Product liability decision hits hard, but may not reach far

Just before Christmas, the California Supreme Court ruled that a product manufacturer can be liable for harms caused by a product someone else made and sold, and for warnings given by that someone else to a user with whom the manufacturer never had any relationship. Even selling the product line to another doesn't cut off liability.

As with many decisions, T.H. v. Novartis Pharmaceuticals Corp., 2017 DJDAR 12115 (Dec. 21, 2017), is neither as good for the bar on the winning side as it may seem, nor as bad for the losing side. Product liability defense lawyers, the sky is not falling. Plaintiffs' lawyers, paradise is not quite at hand. The decision is confined to the context in which it arose, pharmaceuticals, and more specifically to the present FDA regime. Even in that context, the decision affects only negligence and negligent misrepresentation warning-based claims. The decision emphasized that it was decided on demurrer, "a very early stage in the litigation," and identified multiple ways that brand-name pharmaceutical manufacturers could avoid liability at later stages in a case.

There are two parts to the Novartis holding. First, "[a] brand name drug manufacturer may be sued under a theory of 'warning liability'" even when the plaintiff was injured by a generic bioequivalent. The court unanimously endorsed this holding, first recognized in Conte v. Wyeth, Inc., 168 Cal. App. 4th 89 (2008), but little followed outside California. Second, a divided court endorsed a form of "predecessor liability" (in dissenting Justice Carol Corrigan's colorful phrase), in which a past brand-name drug manufacturer, no longer in the business of selling this drug, remains liable for future generic manufacturers.

The decision is grounded on the current FDA requirements that only a brand-name manufacturer can unilaterally change the warning label once it has been approved by the FDA. Generic manufacturers are required by law to use the warning provided by the brand-name manufacturer. "Because the same warning label must appear on the brand-name drug as well as its generic bioequivalent, a brand-name drug manufacturer owes a duty of reasonable care in ensuring that the label includes appropriate warnings, regardless of whether the end user has been dispensed the brand-name drug or its generic bioequivalent." These facts, this control by one manufacturer over warnings used by another, will almost never be the case for other products.

The court recognized this by distinguishing this case from O'Neil v. Crane Co., 53 Cal. 4th 335 (2012), which espoused the principle that "a product manufacturer may not be held liable in strict liability or negligence for harm caused by another manufacturer's product." O'Neil ruled that a manufacturer of pumps on U.S. Navy ships was not liable for harms resulting from asbestos in products of others used with those pumps years later (specifically, insulation and replacement gaskets). The O'Neil court held "that the connection between the defendant manufacturers' conduct and the decedent's injury was 'extremely remote,'" in part because "the decedent did not begin to work in the vicinity of these valves and pumps until more than 20 years after they were installed -- and did not suffer an injury for another 40 years."

Novartis seized on control over warnings as the key difference: "Because the defendants' asserted misconduct, according to the plaintiffs, was simply that they failed to warn about the potential dangers in replacement parts sold by other manufacturers -- and there was 'no reason to think a product manufacturer [would] be able to exert any control over the safety of replacement parts or companion products made by other companies' -- we found that the connection between the alleged misconduct and the injury was too 'attenuate[d]' to warrant imposition of a duty of care."

"Here, by contrast, federal regulations granted the brand-name drug manufacturer -- and no other manufacturer -- control over the active ingredients in the generic drug and the content of the warnings included in the generic's label."

This distinguishes Novartis not only from O'Neil, but from the manufacturers of practically every product other than pharmaceuticals.

With this focus on the warning, rather than the product, the other holding of "predecessor liability" seems almost inescapable, even though three justices dissented from this portion of the holding. (Notably, the "swing" vote came from a court of appeal justice assigned to this case while the Supreme Court has an unfilled vacancy from the departure of Justice Kathryn Werdegar last spring.) Plaintiffs alleged that the risks against which the label did not warn were known during the time that Novartis was manufacturing the drug. Thus, that Novartis was no longer manufacturing the drug was less significant. The court analogized to Hanberry v. Hearst Corp., 276 Cal. App. 2d 680 (1969), where plaintiff alleged injury from defective shoes and the court "allowed negligent misrepresentation claims to go forward against a nonmanufacturer -- the publisher of Good Housekeeping magazine, which had given the shoes its renowned seal of approval." The court distinguished Cadlo v. Owens-Illinois, Inc., 125 Cal. App. 4th 513 (2004), which had affirmed summary judgment for favor of a former asbestos insulation manufacturer where there was no evidence the manufacturer "had an actual connection with the design, manufacture or distribution" of the successor's product causing harm, and which distinguished cases where "the maker of the misrepresentation reasonably foresaw that the intermediary would repeat the misrepresentation to another person." Most "predecessor" product manufacturers will be more like the manufacturer in Cadlo than the manufacturer in Novartis, or the "recommender" in Hanberry.

It may be cool comfort compared to getting out on demurrer, but even as to innovator brand-name drug manufacturers whose warning is used by others, the decision offers the defense multiple ways to obtain a ruling of nonliability"

"Recognizing a brand-name drug manufacturer's duty of care in these circumstances does not prevent the manufacturer from arguing in a given case

[1] that it did not breach its duty given the scientific knowledge at the time;

[2] that its label could not have proximately caused the harm given the passage of time between the transfer of the NDA and the plaintiff's exposure to the drug, as well as the successor's exclusive responsibility for promoting the assertedly dangerous off-label use of the drug; or

[3] that its disclosure of the unwarned risks to the successor manufacturer severed any link between its own label and the harm." (Numbers added and paragraphing altered for clarity.) Similarly, the decision points out that a plaintiff still needs to prove:

"[1] that the injury was foreseeable at the time the brand-name manufacturer held the NDA,

[2] that the brand-name manufacturer's deficient label proximately caused the injury, and

[3] that the prescribing physician relied on the brand-name manufacturer's misrepresentations or omissions." (Numbers added and paragraphing altered for clarity.)

Another Novartis footnote limits the evidence in "predecessor liability" cases in a way that could benefit defendants in other product liability cases. The court noted that "approximately half of the studies cited in the first amended complaint to demonstrate" a known risk "postdated Novartis's sale" of the product line. "To avoid the distortion caused by hindsight bias, trial courts should be careful to protect the jury from needlessly being exposed to or considering scientific studies connecting a drug to some harm where those studies postdate transfer of the" product line to a successor manufacturer. The same rationale ought to bar studies showing a product's risk that postdate the manufacture or sale of the product at issue in any other case.

The Novartis court ruled that its "task here is not to decide whether there should be 'an exception to the general duty of reasonable care on the facts of the particular case before us, but whether carving out an entire category of cases from that general duty rule is justified by clear considerations of policy.'" The "category of cases" affected by the Novartis ruling is not large, and its recognition of "duty" is far from preordaining liability.