United States: Guest Post – Tis Better To Try And Fail, Then To Have Never Tried At All: Internal Corporate Policies Do Not Create A Heightened Legal Duty

Last Updated: November 19 2016
Article by James Beck

What follows is a guest post by Cara DeCataldo, a Reed Smith associate, who gamely stepped up to the plate to research one of a number of blogging topics that have been hanging fire for some time now.  This topic is a type of "no good deed goes unpunished" liability – whether a defendant whose internal policies aspire to a degree of care that exceeds legal requirements can be sued solely because it allegedly failed to live up to those high aspirations.  The two most common theories that purportedly support such a result are negligence per se and negligent undertaking.  Thankfully, Cara's research indicates that such liability is not recognized.

As always, our guest posters are entitled to all of the credit, and any blame, for their efforts.

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Clearly articulated company policies imposing heightened safety standards on a company and its employees can't be a bad thing, right?  But what happens when a Plaintiff attempts to use a company's alleged failure to comply with its own corporate aspirations as the basis for a lawsuit?  There is an inherent tension between a company's desire to set high standards for employee conduct and/or its products, and the fear of liability if those standards are not met.  With this in mind, we thought it would be a worthwhile to take an in-depth look at whether internal company policies that exceed what the law requires, can also pose the risk of creating a legal duty.

For those companies seeking to hold employees and/or products to ambitious standards of care, the news is largely good.  Most courts to address the issue support these endeavors and recognize the value of encouraging companies to maintain high voluntary standards.  They also recognize the potential negative impact if those goals were misused to create legal duties to the public.  Negligence per se claims consistently fail when citing various official pronouncements that encourage, but do not mandate, conduct, such as company credos, internal agency manuals, protocols, policy statements, and the like, as relevant evidence of the alleged negligence. Many states take matters a step further and bar the admission of company policies even as evidence of negligence. The most frequently applied rationale barring the admission of internal policies is that to the extent internal rules and regulations exceed the standard of care, then they are not admissible.

In drug and device cases, plaintiffs sometimes try to heighten the standard of care by arguing that corporate policies and procedures mandate the appropriate standard of care.  A typical plaintiff tactic is to review internal policies and point to how certain things were done contrary to those policies.  Plaintiffs' experts review these policies as well and use them to support their opinion that the violation of such policies is evidence of the company's negligence.

Recently, this scenario has played out in litigation involving an OTC product.  Plaintiff-side experts sought to quote the defendant's corporate credo – which made certain statements about policies regarding communication of product-related risk information to consumers – to suggest that the defendant company had violated legal standards of care.  The defendant argued for exclusion of that expert's testimony on the basis that any opinions about such a credo were an improper attempt to transform a corporate policy into a legal standard for liability and should be rejected. In In re Tylenol (Acetaminophen) Mktg., Sales Practices & Prods. Liab. Litig., 2016 WL 807377, at *8 n. 22 (E.D. Pa. Mar. 2, 2016), the Court excluded the expert testimony:

[The expert's] use of the [defendant's] Credo to show "standard of care" would also be inappropriate. The defendants' own Credo should not be held out as the legal standard by which it should conduct its affairs. See Johnson v. Mountainside Hospital, 239 N.J. Super. 312, 323, (App. Div. 1990) ("It was potentially misleading because it attempted to exalt an exhortatory statement in the by-laws of the Hospital into the legal standard for determining whether or not the defendant physicians committed malpractice. The relevant legal standard is defined by law.").  Additionally, any probative value the Credo may serve would be substantially outweighed by the potential jury confusion—of this standard with what was legally required. See In re Paoli RR Yard PCB Litigation (Paoli II), 35 F.3d 717, 747 (3d Cir. 1994) (explaining how "Rule 403 gives a judge more power over experts than over lay witnesses" but this exclusion of evidence should only happen when they is "something particularly confusing about the scientific evidence at issue—something other than the general complexity of scientific evidence").

            The Court rejected plaintiff's argument that a corporate credo simply serves as an acknowledgement of the standard of care to which they must adhere.  Instead, the Court found that this type of statement was aspirational: requiring more of its employees than the legal standard of care (i.e., putting consumers, not shareholders, first).  Allowing the company to be judged on this standard could discourage companies from creating internal policies that go beyond what the law asks.

The Acetaminophen litigation being an MDL, plaintiffs tried again with a second expert, this time purporting to testify about "pharmacovigilence."  Same result – indeed, same language. In re Tylenol (Acetaminophen) Mktg., Sales Practices, & Prods. Liab. Litig., 2016 WL 4039271, at *10 (E.D. Pa. July 28, 2016).

These results are certainly not outliers – although there aren't any other drug/device examples that we were able to find.  Most of the attempts to impose heightened liability based on internal policies are brought either under the rubric of "negligence per se" or else under a negligent undertaking theory.

California

Lugtu v. California Highway Patrol, 28 P.3d 249 259 (Cal. 2001) (police officer safety manual policies could not be viewed as establishing the applicable standard of care, but they may be considered by the trier of fact in determining whether an officer was negligent in a particular case); Salazar v. S. Cal. Gas Co., 63 Cal. Rptr. 2d 522, 525-32 (Cal. App. 1997) (internal company policy of warning customers that elevating water heaters to at least eighteen inches would reduce the risk of flammable vapors being ignited did not create any duty).

Colorado

Rupert v. Clayton Brokerage Co., 737 P.2d 1106, 1111 (Colo. 1987) (internal rules of brokerage firm relevant, but did not establish, any standard of care for breach of fiduciary duty).

Delaware

Joseph v. Monroe, 419 A.2d 927, 931 (Del. 1980) (provision of handbook regarding supervisory responsibility of teachers did not carry force and effect of law, and violation thereof did not constitute negligence per se).

District of Columbia

Clark v. District of Columbia, 708 A.2d 632, 636 (D.C. 1997) ("an ... internal agency procedure [that is] not a statute or regulation ... cannot embody the standard of care under a negligence per se theory" because "expert testimony [is] still required to establish that the [internal policy] embodied the national standard of care and not a higher, more demanding one").

Florida

Boutilier v. Chrysler Ins. Co., 2001 WL 220159, at *1 (M.D. Fla. Jan. 31, 2001) (that defendant has internal corporate policy does not create a legal duty of care or cause a breach of that duty).

Illinois

Gondeck v. A Clear Title & Escrow Exch., LLC, 47 F. Supp.3d 729, 745 (N.D. Ill. 2014) (defendant's corporate code of conduct did not create a legal duty); see also Rhodes v. Ill. Cent. Gulf R.R., 665 N.E.2d 1260, 1272 (Ill. 1996) ("[w]here the law does not impose a duty, one will not generally be created by a defendant's rules or internal guidelines."); Asmus v. Mac's Convenience Stores, LLC, 438 F. App'x 505, 507 (7th Cir. 2011) ("general policies in an employee handbook are not contractual promises" that can impose a legal duty); Shank v. H.C. Fields, 869 N.E.2d 261, 268 (Ill. App. 2007) ("Violation of self-imposed rules or internal guidelines . . . do not normally impose a legal duty, let alone constitute evidence of negligence."); Fillpot v. Midway Airlines, Inc., 633 N.E.2d 237, 244 (Ill. App. 1994) (declining to recognize a legal duty based on the defendant company's policy manual); Blankenship v. Peoria Park Dist., 647 N.E.2d 287, 291 (Ill. App. 1994) (no legal duty arose from the defendant's internal staffing rules); Quinn v. Sigma Rho Chapter of Beta Theta Pi Fraternity, 507 N.E.2d 1193, 1198 (Ill. App. 1987) ("a legal duty is normally not established through rules and regulations . . . or internal guidelines"); Dezort v. Vill. of Hinsdale, 342 N.E.2d 468, 472 (Ill. App. 1976) ("The failure to comply with self-imposed regulations does not necessarily impose . . . a legal duty . . . nor does the failure to comply with such regulations make a case of prima facie liability").

Indiana

Wal-Mart Stores, Inc. v. Wright, 774 N.E.2d 891, 894-95 (Ind. 2002) ("the law has long recognized that failure to follow a party's precautionary steps or procedures is not necessarily failure to exercise ordinary care" and finding this rule sound because it encourages a company to follow best practices without establishing them as a legal norm).

Kentucky

Flechsig v. U.S., 991 F.2d 300, 304 (6th Cir. 1993) (applying Kentucky law) (allegation of violation of defendant's internal regulations does not establish negligence per se).

Michigan

Zdrojewski v. Murphy, 657 N.W.2d 721, 730  (Mich. App. 2002) (internal company policies may not be used to establish a legal duty in a negligence claim); Burnside Indus., LLC v. CB Richard Ellis, Inc., No. 268343, 2006 WL 2418937, *2 (Mich. App. Aug. 22, 2006) (if duties to protect their employees or customers were imposed based on work rules or policies, companies would abandon such efforts that could benefit such employees or customers, in order to avoid future liability).

Mississippi

Shoemake v. Rental Service Corp., 2008 WL 345498, at *1 (S.D. Miss. Jan. 30,, 2008) (internal company guidelines are not conclusive and do not establish a standard of care, but are relevant evidence).

New Jersey

Johnson v. Mountainside Hospital, 571 A.2d 318, 323 (N.J. App. Div. 1990) (hospital by-laws stating that all patients should receive "the best possible care" was not admissible because the standard of liability is a legal one set by the law and not by internal policies); Cast Art Indus., LLC v. KPMG LLP, 3 A.3d 562, 580-81 (N.J. App. Div. 2010) (applying a company's internal procedures to impose a higher standard of care than common-law standard could discourage companies from creating procedures that exceed common law duties), rev'd on other grounds, Cast Art Indus., LLC v. KPMG LLP, 36 A.3d 1049, (N.J. 2012).

New York

Branham v. Loews Orpheum Cinemas, Inc., 819 N.Y.S.2d 250, 323 (N.Y. App. Div. 2006) ("While a defendant's internal rules may be admissible as evidence of whether reasonable care was exercised, such rules must be excluded, as a matter of law, if they require a standard of care which transcends the traditional common-law standard of reasonable care under the circumstances.").

North Carolina

Mynhardt v. Elon Univ., 725 S.E.2d 632, 636 (N.C. App. 2012) (no legal duty imposed by adoption of policies by universities to deal with student drinking and other incidents); Hall v. Toreros II, Inc., 626 S.E.2d 861, 867 (N.C. App. 2006) (imposing a legal duty from the adoption of internal policies "would serve only to discourage, indeed penalize, voluntary assumption or self-imposition of safety standards"); McCants v. Nat'l Collegiate Athletic Ass'n, 2016 WL 4272362, *8 (M.D.N.C. Aug. 12, 2016) ("the adoption of rules, policies, and procedures is insufficient as a matter of law to impose a legal duty based on the voluntary undertaking doctrine"); Phillips v. Sheetz, Inc., 2013 WL 5567423, *1 (W.D.N.C. Oct. 9, 2013) (company policy that provides for a harassment-free workplace for its employees is insufficient to create a duty owed from employer to employee).

Pennsylvania

Titchnell v. United States, 681 F.2d 165, 173 (3d Cir. 1982) (defendant's internal policies do not, taken alone, establish the applicable standard of care); Ruder v. Pequea Valley School Dist., 790 F. Supp.2d 377, 402 (E.D. Pa. 2011) (negligence per se cannot be found based on a plaintiff's allegation that a defendant has breached its own policy); Hower v. Wal-Mart Stores, Inc., 2009 WL 1688474, *6 (E.D. Pa. June 16, 2009) (defendant's internal policies not the equivalent of its duty of care . . . "A store owner like Defendant should not be faced with a lawsuit for negligence by failing to live up to a heightened, self-imposed duty of care.")

South Dakota

Morrison v. Mineral Palace Ltd. Partnership, 603 N.W.2d 193, 196 n.4 (S.D 1999) (failure to comply with a company rule does not constitute negligence per se; while admissible evidence, such a policy does not set forth a standard of conduct that establishes what the law requires of a reasonable person under the circumstances).

Tennessee

Haney v. Bradley County Bd. of Educ., 160 S.W.3d 886, 892-93 (Tenn. App 2004) (violation of internal policy could not form basis of negligence per se claim because the applicable standard of care owed was established by law, not by policy).

Texas

FFE Transportation Services, Inc. v. Fulgham; 154 S.W.3d 84 (Tex. 2006) (defendant's self-imposed inspection policy, taken alone, did not establish the standard of care that a reasonably prudent operator would follow); Boudreaux v. Swift Transp. Co., 402 F.3d 536, 543 (5th Cir. 2005) ("a company's self-imposed policy with regard to inspection, taken alone, does not establish the standard of care that a reasonably prudent operator would follow"); Texas Southwestern Med. Supply, Inc. v. Texas Commerce Bank – Dallas, N.A., 1994 WL 246169, at *4-7 (Tex. App. – Dallas June 2, 1994, n.w.h.) (internal procedures cannot superimpose a legal requirement over and above the UCC) (not designated for publication).

Virginia

Pullen v. Nickens, 310 S.E.2d 452, 456–57 (Va. 1983) (reversible error for internal employee guidelines to be admitted to establish standard of care where plaintiff neither knew about nor relied upon the internal guidelines); McDonald v. Wal–Mart Stores East, LP, 2008 WL 153782, at *5-6 (E.D. Va. Jan. 14, 2008) (internal store policies could not be used to establish the common law standard of care); Hudson v. Wal-Mart Stores E., L.P., 2007 WL 2107466 , at *3 (W.D. Va. July 20, 2007) (applying Virginia law) ("Violation of company policy does not show a breach in the standard of care.").

Washington

Joyce v. Dept. of Correction, 119 P.3d 825, 834 (Wash. 2005) (internal directives and department policies may provide evidence of the standard of care but the jury must be instructed that a violation of such a policy is not negligence per se).

West Virginia

Cavcon Inc. v. Endress & Hauser, Inc., 557 F. Supp.2d 706, 724 (S.D. W. Va. 2008) (without a special relationship such as that created by contract, violation of company credo regarding communications did not create any duty in tort).

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Given what research reveals about the state of the law in this area, to the extent that other drug or medical device plaintiffs who make arguments similar to those in the Acetaminophen litigation are no more likely to be successful.  Remember, however, that because we don't do the other side's research for them as a matter of policy, it is possible that a bit of adverse precedent exists.

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

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