PREEMPTION AND PERSONAL JURISDICTION IN A POST-SCALIA WORLD. PRESENTED BY DAVID HOLMAN and JOHN K. CRISHAM OCTOBER 5, 2016

Transcription

1 PREEMPTION AND PERSONAL JURISDICTION IN A POST-SCALIA WORLD PRESENTED BY DAVID HOLMAN and JOHN K. CRISHAM OCTOBER 5, 2016

2 INTRO: JUSTICE SCALIA S SIGNIFICANCE His view did not always win and it often lost but his combination of brilliance, eloquence and good timing... ensured that his ideas, originalism in constitutional law and textualism in statutory interpretation, would set the agenda for a serious judicial conservatism and define the worldview that any living Constitution liberal needed to wrestle with in order to justify his own position. Ross Douthat, New York Times, Feb. 13, 2016

3 DRUG & DEVICE PREEMPTION IN A POST-SCALIA WORLD: From Wyeth to Bartlett and Beyond

4 ROADMAP Significant shift in the scope of pharmaceutical products cases over last decade. Three core topics for today: Discuss Supreme Court s decisions in Riegel, Wyeth, Mensing, and Bartlett, and their aftermath Look at the continued challenges for the industry Finally, consider the effect Justice Scalia s absence might have on the Court s resolution of preemption defenses brought by drug and device manufacturers But first, let s start with some basic principles so we re all on the same page

5 WHAT IS PREEMPTION? Preemption arises when a provision of state law conflicts with a provision of federal law. When that happens, federal law is said to trump, or preempt, the state law. Can be a state statute, a state regulation, or even a state common-law claim. In the drug-and-device context, the most common form is a state-law tort claim.

6 WHY DOES FEDERAL LAW PREEMPT STATE LAW? Because the United States Constitution says so

7 THREE DIFFERENT SPECIES OF PREEMPTION Preemption comes in several distinct, but inter-related forms: Express preemption Field preemption Conflict preemption

8 THREE DIFFERENT SPECIES OF PREEMPTION Express Preemption: when the statutory text says that state law claims are barred. Good Example: Medical Device Amendments

9 THREE DIFFERENT SPECIES OF PREEMPTION, CONT. Field Preemption: When Congress has legislated in such a way that is so comprehensive as to occupy the entire field, leaving no room for conflicting, or even complementary, state regulation. Good Example: Immigration laws.

10 THREE DIFFERENT SPECIES OF PREEMPTION, CONT. Conflict Preemption: when compliance with a state requirement would [A] cause a regulated party to violate federal law or [B] otherwise violate the purpose of federal law Two kinds of conflict preemption: Impossibility preemption Purposes and Objectives preemption

11 IMPOSSIBILITY PREEMPTION Impossibility preemption arises where it is impossible for a private party to comply with both state and federal requirements.

12 PURPOSES-AND-OBJECTIVES PREEMPTION Purposes and objectives, or obstacle, preemption arises where enforcing a particular state law would so impede Congress s goal in pursuing a particular statutory scheme. Good example: Seatbelt laws.

13 WHO DECIDES PREEMPTION QUESTIONS? Any court can be called on to resolve a preemption question whether state or federal, trial or appellate The Supreme Court itself decides preemption questions in any number of areas from environmental law, to employment, to immigration, to arbitration, and, as relevant here, to drug and device law In fact, in just the last decade, the Supreme Court has decided no less than four different cases turning on questions of preemption in the drug and device context

14 Riegel v. Medtronic, 552 U.S. 312 (2008) (Scalia, J.) Plaintiff was implanted with a balloon catheter. His heart became blocked and he had to go into emergency surgery. He later sued Medtronic, which made the device, claiming that it was unsafely designed and labeled. The company argued that the claim was expressly preempted under the MDA because the design and labeling was subjected to rigorous FDA review, and because the state requirements were thus different from what FDA had required.

15 Riegel, cont. The Supreme Court, with Justice Scalia writing, agreed that the claim was preempted. As Justice Scalia wrote, common-law duties impose requirements just like positive law does:

16 STATUS OF PREEMPTION FOR MEDICAL DEVICE MAKERS? In Riegel s wake, the general rule is that state-law tort claims targeting Class III manufacturers are expressly preempted However, several courts have carved out an exception for parallel state-law tort claims This exception comes from how these courts have read the express-preemption provision, and from language in Riegel that referenced, but did not sanction, the theory As we ll see in a bit, plaintiffs have attempted to convince courts to adopt a similar exception in drug cases

17 Wyeth v. Levine, 555 U.S. 555 (2009) Plaintiff developed gangrene after IV Phenergan, resulting in amputation. Manufacturer argued impossibility and P&O preemption Held: Federal law does not preempt FTW claims against brands: CBE permits unilateral labeling changes for brands Absent clear evidence that change wouldn t be approved, not impossible for brand to comply with both federal and state requirements. Four justices, including Justice Scalia, dissented Post-Wyeth: Most courts have rejected brand-name companies attempts at preemption dismissals.

18 PLIVA Inc. v. Mensing, 131 S.Ct (2011) Plaintiff ingested generic Reglan (called Metoclopramide) and developed tardive dyskinesia Key holdings State-law tort claims against generics preempted because federal law requires generic labeling to be the same as brand labeling Neither CBE nor Dear Doctor letters available without prior FDA approval No liability for failure to take steps Plaintiffs and the Solicitor General argued that a state-law claim paralleling misbranding statute not preempted; Court found preemption regardless.

19 Mensing, cont. Great decision for generics, but the plaintiffs bar remains inventive in trying to find ways around it Several post-mensing theories pressed in last few years: Disguised FTW claims; i.e., DD, fraud, breach of warranties Failure to update labeling Violations of the FDCA Failure to stop selling RLD designation converts ANDA holder into NDA holder Courts are split on these issues, with really only update succeeding

20 Mutual Pharm. Co. v. Bartlett, 133 S. Ct (2013) State-law design-defect claims against generic manufacturers are preempted because: Can t Change Design: Manufacturers can t unilaterally change drug designs under federal law. Otherwise, the altered chemical would be a new drug that would require its own NDA. And it is a one-molecule drug that can t be redesigned. Id. at Can t Change Warnings: Where a design-defect claim depends on the adequacy of the drug s warnings, federal law prohibits generic drug manufacturers from independently changing their drugs labels. Id. at Court rejected CA1 s stop-selling rationale as incompatible with our pre-emption jurisprudence. Id at Presume that an actor is not required to cease acting to avoid liability. Stop-selling theory would require reversal of decades of its preemption case law.

21 WHAT HAPPENED IN BARTLETT S WAKE? Most courts post-bartlett rejected state-law tort claims, including CA3 (Welch), CA4 (Drager), CA5 (Lashley), CA6 (Strayhorn), CA7 (Houston), and CA10 (Schrock). But the plaintiffs bar is trying to plead around Bartlett. Main carve-out at this point is based on Solicitor General s parallel misbranding exception for pure design-defect claims. Plaintiffs bar has focused in on Bartlett fn. 4 as somehow preserving this theory.

22 CURRENT CHALLENGES FOR BRANDS Post-Mensing, plaintiffs are trying to bring claims against brands even where they took generic. ~ 100 cases rejected claim, but three decisions have accepted it: Conte v. Wyeth: held that it is reasonably foreseeable for brands that doctors will look to branded labeling NB: California Supreme Court has arguably vitiated Conte s core rationale. O Neil v. Crane Co., 266 P.3d 987 (2012) (barring strict liability and negligence claims where defendant did not manufacture the product at issue). Other courts have accepted it too: Kellogg v. Wyeth, Inc., 762 F. Supp. 2d 694 (D. Vt. 2010) Wyeth v. Weeks, 159 So. 3d 649 (Ala. 2014)

23 CURRENT CHALLENGES FOR BRANDS PREEMPTION? Brands invoking preemption must have clear evidence the FDA would not have approved label change. What counts as clear evidence? Where Agency rejected CBE change, PAS revision, or RFA -- preempted. Robinson v. McNeil Consumer Healthcare, 615 F.3d 861 (7th Cir. 2010) (label change) Christison v. Biogen Idec Inc., F. Supp. 3d, 2016 WL , slip op. (D. Utah Aug. 5, 2016) (CBE changes) In re Depakote, 87 F. Supp. 3d 916 (S.D. Ill. 2015) (PAS revision and RFA) Rheinfrank v. Abbott Labs., Inc., 119 F. Supp. 3d 749 (S.D. Ohio 2015) (PAS revision and RFA) In re Fosamax Prods. Liab. Litig., 951 F. Supp. 2d 695 (D.N.J. 2013) (PAS revision) Dobbs v. Wyeth, 797 F. Supp. 2d 1264 (W.D. Okla. 2011) (CBE change) (settled on appeal)

24 CURRENT CHALLENGES FOR GENERICS FDA s Notice of Proposed Rulemaking on CBE Rule FDA trying to amend regulation to allow generics to make unilateral changes, to create parity between NDA holders and ANDA holders with respect to submission of CBE labeling supplements. Real Question Is Whether They Can Do It Contrary to FDCA s sameness requirement and longstanding FDA precedent Inconsistent with Hatch-Waxman s purpose and structure (undermines brand-generic balance) Serious practical problems (confusion for medical professionals, increased costs, could hinder the Affordable Care Act) FDA has since effectively abandoned it at least until after the next election.

25 AGENCY DEFERENCE IN A POST-SCALIA AGE Scalia authored the opinion in Auer v. Robbins, which held that an agency s interpretation of its own regulations is controlling unless the interpretation is plainly erroneous or inconsistent with the regulation. However, he recently began advocating for Auer s abandonment: Perez v. Mortgage Bankers Ass n, 135 S. Ct. 1199, 1213 (2015) (Scalia, J., concurring) ( I would therefore restore the balance originally struck by the APA with respect to an agency s interpretation of its own regulations, not by rewriting the Act in order to make up for Auer, but by abandoning Auer and applying the Act as written. ) Decker v. Nw. Envtl. Def. Ctr., 133 S. Ct. 1326, (2013) (Scalia, J., concurring) ( In any case, however great may be the efficiency gains derived from Auer deference, beneficial effect cannot justify a rule that not only has no principled basis but contravenes one of the great rules of separation of powers: He who writes a law must not adjudge its violation. )

26 AGENCY DEFERENCE IN A POST-SCALIA AGE The Supreme Court has invoked Auer deference in its recent drug and device preemption decisions. In Mensing (authored by Justice Thomas), the Court cited Auer as the basis for the Court s reliance on the FDA s argument in its brief that the CBE regulation prohibits generics from unilaterally changing labeling. Other Justices, meanwhile, have also criticized the use of Auer, at least insofar as it has the effect of shutting down personal-injury claims. In his Bartlett dissent, Justice Breyer noted that he normally gives weight to the FDA s views, but could not do so because the FDA set forth its views only in litigation, set forth conflicting views, and did not solicit the opinion of the public.

27 SPECIFIC JURISDICTION: TWO PARTS The most active area of the law Two parts: 1. Minimum contacts with the forum are required; 2. The lawsuit must arise from forum-related contacts.

28 INTRO: WHAT IS JURISDICTION? At the most general level, two aspects: 1. A government s general power to exercise authority over persons and things within its territory; and 2. A court s power to decide a case or dispute. Black s Law (10th ed. 2014).

29 INTRO: GENERAL VS. SPECIFIC JURISDICTION General jurisdiction: where a person or entity makes itself essentially at home in the forum state That forum can hear any lawsuit related to the defendant. I.e., suing the Broncos in Colorado or Hershey in Pennsylvania. Specific jurisdiction: where the lawsuit arises from the person or entity s single or isolated contacts with the forum state.

30 SUPREME COURT S PERSONAL JURISDICTION ROLE A matter of constitutional interpretation Due Process Clause: Under the 14th Amendment, No state shall... deprive any person of life, liberty, or property, without due process of law.

31 PERSONAL JURISDICTION S COMMON LAW ROOTS Concept existed centuries before the 14th Amendment (1868): Traditionally that proposition was embodied in the phrase coram non judice, before a person not a judge meaning, in effect, that the proceeding in question was not a judicial proceeding because lawful judicial authority was not present, and could therefore not yield a judgment. American courts invalidated, or denied recognition to, judgments that violated this common-law principle long before the Fourteenth Amendment was adopted. Burnham v. Superior Ct., 495 U.S. 604, (1990) (Scalia, J.).

32 PERSONAL JURISDICTION S SIGNIFICANCE FOR LIFE SCIENCES INDUSTRY Predictability! Under current case law, it is arguably possible and courts have held that you can be haled into court in a state where you have no offices, no employees, no travel, no direct business contacts, or no direct sales or distributors, simply by selling your product into the stream of commerce, and it is foreseeable that your product might end up in that state.

33 SPECIFIC JURISDICTION: MINIMUM CONTACTS The defendant must purposefully establish minimum contacts in the forum state. Must be based on an act of the defendant, not the act of the consumer who brings the product into the forum state. So if a family buys a vehicle in the New York City area, takes it on a cross-country trip, and gets injured in Oklahoma, does jurisdiction exist?

34 SPECIFIC JURISDICTION: STREAM OF COMMERCE Must the defendant target the forum state specifically, or is a large enough sales volume toward the forum state enough? The stream of commerce theory Many courts have held that a mere awareness or foreseeability that a product ends up in the forum state is enough for personal jurisdiction to exist. If this is the test, it is hard to find a limit on personal jurisdiction, especially if your sales volume is large enough. If you sell enough widgets, the sheer volume makes it arguably foreseeable that your products end up in every single jurisdiction.

35 SPECIFIC JURISDICTION: STREAM OF COMMERCE Defendant: a Taiwanese manufacturer of tire valve assemblies Relevant sales: sells its product in Taiwan to a Japanese company that incorporates the valve assembly into its motorcycle tire tube Lawsuit: the valve assembly is blamed for a motorcycle accident in California

36 SPECIFIC JURISDICTION: STREAM OF COMMERCE Defendant s California contacts: No offices, property or agents in California Didn t solicit business in California Didn t make direct sales into California Didn t control the distribution of its valve assembly into California But because it was aware that some of its valve assemblies would be incorporated into tire tubes sold in California, and it intentionally placed its product into the stream of commerce, the California Supreme Court held that California courts had jurisdiction

37 SPECIFIC JURISDICTION: STREAM OF COMMERCE Upon review by the U.S. Supreme Court, the Court unanimously found that this was not enough; but it did so in three different opinions, none of which enjoyed a majority. Justice Scalia joined the main opinion, which argued that the Due Process Clause requires something more than that the defendant was aware of its product s entry into the forum state. Five justices found no jurisdiction because it would violate traditional notions of fair play and substantive justice. In other words, it isn t fair.

38 State of the law: SPECIFIC JURISDICTION: STREAM OF COMMERCE Until very recently, this was the law: maybe it was enough to sell your product into the stream of commerce, as long as you were arguably aware that your product would likely end up in the forum state.

39 SPECIFIC JURISDICTION: STATE SPECIFIC? A 2011 case offers a glimmer of hope (J. McIntyre Machinery, Ltd. v. Nicastro) A British-made metal shearing machine injured a worker in New Jersey. Defendant had no direct sales to United States customers, but sold to a United States distributor. Some of its officials attended U.S. conventions, but not in New Jersey. Only 4 machines ended up in New Jersey. New Jersey Supreme Court: this was enough, based on the old stream of commerce theory

40 SPECIFIC JURISDICTION: STATE SPECIFIC? Another fractured Court: Six justices found no jurisdiction. Six-justice majority was also split: Four justices, including Justice Scalia, advanced a very restrictive view of personal jurisdiction, based on sovereignty: a defendant s action to place itself under that forum state s authority. Not enough to show fairness or a defendant s expectation that its product would end up in the forum state. Without any concrete contacts in New Jersey, personal jurisdiction wasn t present.

41 SPECIFIC JURISDICTION: STATE SPECIFIC? Rest of the majority: tried to split the baby. They argued that jurisdiction was lacking without something more : which they suggested would have been a regular flow of sales into New Jersey, or some state-specific action such as state-specific design, advertising, etc.

42 SPECIFIC JURISDICTION: STATE SPECIFIC? Before Justice Scalia died, a growing majority of the Court was dissatisfied with the state of specific jurisdiction law and its open-ended stream of commerce theory. But they weren t unified enough to do something about it. And lower courts are still divided about what Nicastro means.

43 GENERAL JURISDICTION: CONTINUOUS AND SYSTEMATIC Neglected area of the law until recently, probably because establishing specific jurisdiction through the stream of commerce was so easy. Until 2011, the test here was whether a corporation s contacts with the forum state were continuous and systematic. Hard to know where that line is in the closer cases.

44 GENERAL JURISDICTION: ESSENTIALLY AT HOME The Supreme Court unanimously decided that general jurisdiction existed only where the defendant was essentially at home in the forum state. For a corporation, the typical forum for general jurisdiction is its domicile : where it is incorporated or headquartered. Thus, where Goodyear s foreign subsidiaries were sued in North Carolina for a Paris bus accident involving two North Carolina boys, and the tires in question were manufactured in foreign countries by the foreign subsidiaries, no general jurisdiction.

45 Not a bright line rule GENERAL JURISDICTION: ESSENTIALLY AT HOME But a higher bar than continuous and systematic. Difficult to apply essentially at home for large, multinational corporations with various subsidiaries with different roles.

46 GENERAL JURISDICTION: ESSENTIALLY AT HOME Essentially at home clarified in 2014 Daimler AG, the parent company of Mercedes- Benz USA, was sued in California for the actions of its Argentinian subsidiary in the 1983 so-called Dirty War in Argentina. MBUSA is incorporated in Delaware and headquartered in New Jersey, but distributed vehicles to independent California dealerships, and has some corporate facilities in California.

47 GENERAL JURISDICTION: ESSENTIALLY AT HOME The Ninth Circuit found general jurisdiction over Daimler AG because its agent, MBUSA, was subject to general jurisdiction in California. The Supreme Court reversed because Daimler AG itself was not essentially at home in California. The Court clarified that a corporation may be at home in a forum other than its state of incorporation or headquarters only in an exceptional case. Boeing example: headquartered in Illinois, incorporated in Delaware, but with massive operations in Washington State.

48 GENERAL JURISDICTION: CONSENSUS FOR NOW The last two decisions reigning in general jurisdiction were unanimous, but that will probably not continue as the Court explores the exceptional case.

49 GENERAL JURISDICTION: CONSENSUS FOR NOW Further, if both forms of jurisdiction are restricted, then you can bet that the side of the Court that favors the stream of commerce theory will resist additional restrictions on general jurisdiction. Or proponents of universal jurisdiction may push for an even broader stream of commerce theory. See, e.g., Bristol-Myers Squibb v. Superior Ct. (Cal. Aug. 29, 2016): disregarded the second element of specific jurisdiction so suit need not arise from California contacts.

50 GENERAL JURISDICTION: ESSENTIALLY AT HOME EXCEPTIONS? May be ripe for new examination soon. For example, the Tenth Circuit recently held that Daimler didn t change the law of general jurisdiction, and suggested that general jurisdiction is not restricted to the states of incorporation and headquarters. (American Fidelity Assurance v. BNYM (SCOTUS denied cert. petition on Monday))

51 PERSONAL JURISDICTION: AFTER SCALIA Clinton/Merrick Garland Judge Garland did not decide many personal jurisdiction cases, and he decided none since the major decisions of the last several years.

52 PERSONAL JURISDICTION: AFTER SCALIA Trump has taken the unusual step of releasing lists of potential nominees latest two weeks ago Most don t have any significant Supreme Court decisions in the last 5 years None has addressed stream of commerce issue

53 PRACTICAL CONSEQUENCES IN YOUR LITIGATION Both defenses must be pleaded in your answers. Make your record Preservation: a motion to dismiss should be enough in many jurisdictions, as should jury instructions and a motion for directed verdict. Adopt consistent positions across various lawsuits.

54 PREEMPTION AND PERSONAL JURISDICTION IN A POST-SCALIA WORLD OCTOBER 5, 2016 David C. Holman david.holman@dglaw.com (303) John K. Crisham crishamj@gtlaw.com (303)