United States: A Fraudulent Concealment Win Coupled with a Unfavorable Learned Intermediary Ruling

Last Updated: November 9 2016
Article by Michelle Yeary

Yesterday's case is a partially published decision about a partial reversal of a plaintiff verdict in California. So, we are only going to discuss select parts of the decision. It's a long one and there are large sections about plaintiff's counsel's misconduct during trial and excessive damage awards. It is also a joint medical malpractice and product liability case. So, when you strip away the rest, we get down to a handful of legal rulings that we are truly interested in.

The case is Bigler-Engler v. Breg, Inc., 2016 Ca. App. LEXIS 921 (Cal. App. Oct. 28, 2016) and involves the use of a cold therapy medical device, available only upon prescription. Plaintiff underwent arthroscopic knee surgery, following which her surgeon prescribed use of the device to aid in recovery. Id. at *5-6. Plaintiff rented the device from her surgeon's medical practice. Id. at *7. Upon discharge after surgery, plaintiff was advised to use the device at a certain temperature "as much as possible." Id. at *8. Plaintiff's use of the device and the instructions she received from her surgeon are explained in more detail in the opinion, but ultimately, plaintiff developed severe skin damage that required multiple plastic surgeries and scar reduction surgeries. Id. at *9-13.

Plaintiff file suit against her surgeon, the medical practice, and the device manufacturer. The jury found against the manufacturer on plaintiff's claims for design defect, failure to warn, and intentional concealment. Id. at *19. The jury also awarded punitive damages against the manufacturer on the intentional concealment claim. Id. On appeal, the court overturned the intentional concealment verdict, which also meant reversing the punitive damages verdict. But, the court upheld the trial court's decision not to instruct the jury on the learned intermediary doctrine finding it did not apply to a medical device intended to be operated directly by the patient.

Intentional Concealment: Under California law, the elements of a claim for intentional concealment are: "(1) the defendant must have concealed or suppressed a material fact, (2) the defendant must have been under a duty to disclose the fact to the plaintiff, (3) the defendant must have intentionally concealed or suppressed the fact with the intent to defraud the plaintiff, (4) the plaintiff must have been unaware of the fact and would not have acted as he did if he had known of the concealed or suppressed fact, and (5) as a result of the concealment or suppression of the fact, the plaintiff must have sustained damage." Id. at *62 (citation omitted). Defendant in this case challenged that there was no evidence to satisfy the second element, a duty to disclose.

For a duty to disclose to arise, there must be some relationship between the parties. It must be a direct relationship such as seller and buyer or doctor and patient. Or a contractual relationship. In other words, there needs to be a transaction between the plaintiff and the defendant for there to be a duty to disclose. Id. at *63-65. "Such a transaction must necessarily arise from direct dealings between the plaintiff and defendant, it cannot arise between the defendant and the public at large." Id. at *65. Clearly the device manufacturer never had such a relationship or transaction with plaintiff.

So, plaintiff tried to conflate intentional concealment and failure to warn. In response to the lack of a relationship, plaintiff pointed to a manufacturer's general duty to warn. Id. But that is a products liability duty, not a fraud duty. "Products liability law involves a set of circumstances, elements, and doctrines that are independent from, and not directly applicable to, fraud. The duties underlying each cannot simply be applied to the other." Id. at *65-66.

Plaintiff also argued that a duty to disclose may arise if the disclosure is necessary to correct misleading statements. But this duty also depends on the existence of a relationship or transaction that was missing in this case. Id. at *66. There is an exception to the relationship requirement where an affirmative statement is "so misleading." But again, the only affirmative statements plaintiff could point to were the warnings and instructions that accompanied the device. First, the court did not find that the warnings and instructions were direct statements to plaintiff. Id. at *67. In fact, defendant had updated its warnings at least twice since the particular device at issue was manufactured and defendant had no knowledge the device had been provided to plaintiff. Id. More importantly, even assuming the labeling was a direct statement to plaintiff, there was nothing about it that was so misleading as to give rise to a duty to disclose in the absence of a relationship. Id. at *68. While the specific injury sustained by plaintiff may not have been included in the warnings, which may be the basis for a failure to warn claim under products liability law, the instructions and warnings that were provided were not "misleading half-truths" that would support a fraud claim. "To hold otherwise would unduly conflate two distinct areas of law, products liability and fraud, and transform every instance of inadequate product warning into a potential claim for fraud." Id. at *69.

The court concluded that based on the all evidence, there was no set of circumstances under which plaintiff could establish a duty to disclose. So, the court not only reversed the verdict against the manufacturer, but also found in favor of the manufacturer. Id. at *72. Then, because the jury's punitive damage award was based only on the intentional concealment claim, it too was reversed. Id.

Learned Intermediary: The second significant products ruling isn't as favorable as the first. California has adopted the learned intermediary doctrine for prescription drugs and medical devices because for prescription drugs and devices "it is through the physician that a patient learns of the properties and proper use of the drug or [device]." Id. at *80. The court took note that the cases that apply the learned intermediary doctrine to devices in California all involved implantable devices, which by definition don't need to include patient instructions at all. Id. at *81. Using patient instructions as the litmus test, the court concluded that the learned intermediary doctrine does not apply to devices that "require the patient to use and apply the device themselves." Id. at *81.

We aren't buying the court's logic on this one. In the part of the opinion on intentional concealment, the court repeatedly elaborated on the lack of any relationship between the manufacturer and the plaintiff, including the lack of any direct statements from the manufacturer to the plaintiff and even any knowledge that the device was provided to plaintiff. So, how can the manufacturer have a direct duty to warn the plaintiff? The device had been sold to the medical practice years earlier and therefore, was completely out of the manufacturer's control when it was provided to plaintiff. The manufacturer had no ability to interact with the plaintiff, to provide instruction to the plaintiff, to even know which warnings and instructions were provided to the plaintiff. Indeed, the court's finding that it is easier to directly warn the patient regarding a device such as this because warnings can be affixed directly to the device, id. at *82, is contradicted by the fact, as the court noted, that the warnings with this particular device were several versions out-of-date. Warnings that accompany prescription drugs that are re-filled every few months are kept more up to date than the warnings on a medical device that is used by different patients over a course of many years.

Moreover, regardless of instructions for use such as how to position the device or set its temperature, the device was only available by prescription. Therefore, the physician still serves as the learned intermediary. The physician is in a better position to be aware of and to inform his patient of any known risks, especially as science is always evolving. So, while there is an avenue for providing product information, including risks and warnings, to the patient with the device, that is no different than providing risk and warning information inside pill bottles or affixed to medications by pharmacies. It does not create a direct relationship between the manufacturer and the patient. And, we are still talking about highly technical information that would be difficult for a lay person to understand if not explained by a doctor. Are we expecting the average person to understand about vasoconstriction and its potential complications? If plaintiff was alleging her injury was caused because the device did not come with adequate instructions for how to set the temperature, we might see some basis for the court's decision (we still wouldn't agree with it, but we'd find it easier to understand). But, failure to warn about the medical risks of prolonged exposure, that belongs squarely in the learned intermediary doctrine.

This article is presented for informational purposes only and is not intended to constitute legal advice.

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