United States: Innovator Liability, Perpetual Liability Argued In California Supreme Court

Last Updated: October 6 2017
Article by Steven Boranian

The California Supreme Court heard oral argument in T.H. v. Novartis on Monday. That is the case where the California Court of Appeal held that a prescription drug manufacturer could be held liable for injuries allegedly caused by a product that it did not make and did not sell. This situation usually presents itself when plaintiffs sue an innovator drug manufacturer for injuries allegedly caused by generic products. T.H. v. Novartis has an added twist—the innovator manufacturer that the plaintiff sued had not made or sold the product for six years. It sold the product line to another manufacturer, who made and sold the product that the plaintiff allegedly used.

How then can the innovator manufacturer owe a duty to this plaintiff, when it did not sell the product that allegedly harmed her and had not sold the product for anyone's use for six years? We set forth our views on this question here and here, where we listed the Court of Appeal's opinion in T.H. v. Novartis the fifth worst decision of 2016.

The argument before the California Supreme Court lasted well more than the one hour allotted, and it featured questions from all seven justices. We're not going to give you a blow-by-blow account. Our stenographic skills are not up to that task, and it would take too long anyway. We will start, however, the same way counsel for the defendant did: The case presents not one, but two issues of duty. For the plaintiff's case to proceed, the California Supreme Court would have to recognize two unique legal duties: (1) the duty of an innovator drug manufacturer to users of its competitors' generic products, widely called "innovator liability", and (2) the duty of a product's former manufacturer to users of products made and sold by subsequent manufacturers, which we will call "perpetual liability."

Perhaps the Court already knows what it wants to do with innovator liability, because nearly all the questioning was on perpetual liability, and the answers did not completely satisfy all the justices. To start, both sides attempted to seize the status quo—the defendant argued that no court anywhere has ever held a former manufacturer liable for a injuries allegedly caused by a subsequent manufacturer's product, and the plaintiff argued that everyone owes a duty to everyone else to refrain from negligence.

The argument, however, dwelled on the limits of duty and how/where the Court should draw the line. Only one thing was clear: The Court was troubled by the prospect of liability in perpetuity for a manufacturer that no longer sells a product. The plaintiff tried to minimize the issue, arguing more than once that the prospect of perpetual liability was overblown and that perpetual liability cases would be rare. Counsel even suggested once that the Court's questions were "stacking a rare hypothetical upon a rare hypothetical." Despite these efforts, the Court directly confronted the issue, with a couple of justices noting that the situation would not necessarily be rare.

Now, whether the Court will recognize a new duty for former manufacturers and, if so, how the Court will limit such a duty is anyone's guess. Of course, the best and obvious solution is to adopt the bright-line rule urged by the defense, that a former manufacturer owes no duty at all to users of a subsequent manufacturer's products. This is what every court to consider perpetual liability has decided, and it follows California Supreme Court precedent holding that a manufacturer owes no duty to warn regarding hazards in another manufacturer's product, most recently in O'Neil v. Crane Co., 53 Cal. 4th 335, 360 (2012) ("An interpretation of [the law] that would require a manufacturer to warn about all potentially hazardous conditions surrounding the use of a product, even when those hazards arise entirely from the product of another manufacturer, reaches too far."). It is likewise faithful to decades of product liability law in California and elsewhere, which places the duty to warn on a product's manufacturers and sellers.

The Court questioned counsel on other potential limits, for example by asking repeatedly how long a former manufacturer's duty should persist. One justice noted that the lapse of time was the most difficult question. In this case, six years passed between the defendant's sale of the product line and the plaintiff's use of the product manufactured by another company, so how long is too long? Plaintiff had no answer to these concerns, and counsel finally acknowledged after nearly an hour of argument that there was no way to "scrub" perpetual liability from the case.

The Court also asked whether concepts of breach of duty and causation would adequately protect the defendant. In other words, if the Court created the duties, could the defendant move for summary judgment or defend itself at trial on the basis that it neither breached a duty nor caused any injury? At least one justice was relatively open in supporting this idea. Others preferred to focus on the threshold question presented—whether the defendant owed a duty in the first place. In this regard, the expense of litigation and the ability (or inability) of a defendant to spread the cost when it no longer sells the product are particularly relevant considerations.

There were other suggested limits. The plaintiff argued that a former manufacturer could protect itself by updating its label before transferring a product line. But as the defendant pointed out in response, that solution offers false assurance because plaintiffs would just claim the updated label was inadequate, too. One plaintiff's attorney suggested that the Court set a time limit for suing the former defendant, but another retracted that suggestion, noting that statutes of repose were the business of the legislature.

The plaintiff also suggested that a former manufacturer could protect itself by bargaining for indemnity, which led to questions about the whether the identity and reputability of the purchaser of the product line would make a difference. At least one justice thought that it might. One plaintiff's attorney argued that a former manufacturer's duty should depend on how much a more robust warning would have affected the sale price of the product line. We did not follow counsel's reasoning, and we would be surprised if the Court did either.

In rebuttal, the defendant reiterated that the issue is duty, that it is the role of the Court to define duties and set limits, and that the plaintiff had offered no viable protection against perpetual liability. We agree. These are not jury questions. In the end, it will be a split decision, but we know how we would vote. The law cannot justify creating an unprecedented duty of care for a company that did not sell the product that allegedly harmed the plaintiff and no longer sells the subject product at all. The plaintiff's remedy is against the manufacturer and seller of the product that she allegedly used and that allegedly resulting in an injury, just as it always has been under California product liability law. We understand that this will not always give the plaintiff a complete remedy. The manufacturer could be bankrupt or outside the jurisdiction of the court, and in some cases federal regulation of prescription drugs will preemption state-law claims. But California has guidelines on when duties exist and when they do not. We call them the Rowland factors, and they do not predict that a plaintiff will have the right to full recovery in every case. So it should be here. The opinion should be out in about 90 days.

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

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.