Thursday, June 17, 2010

On Substantive Due Process

We’ve posted quite a bit on the substantive due process aspects of punitive damages. Other than that, we frankly hadn’t thought about substantive due process being applicable to other aspects of product liability litigation.


Well, it’s time to start thinking.

A decision has just come down that accepts the argument that the expansion of state common-law tort liability can be so overreaching and so contrary to settled legal expectations as to violate a defendant's right to due process.  See Gibson v. American Cyanamid, Inc., slip op. (E.D. Wisc. June 15, 2010).

We’re particularly pleased with Gibson because it dispatched one of our longest-standing bĂȘte noirs – market share liability.  When Bexis first encountered the market share liability concept way back in law school, he was so offended by it that he put on his “to do” list making sure that Pennsylvania never adopted such a cockamamie theory.  Mission pretty much accomplished:  see Skipworth v. Lead Industries Ass’n, 690 A.2d 169 (Pa. 1997) (represented amicus PLAC); City of Philadelphia v. Lead Industries Ass’n, 994 F.2d 112 (3d Cir. 1993) (same).

Then Bexis took that show on the road, with more mixed results.  He won a diethylstibestrol (DES) case in Ohio (Sutowski v. Eli Lilly & Co., 696 N.E.2d 187 (Ohio 1998)) and a gun case in New York (Hamilton v. Beretta USA Corp., 750 N.E.2d 1055 (N.Y. 2001).  But when Bexis took his act to Wisconsin, he got his head handed to him in Thomas v. Mallett, 701 N.W.2d 523 (Wis. 2005).  Bexis’ ears are still ringing from that one.  He didn’t know it at the time, but Thomas was part of a more generalized running amok of a pro-plaintiff majority on the Wisconsin Supreme Court in 2005-06 – for more about that go here.

Which brings us back to Gibson – because the wholesale expansion of market share liability to non-fungible products in Thomas is what was just declared unconstitutional in Gibson.  Both Thomas and Gibson arise from lead paint pigment litigation.  In that litigation plaintiffs have sought to leverage their self-inflicted (because they choose to sue only raw lead-based pigment manufacturers rather than identifiable paint stores or paint manufacturers) inability to identify product manufacturers as an excuse for doing away with product identification as an essential element of causation.  Thomas was their one big win.

An aside (another one) – you may be wondering what does this have to do with drugs and medical devices?  It does.  Market share liability was first imposed in prescription drug litigation involving DES, and plaintiffs have tried to extend it to other drug and vaccine cases ever since (we expect it will rear its ugly head in pain pump cases when plaintiffs have to put up or shut up). So, yeah, it’s relevant.

Market share liability was created to deal with a generic drug problem before anybody had ever heard the term "generic drug".  As originally applied, it was limited to chemically identical products. That changed in Thomas, which imposed a version of market share liability on a motley selection of lead-based chemicals, none of which was used in residential house paint after 1974 – at least.  Here’s how the Gibson court described what happened in Thomas:

Thomas was a dramatic and novel departure from established legal principles.  The Wisconsin Supreme Court . . . relied upon Article I, Section 9 of the Wisconsin Constitution, which states, in pertinent part, that every person is “entitled to a certain remedy in the laws for all injuries, or wrongs which he may receive in his person, property, or character.”  By reading a due process standard into this section, the court found that the injured Thomas should not be foreclosed from recovery simply because he could not prove causation.  In essence and effect, when the court’s view of due process requires it, every person is “entitled to a certain remedy for all injuries.” When an adequate remedy does not exist to “provide due process, the courts, under the Wisconsin Constitution, can fashion an adequate remedy."
Slip op. at 2.

Ordinarily, unless there’s legislative tort reform (not likely in Wisconsin), that’s been the end of it.  No matter what how idiotic the common-law tort theory – strict liability, market share liability, malfunction theory, medical monitoring, public nuisance – once a state’s high court adopts it, well they never go back, do they?  Pro-plaintiff courts play by one rule, “what’s mine is mine; what’s yours is negotiable.”

Well, wonder of wonders!  In Gibson the court discovered that defendants have due process rights, too – and the defendants’ rights under the federal constitution trump (dare we whisper, “preempt”) the weird universal right to recover that Thomas extracted from the poor, mistreated Wisconsin constitution.

In Gibson the court concluded that defendants are protected by Due Process from excessive retroactive tinkering with the law under the Supreme Court’s decision in Landgraf v. USI Film Products, 511 U.S. 244 (1994).  Slip op. at 23.  Landgraf was one of these decisions in which the Court splintered every which way, and one has to count votes carefully to figure out what it stands for.  Landgraf involved a congressional statute affecting the coal industry’s responsibility for certain injuries suffered by retirees a long, long time before.  It assigned responsibility for medical insurance for over 1000 retirees to a company that had been out of the coal business for a quarter century – to the tune of an extra $5 million a year.

Landgraff found that to be a constitutional no-no – but by the infamous score of 4-1-4 (anybody remember Medtronic, Inc. v. Lohr, 518 U.S. 470 (1996)?).  Four justices (two of whom are no longer on the Court) were of the view that the retroactive imposition of all this additional liability violated the Taking Clause.  511 U.S. at 534-37 (statute unconstitutionally operated “retroactively, divesting [plaintiff] of property long after the company believed its liabilities . . . to have been settled”) (O’Connor, J., et al.).  Another justice took the position that, for essentially the same reason, the statute violated Due Process (but not the Taking Clause).  Id. at 548 (a retroactive law that “change[s] the legal consequences of transactions long closed . . . can destroy the reasonable certainty and security which are the very objects of property ownership”) (Kennedy concurring).  Four other justices, in dissent as to the result, agreed with Justice Kennedy that retroactive acts could give rise to Due Process problems:

[Due process] can offer protection against legislation that is unfairly retroactive at least as readily as the Takings Clause might, for as courts have sometimes suggested, a law that is fundamentally unfair because of its retroactivity is a law that is basically arbitrary. . . .
To find that the Due Process Clause protects against this kind of fundamental unfairness – that it protects against an unfair allocation of public burdens through this kind of specially arbitrary retroactive means – is to read the Clause in light of a basic purpose: the fair application of law, which purpose hearkens back to the Magna Carta.
Id. at 557-58 (various citations omitted) (Breyer, J, et al.). These four, however, found that the retroactivity wasn’t bad enough to be unconstitutional, because the company had, in its past life, actually employed the miners in question.  Id. at 560-61.

As Gibson read Landgraff, there were five definite votes for retroactive imposition of liability being unconstitutional if the person ordered ld to pay didn’t have a sufficient nexus to the liability being imposed.  There were four other votes for retroactive liability being a governmental taking, and thus unconstitutional.  Slip op. at 25-26.

Gibson made quick work of that purported distinction between the statute in Landgraff and a common-law scheme of the sort at issue in Thomas.  “The federal guaranty of due process extends to state action through its judicial as well as through its legislative, executive, or administrative branch of government.”  Slip op. at 23 (quoting Shelley v. Kramer, 334 U.S. 1, 15 (1948)).  “State power may be exercised as much by a jury’s application of a state rule of law in a civil lawsuit as by a statute.”  Id. (quoting BMW, Inc. v. Gore, 517 U.S. 559, 573 n.17 (1996)).

Having thus set the table, Gibson proceeds to sweep Thomas away.  The expansion of market share liability was undoubtedly retroactive – imposing unprecedented liability for products that had been sold many decades earlier, with no maximum limit.  Slip op. at 30 (“the risk contribution rule is retroactive because it attaches new legal consequences to . . . manufacturing operations that occurred between 1936 and 1946”).

The effect of Thomas was also severe, since the cumulative effect of the additional liability could amount to many millions of dollars, which was of the same magnitude as the retroactive liability declared unconstitutional in LandgraffSlip op. at 29-30.

Thomas targeted a disfavored class of “unpopular groups or individuals.”  Slip op. at 30-31.  Gibson didn’t go into detail, but it didn’t really have to.  All one has to do is read the lengthy hatchet-job (called a “backdrop”) that Thomas did on the lead pigment industry, 701 N.W.2d at 533-48, to know that the decision was designed as a form of judicial retribution.

Thomas also upset settled expectations. The decision greatly altered contractual assumptions of liability that were decades old in a way that was “impossible” to anticipate.  Slip op. at 31.

The liability imposed by Thomas was disproportionate.  Quick and dirty is what market share liability is all about. It makes defendants liable for injuries allegedly inflicted by products that they never made or had anything to do with.  Slip op. at 31-32.

The liability imposed in Thomas also was arbitrary and irrational.  We sure think so.  Again, because it was a form of market share liability, the effect of Thomas was a massive creation of liability towards persons as to whom there was utterly no evidence of any contact with any defendant’s product:

The [product] that allegedly injured [plaintiff] could have been applied at any time during [an] expansive time period, even when [defendant] was no longer producing or marketing white lead carbonate. This raises a substantial possibility that defendants not only could be held liable for more harm than they actually caused, but also could be held liable when they did not, in fact, cause any harm to plaintiff at all.
Slip op. at 33.

Finally, the court found additional Due Process support in the Supreme Court’s punitive damages decisions – specifically those portions of State Farm Mutual Automobile Insurance Co. v. Campbell, 538 U.S. 408 (2003), and Philip Morris USA v. Williams, 549 U.S. 346 (2007), that require punitive damages to be imposed solely for harm caused to the specific plaintiff before the court:

[W]hether the damages in a risk contribution case are considered compensatory or punitive is not particularly relevant to the due process concerns expressed in State Farm and Philip Morris.  These cases stand for the principle that it violates due process to impose damages for the wrongful conduct of others.  Stated another way, it violates due process when there is no nexus or provable connection between a damages award and the harmful conduct of the defendant.  When liability is imposed under the risk contribution rule, the end result is the same as that condemned in State Farm and Philip Morris.
Slip op. at 37 (emphasis added).

Wow.  This is good enough that we went and dug up a copy of the defense brief, so everybody can see just how this was done.

We’re so accustomed to seeing Due Process arguments raised by plaintiffs trying to get tort reform declared unconstitutional, that you’ll have to forgive us for just stopping and gawking for a minute….

OK, we’re done now.

We’ll have to see how well Gibson survives inevitable appellate review, but we have to admit that the decision’s got possibilities.  We only wish we’d had it when Sindell v. Abbott Laboratories, 607 P.2d 924 (Cal. 1980), was first decided.  We might well have been spared the monstrosity of market share liability altogether.

But there’s more potential than that.  If Gibson holds up on further review, we can think of a whole judicial rogue’s gallery of grossly expansive liability theories that we’d like clear out – starting with West Virginia v. Karl, 647 S.E.2d 899 (W. Va. 2007), and Conte v. Wyeth, Inc., 85 Cal. Rptr. 3d 299 (Cal. App. 2008).   Speaking of West Virginia, Gibson's "upset settled expectations" rationale holds promise as a Due Process counter to forum-friendly choice of law doctrines that have tempted forum-shopping plaintiffs to bring out-of-state cases in West Virginia courts in the hope getting West Virginia's anti-learned intermediary law applied to cases having no factual connection with the state - something we've bemoaned here.

Then there’s public nuisance, medical monitoring, and who knows maybe bizarre extensions of “unjust enrichment” liability.

But let's not react like kids in a candy store just yet.  That’s all for the future.  Right now we’re more than happy enough to see that Due Process can apply to to kill off market share liability.

1 comment:

Anonymous said...

Interesting stuff. One thing: the 4-1-4 splintered decision the Gibson court based its retroactivity analysis was Eastern Enterprises v. Apfel, 524 US 498 (1998), not Landgraf (although Landgraf was cited in the opinion). Might want to correct that.