We don’t particularly like starting our week with an adverse decision; certainly not after a holiday weekend. But, we seem to have stumbled upon a variety of negative decisions to report on this week, so we’ll just dive in and get it over with. Fittingly for the day after Labor Day (we think), we decided to start with a case that centers on employee liability – specifically whether plaintiff had sufficiently pleaded his claims against the non-diverse sales representative so as warrant remand to state court. The court said yes.
The case is Hutchens v. Smith & Nephew, Inc., 2104 U.S. Dist. LEXIS 116839 (N.D. Tex. Aug. 22, 2014). Plaintiff sued the manufacturer and one of its sales reps over an allegedly defective hip implant, including a claim for violations of the Texas Deceptive Trade Practices Act (“DTPA”). Id. at *6. Defendants removed the case to federal court alleging that the sales rep had been fraudulently joined. On plaintiff’s motion to remand, the question before the court was whether the claims against the sales rep survived a Rule 12(b)(6) dismissal-type analysis. Although pending in federal court, the court opted to apply Texas’ more lenient “fair notice” pleading requirement finding that the “standard applicable at the time the initial lawsuit was filed in state court should govern.” Id. at *10. First strike – no TwIqblal.
Moving to the substantive analysis, the court only examined plaintiff’s DTPA claim – only one claim against the sales rep needed to survive to remand the entire case. The DTPA claim allegations as to the sales rep were that he:
exercised substantial control over the provision of warnings and . . . provided inadequate warnings, instructions, or representations to Plaintiffs that were incorrect, violated the . . . [DTPA] and induced Plaintiffs to implant the identified devices, causing Plaintiffs' harm.
Id. at *13-14. Defendants opposed remand arguing that plaintiff had failed to allege any unlawful acts or misrepresentations made by the sales rep himself as opposed to his actions with and on behalf of the manufacturer. Unfortunately, plaintiffs cited and the court relied on Texas case law holding that “a corporate agent is liable for his own violations of the DTPA, regardless of whether he was simply passing along information from the employer.” Id. at *16 (citation omitted). Second strike – unfavorable Texas corporate agent liability precedent.
Defendants also pointed out that the bulk of the allegations in the complaint lump the manufacturer and the sales representative together with only vague, unsupported assertions that the sales rep “made express representations” and “exercised substantial control over the provision of warnings.” Id. at *14. Unfortunately, under the “fair notice” pleading standard – these allegations were enough to allow the court to find “a reasonable possibility” that plaintiff could recover on his DTPA claims against the sales rep.
That brings us to the third strike in this case – the factual allegations. Most judges cite alleged facts which are important to their analysis and/or decision. When a judge mentions certain alleged facts more than once, we tend to believe they were of particular import. Here, some of those key factual assertions included that the sales rep was the “sole” contact point and source of information for plaintiff and his surgeons. Id. at *21. And, the information that the sales rep allegedly provided included “product information, warnings, surgical techniques, demonstrations on proper implantation, and the proper combinations of [the manufacturer’s] devices for implantation.” Id. at *20. Finally, the kicker for this court was the allegation that the sales rep “was actually in the operating room observing, commenting on and assisting with [plaintiff’s] actual surgery.” Id. at *21. These allegations of the “extensive personal involvement” of the sales rep with plaintiff and his surgeons are what allowed the court to find that the sales rep could “discern the factual basis of the claims against him.” Id. Fortunately, these types of specific allegations – while detrimental to defendants’ position in this case, help limit the overall applicability of the ruling.
We’ve blogged before about the real-life role sales representatives play in the operating room and the real-life risk of litigation exposure to manufacturers based thereon. But still, the idea of sales rep in the operating room seems to really bother courts (and regular people too). So, we are thinking that we as defendants need to push educating judges and juries that this isn’t some strange, unseemly practice – especially as more complex, technological medical devices are being used. If we remove the shock value, we hope more courts will see it as just part of the routine job of the sales rep and not a reason for independent liability – which would be a good thing well beyond the fraudulent joinder issue.