Inventive Claims May Be Unconstitutional in Products Liability Cases

The Legal Intelligencer

Products liability litigation has become more sophisticated during the 21st century as products themselves have become more complex, interconnected and regulated. As the products become more complex, defenses available to product manufacturers have also expanded. With a higher threshold for pleadings, broader application of preemption, and greater limitations on jurisdiction, plaintiffs often find themselves facing significant challenges to a simple duty-breach-cause-harm paradigm. In response, plaintiffs use new theories to supplement traditional product liability claims, such as innovator liability and failure-to-report claims. But under certain circumstances, these new causes of action may not be constitutional.

A court’s exercise of jurisdiction over a product manufacturer must not violate the Constitution’s due process requirement. But in addition, the Constitution reserves to Congress the power to regulate commerce among the states, which limits a court’s ability to enforce state law for activity that occurs beyond its borders. A court can exercise its jurisdiction and enforce state law over a manufacturer that delivers its product into the court’s jurisdiction. However, when evaluating nonproduct liability claims against a product manufacturer, it is important to determine whether the court’s exercise of jurisdiction over the claim violates the manufacturer’s due process rights and whether the court’s enforcement of state law interferes with interstate commerce.

Innovator Liability

Innovator liability is a legal theory that seeks to hold one manufacturer liable for an allegedly defective product made by another manufacturer. Thus far, courts have only adopted this theory in prescription drug cases where a failure-to-warn claim against the generic drug manufacturer is pre-empted. See Dolin v. SmithKline Beecham, 62 F.Supp.3d 705, 713 (N.D. Ill. 2014); Rafferty v. Merck & Co., 92 N.E. 3d 1205 (Mass. 2018); and T.H. v. Novartis Pharmaceuticals, 407 P.3d 18, S233898 (Cal. Dec. 22, 2017) and Conte v. Wyeth, 168 Cal. App. 4th 89 (2008). Federal regulations allow a brand drug manufacturer (innovator) to unilaterally change the drug label under specific circumstances, which generic manufacturers are required to adopt. Because this regulatory structure requires sameness of labels, it pre-empts failure to warn claims against generic drug manufacturers, as in PLIVA v. Mensing, 564 U.S. 604 (2011). Thus, courts in California, Illinois, and Massachusetts have allowed plaintiffs to pursue the branded drug manufacturer even though it was the generic version of the drug that allegedly caused harm. These courts have reasoned that because all labels for the drug must match the branded manufacturer’s label, the branded manufacture should have foreseen that the prescribing physician would rely on its warnings, even when the pharmacist dispensed the generic version.

In a case in which a plaintiff has only taken a generic drug, that plaintiff may be left without recourse. Many pundits believe that courts have filled this gap by creating innovator liability.  When faced with preemption, an absent or bankrupt manufacturer, or other situation in which a plaintiff is unable to recover against the actual manufacturer, a court could extend to other industries the concept of innovator liability; that a product innovator should have foreseen that its design, warning or manufacturing technique would be adopted by others and lead to an injury.

Failure to Report

Plaintiffs have also developed a theory that alleges the manufacturer failed to report a product failure to a governmental body, which presumably resulted in a failed design or inadequate warning. This theory has found support in medical device cases in which device manufacturers have a duty imposed by federal regulation to report adverse events to the FDA. See Bull v. St. Jude Medical, 2018 WL 3397544 (E.D. Pa. Jul 12, 2018); Richardson v. Bayer Healthcare Pharmaceuticals, 2016 WL 4546369 (Idaho Aug. 30, 2016); De La Paz v. Bayer Healthcare, 2016 WL 392972 (N.D. Cal. Feb 2, 2014). A similar theory has arisen in the opioid litigation in which plaintiffs assert that a drug manufacturer’s failure-to-report suspicious orders led to doctors writing inappropriate or medically unnecessary prescriptions.

Like innovator liability, some observers believe that courts initially approved this theory because traditional product liability claims were expressly pre-empted under the Medical Device Amendments to the Federal Food, Drug and Cosmetic Act. But plaintiffs are attempting to expand this theory to other industries, as in a recent aviation case in which the plaintiff unsuccessfully attempted to assert a failure to report claim. See Sikkelee v. Precision Airmotive, 2018 WL 5289702 (3d Cir. Oct. 25, 2018). Regardless of industry, this theory depends on a manufacturer’s alleged failure to comply with a regulatory duty loosely related to the product at issue.

Activity Taking Place Outside the Forum

Courts open to these inventive theories often find, inappropriately, that they can be maintained by a broad reading of state common law sitting parallel to federal regulatory requirements. This reasoning allows the court to look past preemption, the absence of a-private-right of action within the regulations or other legal defenses. There are substantive arguments for why innovator liability and failure-to-report claims are invalid, but at the pleading stage, courts often view such inquires as fact intensive, unsuitable for a motion to dismiss.

These new theories of liability rely on the assertion that the manufacturer has a broad duty—not a duty specific to the plaintiff—to perform a regulatory act. An innovator liability claim is based on the drug manufacturer’s duty to submit to the FDA a change to the drug’s warning label. In a failure-to-report claim, the plaintiff alleges the manufacturer has a duty to report a prior event to a regulatory body. To the extent plaintiffs attempt to extend these theories to other industries, the claimed regulatory activity could be with respect to a third-party testing agency, such as Underwriters Laboratory. In any case, the alleged breach of duty occurs at the manufacturer’s headquarters or government agency. The foreign nature of the alleged conduct allows the manufacturer to challenge the court’s exercise of jurisdiction and the court’s ability to enforce a questionable state law.

No Jurisdiction Over Conduct Outside of State Boundaries

If the manufacturer is not “at home” in the jurisdiction where the case is pending, the court cannot exercise general jurisdiction over the manufacturer. “At-home” status is determined by where the manufacturer is incorporated or where it has its principal place of business, see Daimler AG v. Bauman, 134 S. Ct. 746 (2014). Where the manufacturer is not at home in the forum state, a court’s ability to exercise jurisdiction over the manufacturer is limited to specific jurisdiction.

Specific jurisdiction depends on an affiliation between the forum and the underlying controversy, as in Goodyear Dunlop Tires Operations v. Brown, 131 S. Ct. 2846, 2851 (2011). A defendant’s suit-related conduct must create a substantial connection with the forum state, see Walden v. Fiore, 134 S. Ct. 1115, 1121 (2014). For a court to exercise specific jurisdiction over a manufacturer, there must be a relationship between the manufacturer, the forum, and the litigation, and it must be the manufacturer, not the plaintiff or another manufacturer, who creates the suit-related contact with the forum state. See also Bristol-Myers Squibb v. Superior Court of California, San Francisco County, 137 S. Ct. 1773, 1783 (2017).

In the context of innovator liability, the manufacturer’s challenged conduct is its internal product development (product innovation) and related communications with a government agency; conduct not in the forum state. That a manufacturer may generally sell its product in the forum state is irrelevant for purposes of specific jurisdiction over an innovator liability claim, because there is no connection between a manufacturer’s general in-state sales and some other company’s competing version of the product used by plaintiff. Similarly, where a plaintiff alleges a failure-to-report claim, that conduct took place at the manufacturer’s headquarters or at the government agency. The court cannot exercise jurisdiction over innovator liability or failure-to-report claims because the suit-related conduct occurs outside the state and has no connection within the forum. In Walden v. Fiore, 134 S. Ct. 1115, 1121 (2014) (The state can only exercise jurisdiction consistent with due process if the defendant’s suit-related conduct creates a substantial connection with the forum state.)

The only potential link between the manufacturer’s out-of-state conduct and the forum is foreseeability—that the manufacturer could have foreseen its innovative technology would be relied upon by others causing an injury in the forum, or that the manufacturer should have foreseen that its failure to report some event would result in an injury in the forum. Using foreseeability to analyze minimum contacts impermissibly allows plaintiff’s in-state activity (or the conduct of other parties) to drive the jurisdictional analysis. Foreseeability attributes another person’s forum connections (injury, as in Walden) to the subject manufacturer “and makes those connections ‘decisive’ in the jurisdictional analysis,” obscuring the reality that the manufacturer’s breach of duty did not take place in the forum state.

The Dormant Commerce Clause and Extraterritoriality

In addition to providing an affirmative grant of authority to Congress, the commerce clause encompasses an implicit or “dormant” limitation on the authority of the states to enact legislation affecting interstate commerce. See e.g., Hughes v. Oklahoma, 441 U.S. 322, 326 (1979); H.P. Hood & Sons v. Du Mond, 336 U.S. 525, 534-535 (1949). The commerce clause precludes the application of a state statute to commerce that takes place wholly outside of the state’s borders, as in Healy v. Beer Inst., Inc., 491 U.S. 324, 336 (1989). A statute that directly controls commerce occurring wholly outside the boundaries of a state exceeds the inherent limits of the enacting state’s authority and is invalid regardless of the legislature’s intent. The Constitution is concerned with the maintenance of a national market for interstate commerce. Even if a statute may not in explicit terms seek to regulate interstate commerce, it can do so by its practical effect and design, see C & A Carbone v. Town of Clarkstown, New York, 511 U.S. 383, 394 (1994).

There is a three-part test to determine if enforcement of a state law violates the dormant commerce clause: the law is triggered by activity not occurring within the state; it seeks to regulate out-of-state transactions; and if similarly enacted by other states, the law would impose a significant burden on interstate commerce, see Association for Accessible Medicines v. Frosh, 887 F. 3d 664 (Fourth Cir. 2018).

Where a court construes state law as supporting one of these new claims, the dormant commerce clause should preclude the court from enforcing state law over such a claim. The conduct that would trigger application of either an innovator liability or failure-to-report claim occurs outside the state; at the home of the manufacturer or the governmental agency with regulatory oversight. Also, innovator liability and failure-to-report claims seek to regulate out of state conduct—a manufacturer’s fulfillment of a regulatory duty. Finally, multiple states enforcing their own versions of innovator liability and failure-to-report claims would lead inevitably to multiple interpretations of compliance, obstructing a manufacturer’s ability to design, manufacture and distribute its products, substantially burdening interstate commerce.

“Inventive Claims May Be Unconstitutional in Products Liability Cases,” by Terry M. Henry was published in The Legal Intelligencer on January 22, 2019.

Reprinted with permission from the January 22, 2019, edition of The Legal Intelligencer © 2019 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited. For information, contact 877-257-3382, or visit