and three of its executives, alleging that they violated federal securities laws by failing to disclose material information about Zicam.  The investors had learned that Matrixx had, on a handful of occasions, been contacted by the medical community regarding the link between the use of Zicam and the loss of smell.  Further, Matrixx made statements about product sales and growth without disclosing that the company had been sued upon claims of loss of smell resulting from the use of Zicam.

The Supreme Court was faced with the question of whether a plaintiff can state a claim for securities fraud under § 10(b) of the Securities Exchange Act of 1934, and Securities and Exchange Commission (SEC) Rule 10b-5, based on a Matrixx’s failure to disclose reports of adverse events associated with its product Zicam if the reports do not disclose a statistically significant number of adverse events.

The Supreme Court held that information regarding a side effect of a drug, even if the side effect is extremely rare, was ‘material information’ upon which a ‘reasonable investor’ may have acted.  The decision now clears the way for the investor class-action lawsuit to move forward against Matrixx, holding that the company had an obligation to reveal details of the observed side effects to investors even though the Company claimed the information did not rise to the level of statistically significant data.

A lack of statistically significant data does not mean that medical experts have no reliable basis for inferring a causal link between a drug and adverse events ... We note that courts frequently permit expert testimony on causation based on evidence other than statistical significance.

Given that medical professionals and regulators act on the basis of evidence of causation that is not statistically significant, it stands to reason that in certain cases reasonable investors would as well.

What is important to recognize here is that Martixx made affirmative statements denying the association between Zicam and loss of smell and omitted certain facts and information relating to those side effects.  Simply, Matrixx was not required to provide the information it had.  However, once Matrixx made satements and representations regarding Zicam, those statements needed to be complete and accurate.

...it bears emphasis that § 10(b) and Rule 10b-5(b) do not create an affirmative duty to disclose any and all material information. Disclosure is required under these provisions only when necessary “to make ... statements made, in the light of the circumstances under which they were made, not misleading.

The Court reasoned that there is no bright line rule requiring statistically significant information embracing, rather, a “total mix” standard of whether a reasonable investor would have viewed the non-disclosed information as significantly altering the total mix of information available to the investing public.

The question remains whether a reasonable investor would have viewed the nondisclosed information ‘as having significantly altered the “total mix” of information made available.’

... the mere existence of reports of adverse events-which says nothing in and of itself about whether the drug is causing the adverse events-will not satisfy this standard. Something more is needed, but that something more is not limited to statistical significance and can come from “the source, content, and context of the reports...

The Court's analysis in Matrixx is important to consider when deciding what information your company should make public.  As is so often the case, the mouth piece of the company may not be aware of certain facts or information which may cause their statements to be "misleading."  Good corporate policy regarding dissemination of information to the public and a clear understanding of that policy is critical.

Congressman Bob Filner (D-CA) has introduced the Consumer Protection Act of 2011, H.R. 542, which would “...eliminate the learned intermediary defense to tort claims based on product liability, and for other purposes.”

The legislation would repeal the Learned Intermediary Doctrine, a legal doctrine well established in many jurisdictions that provides a defense for pharmaceutical and medical device manufacturers in failure to warn claims. The Learned Intermediary Doctrine is an exception to the general rule that a product manufacturer has a duty to warn the consumer of the risks associated with the use of its product.  Under the Learned Intermediary Doctrine a manufacturer raises the defense that it had only a duty to adequately warn the “learned intermediary” (who stands between the manufacturer and consumer) of the risk associated with the use of its product.  The theory of the doctrine being that the “learned intermediary” is in the best position to understand and warn the end consumer of the product’s risks.  Over the years however, several exceptions have eroded the application of the doctrine: vaccinations, contraceptives, drugs withdrawn from the market, and direct to consumer advertising.   

When the medicine that was supposed to heal us, instead harms us, we should be able to hold drug manufacturers responsible,” “This legislation puts the power back in the hands of the consumer and makes drug companies accountable for their products.

- Congressman Bob Filner. 

While the Learned Intermediary Doctrine is generally understood to apply only in pharmaceutical related actions and to involve a manufacturer-doctor-patient relationship chain, H.R. 542 is so broadly worded that it has the potential to include any product whether a pharmaceutical or a tractor trailer.  In its apparent simplicity, the Bill could effectively shut the door on any defense that includes a "sophisticated intermediary."  Further, H.R. 542 raises significant preemption issues as it would encompass “...any tort claim in any court in the United States...”

H.R. 542  was introduced on February 8, 2011 and has no co-sponsors.  It has been referred to Committee.  H.R. 542 is in the first step in the legislative process and will first go to committee where it will deliberated, investigated, and revised it before it would go to general debate. The majority of bills and resolutions never make it out of committee.  The full text of the Bill is below.

 112th CONGRESS

1st Session

H. R. 542

To eliminate the learned intermediary defense to tort claims based on product liability, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

February 8, 2011

Mr. FILNER introduced the following bill; which was referred to the Committee on the Judiciary

---

A BILL

To eliminate the learned intermediary defense to tort claims based on product liability, and for other purposes.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the ‘Consumer Protection Act of 2011’.

SEC. 2. LEARNED INTERMEDIARY DEFENSE.

(a) In General- It shall not be a defense to any tort claim in any court in the United States that a manufacture of a product has fulfilled that manufacturer’s duty of care when the manufacturer provides all of the necessary information to a learned intermediary who then interacts with the consumer of the product.

(b) Definition- In this section--

(1) the term ‘learned intermediary’ means a person, licenced under applicable State or Federal law, to advise a consumer whether or not to use the product in question; and

(2) the term ‘State’ includes the District of Columbia, Puerto Rico, and any other commonwealth, possession, or territory of the United States.