Securitizing Litigation Claims for Fun and Profit

By on June 27, 2013

Call me old fashioned, but I am uncomfortable with the growing industry involving third-party financing of commercial claims in litigation. In the not-too-distant future, it may well be that commercial litigations will be “bundled” and traded as securities on financial exchanges, not unlike the exchanges that trade fx.

However, lawyers are not agricultural growers, but professionals who have been trained to serve as both officers of the courts in which they are admitted and skilled advisors to the clients by whom they are retained. In the absence of regulatory safeguards and rigorous judicial oversight, traditional litigation practice is at risk of being turned on its head.

As a counterweight to my negative views on the subject,Aaron Katz, a principal at Parabellum Capital, LLC, and Steven Schoenfeld, a partner at Robinson & Cole, LLP, have written an excellent article titled, “Third-party Litigation Financing: Commercial claims as an Asset Class,” which appears in Practical Law The Journal, July/August 2013. Katz and Schoenfeld offer a compelling argument on behalf of an industry that is estimated to exceed $1,000,000,000 in the United Kingdom and United States combined.

Third-party litigation financing is a mechanism by which a party not affiliated with a certain lawsuit pays for another party’s (usually a plaintiff’s) legal fees to pursue the lawsuit, in exchange for a portion of the proceeds recovered by settlement or judgment. As the authors discuss, third-party litigation financing arrangements are complex transactions that need to be negotiated and structured carefully to address the unique needs of the specific investment.

Katz and Schoenfeld are sensitive to the legal issues inherent in third-party litigation financing, including champerty and maintenance; the duty of confidentiality and the related attorney-client privilege; and litigation counsel’s duties of loyalty and independence.

Litigation counsel owes a duty of loyalty to a client. This duty requires litigation counsel to act in the client’s best interests and give the client independent legal advice without interference from third parties, even if a third party pays the attorney. The authors point out that a third-party funder who controls the litigation may run afoul of litigation counsel’s ethical duties of loyalty and independence in addition to champerty laws. Therefore, it is not advisable for third party funders to not hire or terminate litigation counsel; direct litigation strategy; or make settlement decisions.

Of course, these ethical precautions may be difficult to observe in the heat of battle with millions of dollars of potential fees at stake. The housing crash and the severe recession that followed was, in part, due to the excesses of Wall Street and the development of unusual, difficult-to-comprehend financial products, so instead people is deciding to invest in other sort of products and services like stock or cryptocurrency, moving average crossover pattern strategies which really help to do the right investments. In addition to this, many developers are planning to get substrate to build their own blockchain application. Does any attorney really look forward to the day when your commercial litigation, rated Triple-A by a third-party litigation financing company, has been bundled into other purportedly Triple-A litigations and sold to investors?

One previously Triple-A rated commercial litigation was recently downgraded and assigned a “junk” rating. CNNMoney reported on January 10, 2013 that Burford Capital, a $300 million publicly-traded fund that invests in lawsuits, accused representatives of the Ecuadorians, who are suing Chevron in Lago Agrio, Ecuador, of having defrauded the firm into investing in their case two years ago. It was reported that, on October 31, 2010, Burford gave the plaintiffs $4,000,000 in financing as the first tranche in what was planned to become a $15,000,000 investment. In exchange, it received a 1.5% stake of any recovery, which was to rise to a 5.5% stake upon full funding. Burford accused plaintiffs’ counsel of being “willing to do and say anything to attract new funding.”

Remarkably, Burford was able to recover its full investment by selling a $4,000,000 “participation” to another investor, while retaining an upside interest in the case. The new investor reportedly also owns a minority stake in the Brooklyn Bridge.

Filed under Burford Capital, champerty, Chevron, duty of loyalty, ethics, Lago Agrio, Ecuador, Litigation Issues and Factors, Parabellum Capital, Practical Law The Journal, Robinson & Cole, Securitizing Litigation Claims, Third-party Litigation Financing Tagged with ,

When Should Data Underlying Scientific Studies Be Discoverable?

By on June 19, 2013

There is significant tension between the goals of scientific research and the demands of litigation. For scientific researchers, the amount of time required to respond to discovery takes away valuable time that might be otherwise devoted to research. Injustice and unfairness may result when a scientist, who has taken no part in a litigation, is served with a lengthy subpoena requiring him to devote large chunks of time to produce the required information. 

In an article published in the journal Neurology by Brad A. Racette, MD; Ann Bradley, JD; Carrie A. Wrisberg, JD; and Joel S. Perlmutter, MD, titled “The Impact of Litigation on Neurologic Research,” Neurology 67(12):2124 (Dec. 2006), the authors complain about the burden of time responding to discovery demands:  

"Any hint of scientific data that support such a cause and effect relationship often encourages plaintiffs’ attorneys to file suits against corporations alleging harm to their clients forcing corporations and employers to defend themselves. Both plaintiff and defendant teams hire expert witnesses who are frequently active investigators in relevant fields to bolster their positions. These legal proceedings can influence investigators and hamper research. Interactions with researchers can lead to personal financial or career gain that may bias research findings or impugn other investigators. Even researchers who have not been retained by either side of a legal dispute may be forced to respond to subpoenas for research data causing a substantial loss of research time for investigators and financial burdens on universities. Courts may require release of research records containing personal health information that could sully the trust research participants have in investigators. Litigation and its peripheral effects may bias investigators, impede research efforts, and harm research participants, thereby undermining efforts to understand the cause of neurologic disease."

In a rejoinder to this article, defendant’s counsel in the Welding Fume  Products Liability Litigation, Nathan A. Schachtman, wrote in a reply titled, “Response: The Impact of Litigation on Neurologic Research,” Neurology 69(5):495 (Apr. 2007), that the Racette article offered a one-sided, incomplete picture of the interaction between scientific research and the law. 

Schachtman observes that the authors failed to disclose that the welder screenings for their study were funded by plaintiffs as part of an effort to solicit personal injury clients. Defendants served subpoenas to obtain the study’s underlying data only after plaintiffs’ counsel heavily relied on the authors’ study. Thus, Schachtman argues, the authors were not disinterested researchers inadvertently caught up in litigation. He states, “the authors collaborated with plaintiffs’ counsel so closely that counsel invoked litigation privileges to cloak the work in secrecy.” 

 In what might be characterized as a sur-reply, Dr. Racette responded that his early collaboration with the plaintiffs had been greatly overstated.  Perhaps the best advice, albeit cynical,  to scientific researchers may be to steer completely clear of lawyers at all costs and to avoid the temptation to be "helpful" to lawyers involved in litigation. Of course, the legal profession is the worse off if the best scientists are fearful of becoming involved in the judicial system. 

How then  is a court to balance the competing needs for transparency in litigation and permitting scientific researchers, often unrepresented by counsel, with the peace and tranquility necessary to perform their research?  As the court observed in In Re Welding Fume Products Liability Litigation, 534 F.Supp.2d 761 (2008), Dr. Racette had performed some assessments for plaintiffs’ counsel during the nascent stages of the MDL, but later severed his ties with plaintiffs and took no more payments from them. Under these circumstances, the MDL court opted in favor of disclosure. The MDL court reasoned that where an author publishes an article with a view toward litigation, a probability of bias exists which undermines the logic supporting the admission of this material through the “learned treatise” exception to the hearsay rule. In some cases, the “learned treatise” is excluded from evidence due to the taint of suspected bias. On other occasions, the treatise is admitted but subject to impeachment on cross-examination. 

The difficulty arises when a party’s expert reaches his expert opinions by relying on a study performed by a scientific researcher who is completely disinterested in the litigation. In this instance, what intrusion into this scientist’s life will be permitted? Merely because an author has reached a conclusion that dissatisfies one side or the other in litigation should not make that scientific researcher a “target” of a burdensome subpoena.

Pursuant to a very different set of facts, the Appellate Division, First Department, recently ruled in Weitz & Luxenberg v. Georgia-Pacific LLC, 2013 N.Y. Slip.Op. 04127 (6/6/13), that Georgia-Pacific must turn over for in camera review by the Court internal communications related to scientific studies it commissioned into the safety of its products. This discovery dispute arose in the context of the Weitz & Luxenberg  New York City Asbestos Litigation (“NYCAL”) cases in which Georgia-Pacific is a defendant. 

In 2005, Georgia-Pacific funded eight published research studies to aid in its defense of asbestos-related litigation. To facilitate this endeavor, Georgia-Pacific entered into a special employment relationship with Stewart Holm, its Director of Toxicology and Chemical Management, to perform expert consulting services under the auspices of in-house counsel, whom the Court found was significantly involved in the pre-publication process. 

The studies at issue were designed to cast doubt on the capability of chrysotile asbestos to cause cancer. The Court observed that despite the extensive participation of in-house counsel, none of the articles disclosed in-house counsel’s involvement. Citing the In Re Welding Fume Products Liability Litigation,  the Appellate Division determined that, “large corporations often invest strategically in research agendas whose objective is to develop a body of scientific knowledge favorable to a particular economic interest or useful for defending against particular claims of legal liability.” 

In determining that the studies and related documents should be subject to in camera scrutiny, the Court stated that the trial court was rightfully wary of prejudicing plaintiffs by permitting the sudden introduction of the studies or experts on the eve of trial, or in the many other pending asbestos cases. Therefore, the principles of fairness, as well as the spirit of the Case Management Order, required more complete disclosure. The Court held that it would be inappropriate to permit Georgia-Pacific to use its expert’s conclusions as a sword by seeding the scientific literature with Georgia-Pacific-funded studies, while at the same time using the privilege as a shield, by withholding the underlying raw data that might be prone to scrutiny by the opposing party which may affect the veracity of its expert’s conclusions. In its in camera review, the court will evaluate whether the crime-fraud exception to the attorney-client privilege applies to certain of the client communications in dispute. 

In high stakes toxic tort litigation, such as the NYCAL or Welding Fume litigations, it is not unusual for both well-heeled plaintiffs and defendants to fund studies to support their positions in litigation. In such instances, most courts will require extensive disclosure of the data underlying these studies’ findings. 

However, this is very different from the situation  where an independent scientist, who is uninvolved in any litigation, finds that his scientific research and underlying data is the subject of litigation scrutiny. Although some discovery may be appropriate in these instances, forcing scientific researchers to devote an inordinate amount of their time complying with litigation requests may have a chilling effect on the research community’s willingness to take on scientific challenges relating to important public health issues. 

Filed under Asbestos, chrysotile asbestos, In Re Welding Fume Products Liability Litigation, Litigation Issues and Factors, NYCAL, scientific research, subpoenas, The Impact of Litigation on Neurologic Research, Weitz & Luxenberg v. Georgia-Pacific LLC Tagged with

Court Holds Spicy Meatball, Not Pesticide, Caused Plaintiff’s Illness

By on June 13, 2013

In an Opinion and Order, dated May 31, 2013, the Hon. Sandra J. Feuerstein granted summary judgment to a defendant pesticide manufacturer after determining that plaintiff”s expert failed to meet the reliability requirements of Rule 702 and Daubert, in Mallozzi v. EcoSMART Technologies, Inc., E.D.N.Y., no. 11-cv-02884, 5/31/13.

Defending toxic tort claims against pesticide manufacturers is always challenging because pesticides, by their very nature, are designed to cause injury and death to pests. Plaintiff’s counsel is only too willing to permit the jury to infer that a pesticide product that can be harmful to bugs can also be injurious to humans. Therefore, if a defendant pesticide manufacturer can subject plaintiff’s expert to Daubert scrutiny prior to trial, it may be possible to dispose of scientifically suspect cases before they reach trial.

In Mallozzi, plaintiff claimed that he developed severe gastroesophageal reflux disease (“GERD”) and laryngopharyngeal reflux (“LPR”) as a result of an inhalatory exposure to EcoSmart Organic Home Pest Control, which contains 1% peppermint oil.

However, it was not until plaintiff returned from dinner at an Italian restaurant the night of the alleged pesticide exposure that he experienced nausea, a racing heartbeat and burning in his stomach and chest. Plaintiff obtained the expert opinion of Dr. Barry S. Levy, an occupational and environmental health physician and epidemiologist, that his exposure to peppermint oil caused his LPR by relaxing his lower esophageal sphincter.

In its motion for summary judgment, the defendant argued that Dr. Levy’s testimony was unreliable and did not meet the Daubert standard primarily because Dr. Levy was unable to establish the amount of peppermint oil inhaled.

The articles that Dr. Levy relied upon discussed ingestion of peppermint oil rather than inhalation, which was the case here. Moreover, none of the articles relied upon by Dr. Levy addressed whether inhalation of a substance containing 1% peppermint oil, over the course of a matter of minutes, could relax the lower esophageal sphincter or cause LPR.

In part, defendant’s motion was successful because defendant’s counsel laid the groundwork for the motion by obtaining helpful testimony from plaintiff’s expert in deposition. During Dr. Levy’s deposition, defendant’s counsel elicited testimony that none of the scientific articles relied upon by Dr. Levy involved inhalation of peppermint oil.

In addition to establishing a strong record in deposition, defendant’s counsel was also able to raise issues concerning the cause of plaintiff’s illness by obtaining a detailed medical history of plaintiff. The court rejected Dr. Levy’s reliance on the temporal proximity between plaintiff’s exposure to the product and the onset of plaintiff’s symptoms. In particular, the court observed that plaintiff began experiencing reflux hours after having a heavy meal of “spaghetti with seafood.”

Indeed, plaintiff had been hospitalized in 2001 for esophageal reflux after eating a donut and drinking coffee. On another occasion, he had experienced reflux prior to April 2010 when he had apparently overindulged on linguini with clam sauce. This prior medical history no doubt predisposed the court to believing plaintiff’s causation claim was suspect. The court found that Dr. Levy had “failed to justify his conclusion that reflux specifically caused by inhalation of the product caused plaintiff’s LPR and not reflux caused by plaintiff’s persistent GERD, both before and after April 19, 2010.” 
 

Filed under Agricultural Chemicals, Daubert, EcoSMART, EDNY, GERD, ingestion, inhalation, LPR, Mallozzi v. EcoSMART Technologies, Inc., organic pesticide, peppermint oil, pesticide, Rule 702, spicy meatball Tagged with ,

Balancing The Rights Of Landowners, Wind Power Developers And Mineral Rights Owners

By on June 3, 2013

It is the dream of many landowners in the United States to one day have both oil wells and wind turbines on their land. For this happen, however, landowners must play an active role in keeping oil and wind companies from trying to overreach each other in concurrent development of the land.

In their excellent article published by the University of Denver Sturm College of Law titled, “Jousting at Windmills: When Wind Power Development Collides with Oil, Gas, and Mineral Development,” authors K.K. DuVivier and Roderick E. Wetsel suggest that landowners will have to act as referees in an energy “Super Bowl” if they are to be successful in having concurrent wind and oil development on a single piece of property.

As DuVivier and Wetsel discuss, the spread of wind farming across mineral-producing states has raised concerns among mineral rights owners because of the large swaths of land needed for wind development. Today’s turbines, like those produced by General Electric, rise to a height of 262 feet at their hub and have a rotor radius of approximately 125 feet. Although the surface footprint of each turbine is relatively modest in relation to its height, wind development requires more extensive surface use than traditional oil and gas development due to: (1) turbine spacing; (2) buffer zones; (3) other surface uses such as roads, substations, operations and maintenance facilities, and laydown yards; and (4) overhead and underground transmission, collection and distribution lines.

Significantly, the turbines are linked by a spiderweb of underground and overhead transmission, collection and distribution lines. Although these lines may take up little surface space, they may interfere with concurrent use of the same land for oil, gas or mineral exploration and development.

Although there is a well developed common law concerning whose rights are superior to whom in any given situation, a landowner is much better off altering these common law approaches by making express agreements with wind project developers and prospective mineral estate lessees. If the landowner, as grantor, can negotiate clauses in the lease agreements that put pressure on lessees to work together, it may eliminate some of the battles that can occur between wind and mineral developers in the absence of clear contractual terms.

Over the years, mineral companies have come into conflict with surface owners and other lessees such as farmers, ranchers and hunters. These conflicts are due primarily to the conflict rising from the severance of the surface estate from the mineral estate such that surface owners frequently do not own the minerals underneath their own property. Although the mineral lessee may interfere with a landowner’s ranching or farming operation, many courts view it as unreasonable to allow the mineral estate owner to give way to grazing animals and not be allowed to develop the underlying minerals, i.e., by not drilling wells, building roads, powerlines, flowlines and tank batteries.

Unfortunately for the surface owner, the laws of certain states, such as Texas, require the landowner to provide the mineral lessee a large measure of deference to permit the development of mineral resources.
 

Filed under Jousting at Windmills: When Wind Power Development Collides with Oil, Gas, and Mineral Development, K.K. DuVivier, landowners, mineral estate lessees, mineral rights, Roderick E. Wetsel, severance of the surface estate from the mineral estate, Wind Power Tagged with , ,

Are Environmentalists Who Oppose Wind Farms Environmentalists?

By on May 22, 2013

Wind power can help address the nation’s compelling demand for electric power without increasing greenhouse gas emissions or enlarging our carbon footprint. Environmental activists, who are critical of the use of fossil fuels due to their perceived negative impact on the environment, are generally supportive of developing wind power as an alternative energy source. Wind is renewable, sustainable and non-polluting.

Why is it then that environmental groups sometimes oppose the development of wind power in the courtroom? From a global or even regional perspective, environmentalists should be rallying behind wind power, not opposing.

The short answer is that any commercial-scale, land-based development project within the United States is likely to involve a matrix of regulatory and environmental issues that arise during the siting process. Wind farm siting often involves addressing issues concerning aesthetics, noise and wildlife impacts. In many instances, environmental groups have joined local activists and Nimbies in opposing a wind power development.

A more responsible role for an environmental group, which should recognize the benefits of wind power, should be to mediate siting disputes rather than oppose development. From the environmentalist’s perspective, the more available wind power to generate electricity the better.

Many of the so-called environmental groups that oppose wind power are actually not environmentalists at all, but single purpose organizations whose sole object is to oppose wind development. Most environmental groups have an agenda that balances the pros and cons of various types of energy. However, these single purpose groups do not advocate in favor of anything.

For example, Friends of Maine’s Mountains claim to be dedicated toward working to “foster a civil and fact-based debate with the goal of exposing the true costs of mountain-based industrial wind development in Maine.” This group seeks donations to further its work in “shaping a sound, scientific and economics-based energy policy for the State of Maine.” However, a review of its website demonstrates that it offers neither constructive energy policies nor recommendations for keeping Maine on the energy grid. Rather, it is a NIMBY group that advocates the view that any public or governmental support for wind power is misplaced.

In Friends of Maine’s Mountains v. Board of Environmental Protection, 61 A.3d 689 (Me. 2013), Friends of Maine’s Mountains, along with other environmental groups, opposed the approval of a wind energy project near a lake and multiple homes. The Maine Department of Environmental Protection (“DEP”) set the appropriate nighttime noise level and refused to treat Webb Lake, which is located near the project, as a “scenic resource of national resource.”

The Board of Environmental Protection (“BEP”) upheld DEP’s approval of the wind energy project. However, in doing so, BEP agreed to a higher noise threshold than what it had previously agreed to for wind projects generally. Plaintiffs brought suit to block the plan, claiming that BEP abused its discretion and violated the Maine Constitution.

On appeal, the court agreed that BEP had abused its discretion by approving the higher noise threshold. On the basis of this determination, the case was remanded for further consideration of the appropriate nighttime decibel level.  However, the decision represents a considerable setback for Friends of Maine’s Mountains (and other neo-environmentalists) despite the remand on the noise level issue.

The Supreme Judicial Court rejected plaintiffs’ constitutional arguments that: (1) the Maine Wind Energy Act denied plaintiffs equal protection by denying protection for lakes listed among “Maine’s Finest Lakes”; (2) the Wind Energy Act violated the separation of powers clause of the Maine Constitution; and (3) DEP and BEP denied plaintiffs’ due process rights because of demonstrated bias. The court  also rejected  plaintiffs’ argument that Webb Lake, despite its natural beauty, was deserving of protective “scenic resource” status. The Court determined that legislative action, not administrative orders, determines what lakes in Maine are protected as “scenic resources.”

In addition, the court flatly rejected plaintiffs’ argument that the Wind Energy Act’s criteria for assessing visual impact are overly vague and therefore violative of the Separation of Powers Clause. The criteria in dispute were the six factors that the Board considers when making its determination regarding a wind energy project’s impact on scenic resources.

The court held that a statute is not constitutional merely due to difficult application. For example, in an earlier case, the court grappled with the difficulty of defining an “annoying” dog bark. As difficult as it is to judicially determine when and under what circumstances a bark becomes an annoyance, this criterion was upheld as constitutional.

Maine’s Legislature enacted the Wind Energy Act as a means to promote wind as a renewable energy source and streamline the permitting process for wind energy. Despite the opposition of the NIMBY groups like Friends of Maine’s Mountains, the Supreme Judicial Court had previously held that the “state interest in facilitating the rapid development alternative, renewable energy resources” is a legitimate interest that rationally relates to provisions in the Wind Energy Act.

There is a constructive role for environmental activists to play in the wind power siting discussions, but single-minded opposition to the expanded use of wind power as an energy source is misplaced. These so-called “environmentalists” would better serve their stakeholders by engaging in constructive discussion rather than running to the courthouse. 

 

Filed under Board, Environmental, Friends of Maine, levels', Maine Supreme Judicial Court, Maine Wind Energy Act, Mountains, NIMBY, Protection', scenic resources, Webb Lake, wind farms, Wind Power Tagged with

No FIFRA Preemption, No Problem!

By on May 16, 2013

In Gresser v. Dow Chemical Co., Ind. Ct. App., No 79A02-1111-CT-1014, 4/30/13, the plaintiffs in this toxic tort case alleged that their children developed a variety of illnesses after a purported exposure to Dursban TC in their home following a pesticide application by the co-defendant pesticide applicator.

Plaintiffs alleged that defendants Dow Chemical Company and Dow Agrosciences (collectively, “Dow”) failed to use reasonable care to instruct about the use of the product; warn about its danger; and appropriately test the design of the product. Following discovery, both plaintiffs and Dow filed motions for summary judgment.

On April 13, 2013, the Indiana Court of Appeals reversed a trial court order granting Dow summary judgment on FIFRA preemption grounds, but granted Dow summary judgment on the basis of the rebuttable presumption in Indiana’s product liability statute (the “IPLA”) that a product is not defective if it complies with federal or Indiana standards or regulations. Thus, Dow obtained from the IPLA presumption relief that it could not obtain by preemption.

Ind. Code § 34-20-5-1  provides a rebuttable presumption that a product which caused physical harm is not defective, and the manufacturer or seller of the product is not negligent, if before the sale by the manufacturer, the product “complied with applicable codes, standards, regulations, or specifications established, promulgated, or approved by the United States or by Indiana, or by an agency of the United States or Indiana.”

In determining that Dow was entitled to the statutory presumption, the court held that Dursban TC’s compliance with both FIFRA and Indiana law had a significant impact under IPLA’s consumer expectation-based product liability regime because the risk of harm had been evaluated by agencies with the duty of monitoring the effects of Dursban TC. Furthermore, Dursban TC’s labeling and warnings had been approved by experts.

On the basis of this ruling, the appellate court determined that the trial court correctly granted Dow summary judgment motion on plaintiffs’ failure to warn claims
 

This decision is significant because Dow was able to obtain through the use of the statutory presumption the same end result that it would have obtained had the appellate court found that the plaintiff’s claims were subject to preemption. Other states, including New Jersey, have similar provisions in their statutes in varying contexts.  In New Jersey, the New Jersey Product Liability Act, N.J.S.A. 2A:58C-1 et seq., specifically provides an evidentiary presumption in the favor of drug manufacturers against failure-to-warn claims:

"If the warning or instruction given in connection with a drug or device or food additive has been approved or prescribed by the federal Food and Drug Administration under the Federal Food, Drug and Cosmetic Act, 52 Stat. 1040, 21 U.S.C. Sec. 301 et seq., … rebuttable presumption shall arise that the warning or instruction is adequate."

Thus, product liability practitioners, in both the FDA and FIFRA contexts, should be mindful of the importance of developing evidence in discovery and at trial concerning the regulatory approval process and the  evaluations performed by the agency of the appropriateness of the product warnings, directions for use, and of the product’s safety and efficacy.
 

Filed under Agricultural Chemicals, Dow Agrosciences, Dow Chemical Company, Dursban, Failure to Warn, FIFRA preemption, Gresser v. Dow Chemical Co, Indiana Court of Appeals, IPLA, Preemption, presumption, Rebuttable Presumption Tagged with

Second Circuit Grapples with Medical Monitoring

By on May 3, 2013

On May 1, 2013, the Second Circuit issued an important decision in Caronia v. Philip Morris USA Inc., 2d Cir., No. 11-0316 (5/1/13). The Court provides an excellent summary of the law concerning medical monitoring claims in New York state and federal courts, and in other jurisdictions around the country. However, the Second Circuit concluded that the New York Court of Appeals was best suited to determine whether New York recognizes an independent claim for medical monitoring.

Therefore, the Court certified the following questions of New York law to the Court of Appeals: (1) Under New York law, may a current or former longterm smoker who has not been diagnosed with a smoking-related disease, and who is not under investigation by a physician for such a suspected disease, pursue an independent equitable cause of action for medical monitoring for such a disease? (2) If New York recognizes such an independent cause of action for medical monitoring, (a) what are the elements of that cause of action? and (b) what is the applicable statute of limitations, and when does that cause of action accrue?

Caronia, a putative class action, was commenced on January 19, 2006. The class plaintiffs are persons aged 50 years or older who currently smoke Marlboro cigarettes or ceased smoking them within one year prior to the commencement of the lawsuit, and smoked Marlboro cigarettes for at least 20-packed years. The complaint alleges that none of the plaintiffs are presently diagnosed with lung cancer nor under investigation under a physician for suspected lung cancer. Plaintiffs’ most recent amended complaint alleges that a newly established medical surveillance technique known as Low Dose CT scanning of the chest is a safe, efficacious and inexpensive technique which, for the first time, provides the means to identify and diagnose lung cancer at an early stage, when it is still curable.

In the trial court, the plaintiffs sought medical monitoring as a remedy for their tort claims of strict liability, negligence and breach of warranty but had not pled a free-standing claim for medical monitoring. It was not until plaintiffs filed their Fourth Amended Complaint that a stand-alone claim for medical monitoring was pled.

The Second Circuit affirmed the SDNY’s dismissal of plaintiffs’ traditional strict liability, negligence, and breach of warranty claims for redress of the smokers’ increased risk of developing lung cancer on the ground that these claims were time-barred. Thus, whether plaintiffs’ sole remaining claim for medical monitoring is a stand-alone claim or merely an element of consequential damages becomes critical to plaintiffs’ right of recovery. Because the statute of limitations bars plaintiffs’ pursuit of their traditional claims for negligence and strict products liability, any medical monitoring issue becomes moot if it is merely an element of consequential damages. If the underlying negligence and strict products liability claims are time-barred, then no consequential damages are recoverable.

 However, if New York recognizes an independent cause of action for medical monitoring, and, if, as recognized, that claim is viewed as accruing when an effective monitoring test becomes available, then, according to the Second Circuit, the statute of limitations likely will not have run on such an independent cause of action. Thus, the question certified to the New York Court of Appeals takes on critical importance.

 In Donovan v. Philip Morris USA, Inc., an almost identical case brought by the same plaintiff lawyers in the District of Massachusetts, the federal district court certified similar questions of law to the Supreme Judicial Court of Massachusetts. Notably, Sheila Birnbaum, now with Quinn Emanuel, and Gary Long of Shook Hardy & Bacon, argued on behalf of Philip Morris in both Massachusetts and New York.

In Donovan, the court held that plaintiffs who sued for medical monitoring, based on sub-clinical effects of exposure to cigarette smoke and increased risk of lung cancer, stated a cognizable claim under Massachusetts state law.

 The issue is whether the New York Court of Appeals will adopt the reasoning of Donovan, which sets a dangerous precedent, or take a more conservative approach. The obvious concern is that the “damages floodgates” may potentially open if the burden of medical monitoring plaintiffs is reduced to demonstrating a sub-cellular or physiological change rather than an injury or disease. Under such a loosened standard, particularly if an independent cause of action for medical monitoring is permitted to proceed, a sun tan, a skin blemish, a sneeze or elevated cholesterol could justify permitting a medical monitoring claim to proceed.

Perhaps we exaggerate, but why would not McDonald’s restaurants potentially be exposed to claims for diabetes medical monitoring claims brought by customers alleging they suffer  from  fast food-induced obesity?  Why would not Coppertone be subject to damages claims by customers with sunburns who allege they may be at risk for developing skin cancer due to the sun tan lotion’s  lack of efficacy in preventing sunburns?  In both situations, sub-cellular or physiological change could be demonstrated, particularly in the absence of a requirement to demonstrate phsical injury or disease.  A cynic might argue that a Donovan-style medical monitoring rule is designed only  to punish the tobacco industry rather than establish sound jurisprudence..

Although New York courts have held that medical monitoring may be an element of consequential damages, if certain requisites are met, Donovan can be distinguished from several Appellate Division medical monitoring cases in New York. For example, in Abusio v. Consolidated Edison Co., the Second Department upheld the trial court’s dismissal of cancerphobia claims on the grounds that plaintiffs had not presented sufficient evidence to prevail. However, in its decision, the Second Department cited cases which found that future medical monitoring costs could be sought for cancerphobia if a plaintiff could “establish both that he or she was in fact exposed to the disease-causing agent that there is a ‘rational basis’ for his or her fear of contracting the disease… this ‘rational basis’ has been construed to mean the clinically demonstrable presence of PCBs in the plaintiff’s body, or some indication of PCB-induced disease, i.e., some physical manifestation of PCB contamination… .”

A much-cited Fourth Department Appellate Division case, Askey v. Occidental Chemical Corp, examined claims of exposure to toxic discharges from a landfill and considered whether plaintiffs could recover for an anticipated need for medical monitoring. In particular, the court examined the then “novel issue” whether persons with an increased risk of disease could recover the costs of future medical monitoring in the absence of any apparent physical injury. In that case, the court concluded that recovery for medical monitoring was available as an element of consequential damage, but not as a stand-alone cause of action. But this article is not intended to be a survey of New York law on the subject.  The Second Circuit decision provides a cogent analysis of the important New York case law on medical monitoring and .I direct the reader to that discussion.

It is my view that any medical monitoring plaintiff should be required, at a minimum, to demonstrate injury or disease to recover medical monitoring damages and that no stand-alone claim for medical monitoring should be permitted. 

 

Filed under Birnbaum', Caronia v. Philip Morris USA Inc, Class Actions, CT Scans, Donovan v. Philip Morris USA, Inc, Gary Long, Marlboros, Medical Monitoring, physical injury or disease, risk of developing lung cancer, sub-cellular or physiological change, tobacco litigation Tagged with ,

Comcast Corp. v. Behrend Decision Levels Class Action Playing Field

By on April 26, 2013

The Foley Hoag Product Liability Update is a good source of information concerning developments in product liability and related law for product manufacturers and sellers. Published quarterly, the Update is prepared under the aegis of David R. Geiger, the chair of Foley Hoag’s product liability and complex tort practice.

Although any of the six articles in the April 2013 Update are worthy of comment, the Update’s discussion of Comcast Corp. v. Behrend, 133 S. Ct. 1426, 2013 WL 1222646 (Mar. 27, 2013) is the most significant. Behrend was filed as a hope-to-be antitrust class action in the U.S. District Court of the Eastern District of Pennsylvania.

Among other Rule 23 requirements, plaintiffs were required to prove that the damages resulting from the alleged injury were measurable on a classwide basis through use of a common methodology. Although plaintiffs proposed four distinct theories as to how they had been injured by defendants’ anti-competitive conduct, the trial court held that only one theory of damages was capable of class-wide proof. Nevertheless, the court certified a class under that single theory.

On appeal to the Third Circuit, defendants argued certification was inappropriate because plaintiffs’ expert had acknowledged that his model measured damages resulting from all four of plaintiffs’ theories of harm, not just a single theory.

The Third Circuit affirmed class certification on the ground that defendant’s objections to the scope of the expert’s damages model were not appropriate at the class certification stage; such an inquiry would improperly require the trial court to reach the merits of plaintiffs’ claims. Any consideration of the objections to the scope of the expert’s damages assessment should await the merits phase of the case, according to the court.

After granting certiorari, the Supreme Court reversed, holding that the Third Circuit had erred in refusing to consider defendants’ arguments that plaintiffs’ damages model was insufficient to establish their alleged damages on a class-wide basis. The Court reaffirmed the legal principle that class certification requires the trial court to determine that the prerequisites of Rule 23 are satisfied, even if that analysis necessitates some degree of inquiry into the merits of plaintiffs’ claim.

Although damages calculations need not be exact at the class-certification stage, the Court held that any model supporting a plaintiff’s damages case must at least be consistent with its liability case, particularly with respect to the anti-competitive effect of the alleged violation at issue in the case. The trial court certified only one of plaintiffs’ four theories of harm, all of which theories plaintiffs’ experts had modeled for damages purposes. The Supreme Court held that a model that does not even attempt to measure the damages attributable to the lone surviving theory of damages is insufficient under Rule 23.

 The Behrend holding is significant for class action practitioners. As much as possible, class action plaintiffs want to reserve any discussion of the merits of their claim until after class certification. Behrend should now permit defendants to place merits issues before the court at an earlier stage in the litigation if they can argue that such an inquiry is necessary to establish that Rule 23 prerequisites have been satisfied.

Going forward, defense counsel should be able to argue that a plaintiff’s damages model should be able to withstand rigorous Daubert scrutiny prior to class certification. The certification of a class creates enormous pressure on defendants to settle regardless of the merits of the case. The practical result of the decision is that the bar for class certification has been raised and the playing field leveled. 
 

Filed under class, Class Actions, Class Certification, Comcast Corp. v. Behrend, David R. Geiger, Foley Hoag Product Liability Update, merits, Rule 23 Tagged with

Keeping Your Adversary’s Environmental Expert Honest

By on April 16, 2013

Law 360 reported on April 12, 2013 that Steven Donziger, counsel for the indigenous Ecuadorians known as the Lago Agrio plaintiffs, “meddled” in the preparation of a key environmental report used against Chevron as part of an effort to secure, by hook or by crook, the $19.2 billion judgment.

The environmental consultants at Stratus Consulting Inc. (“Stratus”) who prepared the report, Law 360 reported, found no credible scientific evidence linking Chevron’s operations in Ecuador to groundwater contamination, adverse health effects or an increase in the incidence of cancer. In fact, Stratus claims it was pressured by Donziger into making false public statements and concealing its role in drafting a purportedly “independent damages assessment.” The lead Stratus consultant stated, “I based my opinions and conclusions on a series of assumptions and data provided to me by Donziger and the [Ecuadorian plaintiffs’] representatives that I do not know to be true.”

In a press release, dated April 11, 2013, Stratus announced that Chevron had dismissed with prejudice the fraud and racketeering claims asserted against Stratus in the SDNY. According to the press release, Stratus’ environmental consulting work for Donziger was used in a report submitted to the Ecuadorian court by the supposedly “independent” court expert, Richard Cabrera, as part of a process that Stratus learned was “fatally tainted” by Donziger and the plaintiffs’ representatives “behind the scenes activities.”

 Most toxic tort cases do not have stakes anywhere near as high as Chevron’s Ecuador case. There is the danger in any high stakes litigation that an environmental consultant is pressured into offering baseless conclusions under pressure from plaintiffs’ counsel or, alternatively, that the consultant’s data is used improperly.

 There are steps that the diligent defense lawyer can take to reduce the likelihood of falling victim to expert witness fraud or abuse.

1. Obtain all the data. Well before the deposition of the plaintiffs’ expert, every piece of scientific data available should be obtained and reviewed. It may not be enough to rely upon reports submitted by the consultant to plaintiffs’ counsel or a regulatory agency. Often, the reports do not contain all the available information.

Where site investigation work is involved, it is good practice to obtain the consultant’s field notes so that defense counsel can investigate what on-site activities were performed on each day and by whom. If an issue in the case involves groundwater contamination, defense counsel should obtain the location, depth and construction details of each monitoring well, if detailed boring logs are not part of the report. The boring logs can provide important information concerning the observations of the staffers involved in the drilling, such as odors detected during drilling and soil composition.

2. Does the data permit the consultant to draw the conclusions made in his report? If there is a claim that groundwater contamination caused off-site impacts, for example, what assumptions were made in reaching this conclusion. Were on-site or off-site perimeter wells drilled? What does the data suggest about the presence of a groundwater plume? Was sufficient groundwater data obtained to permit reliable mapping of a plume? What assumptions does the consultant make concerning the size of the plume or the speed at which it is moving? Are these assumptions based on scientific evidence or guesswork?

Defense counsel should always be on the lookout for data that does not support the consultant’s conclusions. Does the consultant draw selectively upon certain pieces of data to support his thesis but ignore other data?

Often, an environmental consultant and a toxicologist are both retained to advance plaintiffs’ theory of the case.  Does the plaintiffs’ toxicology expert misapply the information generated by the environmental consultant? If the toxicologist alleges that plaintiffs were injured due to an inhalatory exposure, for example, evidence of elevated groundwater levels is not relevant in the absence of evidence that contaminants in groundwater reached the ambient air where they could be inhaled.

Similarly, evidence of groundwater contamination in a monitoring well may not be indicative of the quality of the water at plaintiffs’ tap. There may be data gaps that plaintiffs’ toxicologist will attempt to fill with mere speculation. Defense counsel must be prepared to exploit those gaps and reveal the fallacies in the expert’s presentation.   

 

Filed under Chevron, environmental consultants, environmental data, Fraud, Independent Court Expert, Lago Agrio plaintiffs, Richard Cabrera, Steven Donziger, Stratus Consulting Inc., tainted evidence, Toxic Tort/Product Liability Litigation Tagged with

Among Environmentalists, Hydrofracking Is Not A “Yes Or No” Issue

By on April 11, 2013

On April 10, 2013, I participated in “Justice Speaks,” an event sponsored by the Justice Action Center at New York Law School on hydraulic fracturing.

 Joining me on the podium was Daniel Raichel, a Project Attorney with the Natural Resources Defense Council (“NRDC”), and the lead attorney with the newly formed Community Fracking Defense Project. Pursuant to this initiative, NRDC provides legal assistance to towns and local governments in potential shale drilling zones upstate that seek to prohibit hydrofracking in their communities.

 My presentation concerning hydrofracking centered broadly around the following points:

1.  The technology under discussion, by which oil and gas is extracted from shale deposits, is a game-changer. Due to technological advances, the use of horizontal drilling and hydrofracking has had a transformative effect on oil and gas exploration;

2.  The discussion over hydrofracking is not merely an environmental debate. What is at stake has important economic and social implications, not just for the United States, but for the entire world. The extent to which this technology can make the United States energy independent has significant national security and foreign policy ramifications.

 3.  Among mainstream environmentalists, hydrofracking is no longer a “Yes/No” question. Both industry and the environmental community recognize a need for more comprehensive regulation and environmental oversight. This recognition has resulted in significant joint efforts to develop standards and best practices.

The players on both sides of the debate have come together to find common ground. For example, a partnership has emerged between energy firms involved in hydraulic fracturing, including Chevron and Royal Dutch Shell, and environmental groups that are often opposed to fossil fuel development, including the the Environmental Defense Fund, the Clean Air Task Force, and the Group Against Smog and Pollution.

These entities jointly established the Center for Sustainable Shale Development (“CSSD”), which will provide independent and voluntary evaluations and certifications of shale gas developers. CSSD will establish standards to limit flaring, maximize water recycling, and reduce the toxicity of injection fluids, among other initiatives.

There is recognition by both the environmental community and industry that industry made a number of missteps early on and did not do as good a job as it could have in bringing this new technology online. Part of the problem was that regulators in many states were overwhelmed by the increased industrial activity and did not have the manpower or the necessary regulations on the books to properly oversee the activity that was occurring. Another problem was that the horizontal drilling technology was developing so rapidly. However, as public scrutiny on horizontal drilling has increased and as the industry has become more mature with the passage of time, the likelihood of serious environmental problems occurring due to hydrofracking has significantly diminished.

Mr. Raichel argued convincingly that there remain many gaps in regulatory oversight of hydraulic fracturing, particularly in existing statutory schemes such as the Clean Water Act and the Clean Air Act. However, New York’s deliberate and painstaking approach to understanding the potential impacts of hydrofracking on human health and the environment will  hopefully result in a well-regulated program once permits are issued and gas exploration finally gets off the ground.

Filed under envrionmental concerns, Hydraulic Fracturing, New York State' 'Justice Action Center' 'New York Law School' 'Center for Sustainable Shale Develo, Oil & Gas, question" Tagged with

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