MG+M obtained on June 1, 2018, an order granting summary judgment and dismissal of its client, a nationwide distributor of Asian food products in the 24th Judicial District Court for the Parish of Jefferson in the state of Louisiana. The plaintiff consumed sushi at a New Orleans area sushi restaurant and within days became violently ill, followed by 9 days of hospitalization caused by salmonella poisoning.  The Centers for Disease Control eventually traced the plaintiff’s poisoning to contaminated ground tuna that had been imported into the United States from India.  Some of the ground tuna that originated from India had been distributed by MG+M’s client to the New Orleans sushi restaurant chain.  Other defendants in the case included Little Tokyo Restaurant, and Moon Marine (settled manufacturer). Over 400 cases of the poisoning were reported nationwide, with many lawsuits brought in several jurisdictions.  The plaintiff’s alleged medical conditions resulting from the poisoning episode were: autoimmune thyroid disease, Cushing’s Syndrome, gastrointestinal problems, kidney tumors, lifetime vitamin B-12 deficiency, and Stargardt’s disease (early onset macular degeneration leading to blindness). MG+M persuaded the court, following ample discovery, that its client notified the New Orleans restaurant chain customer of the nationwide recall of the tuna product in a timely manner, and otherwise met its legal duty to the plaintiff and consuming public in this food-provider poisoning case.

MG+M’s Lake Charles Partner, David R. Frohn, was lead counsel, and he received excellent support from the firm’s New Orleans Associate, Helen M. Buckley.

 

The overwhelming majority of courts (including all seven federal circuits that considered the issue) have rejected the so-called “innovator liability” doctrine.[1]  In 2017, however, the California Supreme Court in T.H. v. Novartis Pharm. Corp.[2] unanimously recognized the doctrine holding that brand-name prescription drug manufacturers owe a duty to warn to consumers who use generic drugs.[3]  In March of 2018, the Massachusetts Supreme Judicial Court (SJC) considered the issue, and took a middle ground.  Specifically, in Rafferty v. Merck & Co., Inc.,[4] the SJC held that plaintiffs who ingest the generic form of a drug may bring failure to warn claims against the brand-name manufacturer of the drug if the brand-name defendant acted recklessly by “intentionally fail[ing] to update the label on its drug while knowing or having reason to know of an unreasonable risk of death or grave bodily injury associated with its use.”[5]  In so doing, the SJC reasoned that a plaintiff is, in fact, injured by a brand-name product’s label despite never having used said product because statutes require identical labeling of the generically manufactured version.[6]

 

The Facts

 

In 2010, a physician prescribed Finasteride, the generic version of the brand name drug Proscar, to treat Rafferty’s enlarged prostate.[7]  Rafferty experienced anticipated temporary side effects from the drug, causing him to stop taking the medication.[8]  Rafferty, however, continued to experience these side effects and his physician informed him that they could actually continue “indefinitely.”[9]  The potential lifelong side effects of this drug were not disclosed within the brand-name manufacturer’s nor the mirrored generic manufacturer’s warning label.[10]  Rafferty presented evidence that the brand-name manufacturer became aware of these potential long-term side effects by 2008, when it updated Proscar’s warning label in select European markets to include this risk.[11]

 

Rafferty filed suit against the brand-name manufacturer in 2013, asserting a claim of negligence for, inter alia, failure to warn and for violation of the Commonwealth’s Consumer Protection Statute, G.L. c. 93A.[12]  The Superior Court dismissed Rafferty’s claims, “ruling that [the brand-name defendant] owed no duty of care to [him].”[13]  The SJC took over the case by its own motion from the Appeals Court.[14]

 

The SJC Weighs In

 

Traditionally, Massachusetts has not recognized liability for products manufactured by others.[15]  However, the SJC noted that The Restatement (Third) of Torts allows a modification to this general rule in exceptional cases.[16] The SJC considered innovator liability to require such a modification given the certainty that a user of a generic drug will rely on the label fashioned by the brand-name manufacturer and as state law shields failure to warn claims from generic manufacturers, leaving plaintiffs without recourse for their injuries.[17] However, the SJC also recognized that imposing innovator liability could impact the public policy of encouraging innovation in the drug market and a potential increase in drug pricing.[18]

 

Balancing these competing interests, the court held that, “a brand-name manufacturer that controls the contents of the label on a generic drug owes a duty to consumers of that generic drug not to act in reckless disregard of an unreasonable risk of death or grave bodily injury.”[19]  As an added protection to the manufacturers, it will be the trial judge’s responsibility to determine whether an injury constitutes an “unreasonable risk of death or grave bodily injuries.”[20]  The court went on to define recklessness as an act performed while knowing or having reason to know of facts which would lead a reasonable person to realize that his or her conduct creates an unreasonable risk of physical harm to another and that such risk is substantially greater than that which is necessary to make his conduct negligent.[21] In order to meet this threshold with regard to failure to act, there must be “an intentional or unreasonable disregard of a risk that presents a high degree of probability that substantial harm will result.”[22]

 

The court then vacated the dismissals and remanded the case to Superior Court where the plaintiff would be granted leave to amend his complaint should he believe his claims meet the newfound threshold.[23]

 

National Scope

 

In August of 2017, the United States District Court – District of Massachusetts held in In re Zofran[24] that a brand-name manufacturer is not liable for a generic version’s failure to warn claim spawning from an injury caused by the use of the generic.[25]  Judge Dennis F. Saylor IV articulated this point by emphasizing the consistency of the Circuit Courts’ decisions and citing to a Sixth Circuit multi-district litigation holding “affirming the dismissal of claims against brand-name manufacturers under the laws of 22 states.”[26]  Notwithstanding this majority view, in December of 2017, the Supreme Court of California held that a brand-manufacturer is liable for a failure to warn claim arising from “risks about which it knew of reasonably should have known, regardless of whether the consumer is prescribed the brand-name drug or its generic ‘bioequivalent.’”[27]  Here, the SJC has offered a compromise to the majority and minority viewpoints by adopting a recklessness standard, which is a higher threshold than the minority view, while still maintaining failure to warn liability against the brand-name manufacturer, in contrast with the majority.

 

The court’s concern that redress be available to those who ingest generic drugs by establishing liability to the controlling brand-name manufacturer carried the day.  Our hope is that innovators will continue to advance modern pharmaceutical products despite their increased potential for liability. We will be watching this space for further developments.

 

 

[1] In re Zofran (Ondansetron) Products Liability Litigation, 261 F.Supp.3d 62 (D. Mass. 2017) (citing In re Darvocet, Darvon, and Propoxyphene Products Liability Litigation, 756 F.3d 917, 938-939 (6th Cir. 2014)).

[2] 407 P.3d 18, 29 (Cal. 2017).

[3] Id. at 47.

[4] Rafferty v. Merck & Co., Inc. & Sidney Rubenstein, No. SJC–12347 (Mass. Mar. 16, 2018).

[5] Id. at 2-3.

[6]Rafferty v. Merck & Co., Inc., No. SJC–12347 at 3-4. The statutory and regulatory constructs pertaining to drug labeling are quite complicated.  Relevant to the matter considered by the SJC, the Drug Price Competition and Patent Term Restoration Act, informally known as the “Hatch-Waxman Act” requires the “manufacturer of a generic drug [to] provide its users with a warning label that is identical to the label of the brand-name counterpart.”  Id. at 4.  In accordance with the “federal duty of ‘sameness’” the two opportunities to alter a generic manufacturers preexisting warning are to: (1) update their label in response to their brand-name counterpart’s update; and (2) per specific FDA instruction. Id. at 6-7 (citing PLIVA, Inc. v. Mensing, 564 U.S. 604, 613-616 (2011)).  These federal laws makes it almost impossible for generic manufacturers to follow Massachusetts labeling laws because they do not have the unilateral power to act. See id.

[7] Rafferty v. Merck & Co., Inc., No. SJC–12347 at 8.

[8] Id.

[9] Id.

[10] Rafferty v. Merck & Co., Inc., No. SJC–12347 at 8-9.

[11] Rafferty v. Merck & Co., Inc., No. SJC–12347 at 9.

[12] Id. Plaintiff also asserted a G.L. c.93A § 9 Consumer Protection Act claim and a negligent failure to obtain informed consent action against his physician.

[13] Rafferty v. Merck & Co., Inc., No. SJC–12347 at 10; Rafferty v. Merck & Co., Inc. & Sidney Rubenstein, No. 2013–04459, 4 (Mass. Super. May 23, 2013) (emphasizing that because “Rafferty did not ingest the drug that Merck manufactured, Merck owes Rafferty no duty of care”).

[14] Rafferty v. Merck & Co., Inc., No. SJC–12347 at 11.

[15] See e.g. Mathers v. Midland-Ross Corp., 403 Mass. 688, 691 (Mass. 1989); Mitchell v. Sky Climber, Inc., 396 Mass. 629, 631 (Mass. 1986).

[16] Rafferty v. Merck & Co., Inc., No. SJC–12347 at 16.

[17] Rafferty v. Merck & Co., Inc., No. SJC–12347 at 17. This was especially so given generic products command approximately ninety percent of the market. Id.

[18] Rafferty v. Merck & Co., Inc., No. SJC–12347 at 20-22.

[19] Rafferty v. Merck & Co., Inc., No. SJC–12347 at 29.

[20] Rafferty v. Merck & Co., Inc., No. SJC–12347 at 30.

[21] See Rafferty v. Merck & Co., Inc., No. SJC–12347 at 29 (citing Boyd v. National R.R. Passenger Corp, 446 Mass. 540, 546 (Mass. 2006); Restatement (Second) of Torts, § 500, 587 (1965)).

[22] Rafferty v. Merck & Co., Inc., No. SJC–12347 at 30.

[23] Rafferty v. Merck & Co., Inc., No. SJC–12347 at 36. Additionally, Rafferty’s G.L. c. 93A § 9 claim was vacated because it did not satisfy the “any trade or commerce” provision, which requires that the unfair or deceptive practice is directly related to the advertising, selling, or trade of a Merck product.  Id. at 38.  Thus, because Rafferty used Finasteride, as opposed to Proscar, the claim is beyond the scope of G.L. c. 93A § 9.  Id. at 38-39

[24] 261 F.Supp.3d 62 (D. Mass. 2017). A multi-district litigation matter regarding side effects not purported within the label of Zofran and in-turn not purported on the label of the generic version, Ondansetron.

[25] In re Zofran, 261 F.Supp.3d at 64-65.

[26] In re Zofran, 261 F.Supp.3d at 71-72 (citing In re Darvocet, Darvon, and Propoxyphene Products Liability Litigation, 756 F.3d at 938-939.

[27] T.H. Novartis Pharm. Corp., 407 P.3d at 29 (citing Dolin v. SmithKline Beecham Corp., 62 F.Supp.3d 705 (N.D. Ill. 2014); Chatman v. Pfizer, Inc., 960 F.Supp.2d 641, 654 (S.D. Miss. 2013); Kellogg v. Wyeth, Inc., 762 F.Supp.2d 694, 704 (D. Vt. 2010); Wyeth, Inc. v. Weeks, 159 So.3d 649 (Ala. 2014)). See also Conte v. Wyeth, Inc., 168 Cal.App.4th 89 (Cal. Ct. App. 2008).

beefCareful consideration of the language used in an insurance policy, or any contract for that matter, is extremely important.  A food services company, Meyer Natural Foods LLC (“Meyer”), found that out the hard way in a recent case filed in the U.S.D.C for the District of Nebraska.[1]  Exclusionary language in an insurance policy precluded Meyer from recovering its $1.4 million of damages related to the loss of a beef order due to contamination from a pathogen.  Meyer had contracted with a beef supplier, Greater Omaha Packing (“Greater Omaha”) to purchase certain beef products.  As part of their contract, Meyer required Greater Omaha to obtain an insurance policy to protect the value of the beef that was to be shipped, which they did through the Defendant in this case, Liberty Mutual.  One of the beef shipments Greater Omaha made to Meyer, unfortunately, contained E. coli, which resulted in the destruction of the entire shipment valued at $1.4 million dollars.

In an effort to recover that loss, Meyer turned to the Liberty Mutual insurance policy, which was purchased by Greater Omaha pursuant to their agreement.  However, there were certain exclusions in the policy, which may not have been considered by Meyer and/or Greater Omaha, and this language is the reason that U.S. District Judge John M. Gerrard dismissed Meyer’s suit against Liberty Mutual.  The language in question? An exclusion of coverage for “loss attributable to . . . contamination”.  Meyer’s main argument was that the policy exclusion did not specifically refer to E. coli, and that the word contamination is ambiguous, such that E. coli cannot be included therein.  But that argument was unsuccessful, as the court simply relied primarily on the plain meaning of the word contaminate, “to render unfit for use by the introduction of unwholesome or undesirable elements.”  In doing so, the court determined that E. coli clearly fits within this definition.[2]

The first lesson to take away from this case?  Always read and understand the insurance policy that will be covering a potential loss of your property.  No matter where you are on the food chain, you must be aware of all provisions of the insurance covering your property.  In this instance, Meyer did not obtain the insurance policy directly, but rather Greater Omaha did as part of their contract.  This case is a cautionary tale for obtaining insurance coverage of your property through a third-party.  In cases where a third-party obtains coverage, you still must read the policy, and understand the implications of its various exclusions.

Taking a step back to think about this particular scenario, one must ask, for what purposes would a company in the food distribution and supply industry seek insurance on their food products from a potential loss?  Risk of contamination or adulteration of the beef due to a pathogen such as E. coli would clearly be high on that list and, therefore, it should have been tantamount for Meyers to have sufficient language in the policy to protect against such an incident and ensure coverage.  Is it possible that Meyer never saw the insurance policy? Sure.  But that is the point.  A company, or their counsel, should always read every insurance policy with a fine-toothed comb to ensure that their property will be protected in the event of loss, even if they did not directly obtain that policy.

This is not to suggest that Liberty Mutual was hiding the ball when including exclusions in their policy. Rather, it appears Liberty Mutual was simply protecting its own interests.  Liberty Mutual likely inserted this contamination exclusion with this very type of loss in mind.  In many cases, as in this one, insurance companies are providing coverage to sophisticated companies that have the ability to negotiate the policies terms.  Including multiple exclusions as a starting off point for a well negotiated insurance policy is simply good business for an insurance company.  In fact, this case is not alone, as there have been a number of recent cases in which similar exclusions have been applied by the courts to preclude policy coverage.[3]

There was one final gaffe: One of Meyer’s main arguments in the suit was that the word “contamination” was ambiguous and therefore did not include beef tainted with E. coli.  However, in their own Complaint in this very case, they referred to their property loss as the result of contamination.  In fact, they referred to the “contamination” of beef by a pathogen eleven times.  To even the non-legal trained eye this position is contradictory.  One would be hard pressed to persuade a judge or jury that the very word used by that party to describe their property loss, is actually ambiguous when written in the insurance policy intended to cover that very property loss.   A reading of Judge Gerrard’s decision shows that this word choice in the Complaint certainly impacted the Court’s decision.

Again, the final take-away of this case study: lawyers need to choose each and every one of their words very carefully in all pleadings submitted to court.

 

Meyer Natural Foods LLC, et al. v. Liberty Mutual Fire Insurance Co., C.A. No. 8:15-cv-03116

 

[1] Meyer Natural Foods LLC, et al. v. Liberty Mutual Fire Insurance Co., C.A. No. 8:15-cv-03116

[2] The plain meaning was not the only basis for Judge Gerrard’s conclusion, as will be explained further below.

[3] Perhaps the most extreme example is when the Eleventh Circuit Court of Appeals affirmed a decision by the USDC for Northern Alabama in 2011.  The Appellate Court determined that a curry aroma from a neighboring Indian restaurant was considered a “pollutant” under the insurance policy, such that the property damage (fur coats) caused by the aroma was not protected by the policies coverage.

Maxine Furs, Inc. v. Auto-Owners Ins. Co., 426 F. App’x 687, 687 (11th Cir. 2011).

MillerCoors LLC, owner of the Blue Moon Brewing Company (“Blue Moon”) brand and purported brewer of the Belgian-style witbier, recently removed to the U.S. District Court for the Southern District of California a class action lawsuit filed by Evan Parent on behalf of himself and all similarly situated consumers.  Despite the fact that he claims to be a “beer aficionado,[1]” Parent alleges to have purchased Blue Moon beer from various retailers from 2011 to mid-2012 under the mistaken belief that it was a “microbrew or ‘craft’ beer.” Parent asserts that MillerCoors deceptively marketed and charged a premium for Blue Moon beer by: (1) misleadingly characterizing it as a “craft” or “artfully crafted” beer; and (2) withholding the name “MillerCoors” from its label.

In 1980, there were 8 craft breweries in the United States. By 2014, that number had grown to 3,418.  During that time, craft breweries have slowly cut into the massive share of the $100 billion domestic beer market held by large breweries, such as Anheuser-Busch and MillerCoors. Craft beer has quickly grown from roughly a 3% market share in 2000 to 19% in 2014.  The large breweries have responded by creating their own “craft beer” brands, such as Blue Moon and Shock Top, and by purchasing craft breweries, such as Goose Island, Kona Brewing Co., Leinenkugel, and 10 Barrel Brewing.

Parent’s claim is founded upon the definition of “craft beer” set forth by the Brewer’s Association, a not-for-profit trade association, “dedicated to small and independent American Brewers, their beers and the community of brewing enthusiasts.”  The Brewer’s Association defines “American Craft Brewer” as:

  • Small: Annual production of 6 million barrels of beer or less;
  • Independent: less than 25 percent is owned or controlled by an alcoholic beverage industry member that is not itself a craft brewer; and
  • Traditional: a brewer that has a majority of its total beverage alcohol volume in beers whose flavor derives from traditional or innovative brewing ingredients and their fermentation.

Parent alleges that Blue Moon is located in Coors Field, but that the Blue Moon beer sold in stores is brewed at MillerCoors’ Colorado and North Carolina breweries. Parent asserts that MillerCoors’ massive annual production takes it outside the definition of Craft Brewer set forth by the Brewers Association.

It is undisputed that MillerCoors does not qualify as a “Craft Brewer” pursuant to the guidelines set forth by the Brewer’s Association. Contrary to plaintiff’s assertion, however, the Brewer’s Association is not the arbiter of how “Craft Brewer” is defined.  Additionally, it remains to be seen whether “craft beer” can only be brewed by a “Craft Brewer.” In other words, it is unclear whether the term “craft beer” is reflective of the brewer who produces it or relates to the product itself. Does MillerCoors’ size preclude it from producing a “craft beer,” even if it uses quality ingredients and small batch sizes? Presumably, Parent will have a difficult time disputing the “quality” of Blue Moon beer given he purchased and consumed it regularly over an 18 month period. Despite being an “aficionado,” over that lengthy time period, Parent was unable to distinguish the “quality” of Blue Moon from the other craft beers he presumably consumed.

craft beer 2Parent’s suit is the latest foray of plaintiffs into the requirements of truth in labeling, as it relates to the beer industry, following Anheuser-Busch’s settlement with a class of consumers alleged to have been misled that Kirin Ichiban beer was brewed in Japan. Similar battles have been fought within the food and soft drink industry over terms such as “all natural” and “organic.”

Parent’s initiation of a legal battle over the definition of the term, “craft beer,” and the ability of the large breweries to use that phrase in reference to their product represents the culmination of a significant “craft beer” movement that has dramatically changed the landscape of the beer industry.  The outcome of this case will not only set an important precedent for future mislabeling and deceptive marketing class actions, it could also have a significant and widespread impact on the beer industry, particularly in how large breweries, such as Anheuser-Busch and MillerCoors, respond to their market share losses, and promote their own “craft beer” brands and subsidiaries. Many interested parties will be watching this case carefully, including this writer.

 

[1] No self-respecting beer nerd buys Blue Moon., or refers to themselves as an “aficionado.”

 

How to ‘Bell-weather’ a Recall: Position Your Company to Withstand a Recall Efficiently and Effectively

 

Headlines announcing the recall of some product or another seem to appear as regularly as the changing of the seasons, and often times, to the consumer at large, they come and go just as subtly. It is wholly unsurprising, however, that recalls involving a food item often land with the jolt and turbulence of a spring thunderstorm.

The notion that food, the very purpose of which is to nourish and sustain, could in fact be causing us substantial harm is inherently alarming, and opportunistic news outlets are well aware that food-related recalls increase viewership and website traffic.

Making headlines right now, just as warmer weather is finally reaching much of the country, are two separate wide-ranging recalls involving that American favorite, ice cream. The recalls were initiated by popular producers Blue Bell Creameries, of Texas, and Jeni’s Splendid Ice Creams, of Ohio. The culprit in each recall has been identified as the bacteria Listeria monocytogenes, a potentially lethal contaminant.Jeni's Splendid Ice Creams

Jeni’s Splendid initiated a preemptive voluntary recall of its entire product line on April 23, 2015, while temporarily closing its retail scoop shops, after a random sample collected by the Nebraska Department of Agriculture tested positive for the bacteria. Blue Bell’s path to recall followed a rockier road.

A joint CDC and FDA investigation into an outbreak of 10 reported illnesses resulting in hospitalization, including three fatalities, from January 2010 through January 2015 eventually pointed to Blue Bell ice cream as the likely source. After laboratories in multiple states isolated the Listeria bacteria in several of its products, Blue Bell issued a limited voluntary recall of what it believed were the affected lines in March, 2015. After further investigation resulted in positive test samples in additional product lines, Blue Bell finally moved issued a full recall of all of its products currently on the market on April 20, 2015.

A recall has the potential to create consumer panic towards a product, sometimes an entire brand, and it is almost always a major conundrum for the product seller. The decision to issue a recall of a product that your company has placed on the market involves balancing as many factors as there are flavors of ice cream. The potential impacts are far reaching and substantial, not just to the consumer, but to everyone involved in placing the product in the stream of commerce, from the manufacturer, to the distributor, to the retail seller. What are the risks to the consumer? How many people may potentially be affected? What is the cost of the recall to your company, not just in dollars and cents, but in brand goodwill? How will your employees be impacted? Will you be facing punitive action by a regulatory agency is nothing is done? Will you be exposed to civil or criminal litigation? If a recall is necessary, how broad should it be?

The recalls issued by Jeni’s and Blue Bell followed different paths and for different reasons, but both necessarily caused significant impact on the companies and their respective brands. Blue Bell, avoiding the nuclear option of total recall, rolled out piecemeal corrective measures while continuing wide-scale production, thereby keeping revenue streams open, but exposing itself to protracted negative media coverage and potentially harming further consumers when additional product lines turned up positive for Listeria. There is also a risk that they may ultimately face punitive damages in a civil suit if it is found that their response was too slow or insufficient.

Jeni’s swift and sweeping response likely reduce any long-term impact of the incident to a hiccup, potentially minimizing damages in any future civil law suit.

Meanwhile, Jeni’s (having had the benefit of observing Blue Bell’s struggles,) opted to shut its operations down entirely at the first positive test, even absent any evidence of contaminate-related illnesses. Though likely causing substantial interruption to their bottom line in the short term, Jeni’s swift and sweeping response likely reduce any long-term impact of the incident to a hiccup, potentially minimizing damages in any future civil law suit, and perhaps even increasing consumer confidence in the brand due to their immediate and unequivocal response.

Blue Bell Ice CreamsEvery recall scenario is unique, and when the decisions are made companies do not have the benefit of hindsight, but whether you are an ice cream company, pasta maker, or industrial tool manufacturer, it is important to learn from a situation like Blue Bell’s and Jeni’s and prepare for the future. Companies would be well-advised to have a team on standby for a recall situation, consisting of product and industry specific specialists, and legal, financial and marketing professionals. Furthermore, it is important to think of the long term effects of an outbreak, particularly on your brand name, and not just the short term financial impact of a large scale recall when making any decision.

Of course, preparing a proactive strategy to avoid facing a recall situation in the first place by maximizing internal safety and quality control measures is vital to any manufacturer or supplier. For example, one measure which we have utilized to the benefit of our clients is to conduct periodic continuing education seminars on hot button litigation issues in their specific industry. These presentations benefit both company management and the everyday employees on the product floor and are designed to help limit reoccurring pitfalls and problems which we see once matters reach litigation. With proper preparation and guidance, a company can either avoid a recall altogether, or at the very least minimize any potential negative consequences in the unfortunate event that one must be issued.