A Ray of Hope for Innovator Liability
This guest post, by long-time friend of the blog, Terry Henry of Blank Rome, is a little different than most. It was invited. We read an article Terry wrote, which, at the end (it was mostly about other stuff), advised “[a] brand manufacturer defending itself [against innovator liability] should consider, at the appropriate time, a motion to dismiss any potential claims related to innovator liability on lack of jurisdiction.” It just so happens that we (well, Bexis) had been thinking about precisely that – the “suit-related conduct” in innovator liability cases does not take place in the plaintiff’s forum state (MA or CA) because the branded defendant didn’t sell the injurious product, so unless that defendant is unfortunate enough to be “at home” in those states, there shouldn’t be case-specific personal jurisdiction either. Without a product sale there’s not even a stream of commerce argument. Wishing to encourage innovative thinking by defense counsel, we reached out to Terry and invited him to write a full blogpost devoted solely to personal jurisdiction in innovator liability cases. Here it is. As always our guest posters deserve 100% of the credit, and any blame, for their posts. – James M. Beck
Friday evening this writer and his son were to catch a flight from Philadelphia to Denver so that the boy could attend his scheduled tour of University of Colorado, Boulder. As the time to board our 6:00 pm flight approached, the gate agent announced a delay. The aircraft coming in from Boston had a mechanical problem and our flight was now pushed back to 10:45! We quickly investigated other options, but the two remaining flights were booked solid. The situation looked bleak. Experience told me that our flight was probably going to cancel and that our weekend in Boulder would not happen. But how can you look your hopeful teenager in the eyes and dash his expectations? So we decided to be optimistic and set up camp for the long wait. When my Flight Aware app updated to let us know our incoming aircraft had finally taken off from Boston, we could see a ray of hope. And so too, should branded drug manufacturers facing innovator liability claims.
Readers of this blog are familiar with the bleak prospects for branded manufacturers facing innovator liability claims in California; that distorted theory that holds a branded manufacturer liable for an allegedly inadequate label on the generic version of the branded manufacturer’s drug. Innovator liability has hit the headlines again because the Massachusetts Supreme Court recently adopted it in Rafferty v. Merck. Innovator liability also snuck past the district court and is pending before the Seventh Circuit in Dolin v. GSK. What seemed like an aberration when Conte v. Wyeth first gave life to the theory in 2008 may be gaining ground with courts looking to provide a remedy to plaintiffs that took the generic form of a drug. The blog warned us this could happen.
So where can a brand drug manufacturer find a little ray of hope in what appears to be expanding exposure from innovator liability? Two words – specific jurisdiction. In addition to the usual substantive arguments for why innovator liability is not a valid claim, a brand manufacturer should also assert lack of jurisdiction.
If the brand manufacturer defendant is not “at home” in the jurisdiction where the case is pending, the court cannot exercise general jurisdiction over the brand manufacturer. “At-home” status is determined by where the manufacturer is incorporated or where it has its principal place of business. Daimler AG v. Bauman, 134 S. Ct. 746 (2014). State of incorporation is usually a pretty straight forward determination, but principal place of business can be a bit murky. The reality of today’s business organizations mean that companies may have operations in many states and employ senior officers in a variety of locations. Hertz Corp. v. Friend, 599 U.S. 77 (2010), explains how to determine a corporation’s nerve center, which is how Hertz defines principal place of business. If a branded manufacturer is facing potential innovator liability, it should establish early, by affidavit or declaration, the facts showing that the defendant is not at-home in any innovator liability state. This will limit the court’s jurisdiction over the brand manufacturer to specific jurisdiction.
Specific jurisdiction depends on an affiliation between the forum and the underlying controversy. Goodyear Dunlop Tires Operations, S.A. v. Brown, 131 S. Ct. 2846, 2851 (2011). A defendant’s suit-related conduct must create a substantial connection with the forum State. Walden v. Fiore, 134 S. Ct. 1115, 1121 (2014). For a court to exercise specific jurisdiction over a branded manufacturer, there must be a relationship between the branded manufacturer, the forum, and the litigation, and it must be the branded manufacturer, not the plaintiff or generic manufacturer, who creates the suit-related contact with the forum state. Id. at 1126. See also Bristol-Myers Squibb Co. v. Superior Court of California, San Francisco County, 137 S. Ct. 1773, 1783 (2017). That the brand manufacturer may generally sell its branded version of the drug in the forum state is irrelevant for purposes of specific jurisdiction, because there is no connection between general in-state sales and some other manufacturer’s competing generic version of the drug taken by plaintiff. See generally Bristol-Myers Squibb Co., 137 S. Ct. at 1773. Similarly, the fact that a plaintiff may have been injured in the forum is irrelevant because there must be a connection between the injury and the branded manufacturer’s in-state conduct. Walden, 134 S. Ct. at 1121.
In the context of innovator liability, the brand manufacturer’s case-linked conduct will be its internal decision making with respect to its drug label and its communications with FDA about the label. That conduct likely took place at the manufacturer’s headquarters or in its dealings with FDA, not in the forum state. Under BMS, a court cannot exercise specific jurisdiction over that out-of-state conduct. Plaintiffs argue. and courts have speculated, that a brand manufacturer should have known that generic manufacturers were required to adopt its label, and should have foreseen that the information in their branded label would be communicated to plaintiffs by way of the generic drug being sold in-state. If at all, that knowledge exists at corporate headquarters. Using foreseeability to analyze minimum contacts impermissibly allows plaintiff’s contacts (or the generic manufacturer’s contacts) to drive the jurisdictional analysis. Walden 134 S. Ct. at 1125. Foreseeability attributes another person’s forum connections to the branded manufacturer “and makes those connections ‘decisive’ in the jurisdictional analysis,” obscuring the reality that none of the branded manufacturer’s challenged conduct (related to the label) took place in the forum state. Id.
This jurisdictional analysis addresses innovator liability claims filed in a state where the branded manufacturer is not at-home, but not claims filed in the branded manufacturer’s home state. In such a situation, the court would be able to exercise general jurisdiction over the branded manufacturer, but would have to undertake a choice of law analysis – including application of “public policy,” see Restatement (Second) of Conflict of Laws §187(2)(b) − to determine if the plaintiff would get the benefit of innovator liability imported from his or her home state (presumably Massachusetts or California). That is a discussion for another blog.
The end of our story is all good. Our flight finally pushed back at 11:00 pm and we were pretty exhausted arriving in Boulder at 3:00 am (5:00 am east coast time). But when the sun crested over Folsom Field just a few hours later, with the majestic cloud capped Rockies towering over campus, we were glad that we remained optimistic. And so, as we fly back east with the sun setting behind us, it is good to know that the requirements of due process can provide that light of hope for branded manufacturers by precluding courts from exercising jurisdiction over allegations of innovator liability.
“A Ray of Hope for Innovator Liability,” by Terry M. Henry was published in Drug & Device Law Blog on April 20, 2018. Reprinted with permission.