Illinois Association of Defense Trial Counsel P.O. Box 7288, Springfield, IL IDC Quarterly Vol. 16, No. 3 ( ) Product Liability

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1 Product Liability By: James W. Ozog Wiedner & McAuliffe, Ltd. Chicago Jurisdiction Over Foreign Product Designers Saia v. Scripto-Tokai Corporation, 2006 WL (Ill. App. 1st Dist. decided May 26, 2006) With more and more product designing and manufacturing moving off-shore, attorneys increasingly find themselves representing foreign corporations in product liability litigation. As the world marketplace continues to expand, foreign product manufacturers and designers will be challenged to defend themselves in the U.S. courts. The first issue in any product liability case involving a foreign manufacturer is usually whether the court has personal jurisdiction over that entity. In Saia v. Scripto-Tokai Corporation, 2006 WL (Ill. App. 1st Dist. 2006), the appellate court considered whether an Illinois court could exercise jurisdiction over a foreign product designer that marketed products into Illinois through a U.S. based subsidiary. On June 3, 1999, an apartment building in Roselle, Illinois, caught fire. A minor occupant, Alexis Saia, died a few months later. Her mother, Helen Saia, as special administrator of her estate, sued Tokai, Scripto (Tokai s wholly-owned subsidiary), and others, alleging that a flame from an Aim n Flame II lighting rod ( lighting rod ) started the fire that ultimately led to Alexis death. The Saia family bought the lighting rod at a K-Mart in Illinois. The plaintiff sought to recover on theories of strict products liability and negligent design. Scripto admitted in its answer that it distributed the lighting rod, but it claimed that Tokai designed the rod. Tokai moved to dismiss the complaint for lack of personal jurisdiction. In the supporting affidavit, Tokai s director swore that Tokai had transacted no business in Illinois. Tokai had no offices, no mailing address and no local telephone listing in Illinois and it never had any employees in Illinois. Further, Tokai never sent its officers into Illinois to conduct business. It did not directly distribute its products in Illinois, nor did it directly profit from the sale or marketing of products sold in that state. A manager for Tokai admitted that Tokai designed the lighting rod and that Scripto was its exclusive distributor in the United States, but claimed that this distributor arrangement has not been reduced to a formal agreement. Scripto s subsidiary, JMP Mexico, manufactured the lighting rods. Tokai s manager swore that Tokai did not control the marketing or distribution of lighting rods distributed by Scripto. Similarly, an officer of Scripto said in an affidavit that Tokai has never directed or requested Scripto to market or sell utility lighters in the state of Illinois. Although Tokai manufactured some of the component parts of the lighting rods, the manager swore that Tokai [was] not involved in Page 1 of 7

2 decisions concerning how [component] parts were used by Tokai s customers, including JMP Mexico. The trial court permitted the parties to conduct limited discovery on the issue of jurisdiction. In that discovery, Scripto admitted that it distributed Aim n Flame lighters to customers in Illinois, including K-Mart. Both Scripto and Tokai claimed that they were unaware of the actual amount of lighters that might have been sold to Illinois consumers. Tokai denied generating any revenue from lighters sold or distributed in Illinois, but admitted that its agreement with Scripto permitted sales of its lighters in Illinois. On appeal, the court reversed the trial court s finding that there was no personal jurisdiction over Tokai. The court observed, citing Kostal v. Pinkus Dermatopathology Laboratory, P.C., 357 Ill. App. 3d 381, 827 N.E.2d 1031 (2005), that the Illinois long-arm statute permitted courts to exercise jurisdiction to the extent permitted by due process. The plaintiff, however, must prove a prima facie case of jurisdiction. Saia, 2006 WL at * 3, (citing Gaider v. Tippecanoe Distribution Serv., Inc., 299 Ill. App. 3d 1034, 702 N.E.2d 316 (1998). But a defendant s uncontradicted evidence can in some cases defeat jurisdiction. Id. The court stated, therefore, it reviews the record only to determine whether the uncontradicted facts demonstrate that constitutional due process forbids the exercise of personal jurisdiction over Tokai. Id. (citing Kostal v. Pinkus Dermatopathology Lab., P.C., 357 Ill. App. 3d 381, 827 N.E.2d 1031 (2005). The Saia plaintiff argued that jurisdiction existed because Tokai introduced its lighting rods into the Illinois stream of commerce, citing to Oswalt v. Scripto, Inc., 616 F.2d 191 (5th Cir. 1980) for support. In Oswalt, the plaintiff asked the federal court to exercise jurisdiction over Tokai-Seiki, a Japanese corporation that manufactured a cigarette lighter and sold it to Scripto, the exclusive distributor of Tokai-Seiki s lighters in the United States. Oswalt, 616 F.2d at 197. The 5th Circuit held that jurisdiction did exist. The court reasoned that Tokai-Seiki should reasonably anticipate being sued in a Texas court because of the distributorship arrangement with Scripto, and the fact that Scripto told Tokai-Seiki of its intention to distribute lighters to a customer for resale in national retail outlets. Oswalt, 616 F.2d at The Oswalt court also noted that the exercise of jurisdiction over Tokai-Seiki comported with the principles of the Illinois Supreme Court s landmark ruling in Gray v. American Radiator & Standard Sanitary Corp., 22 Ill. 2d 432, 176 N.E.2d 761 (1961). In Gray, the defendant manufactured a safety valve that a manufacturer in another state incorporated into a water heater eventually installed in Illinois. The plaintiff alleged that she suffered an injury when the heater exploded due to negligent construction of the safety valve. The Court in Gray stated: [T]he defendant s only contact with this State is found in the fact that a product manufactured in Ohio was incorporated, in Pennsylvania, into a hot water heater which in the course of commerce was sold to an Illinois consumer. The record fails to disclose whether defendant has done any other business in Illinois, either directly or indirectly. We do not think, however, that doing a given volume of business is the only way in which a nonresident can form the required connection with this State.* * * [T]he relevant inquiry is whether defendant engaged in some act or conduct by which he may be said to have invoked the benefits and protections of the law of the forum.* * * The fact that the benefit he derives from its laws is an indirect one, however, does not make it any the less essential to the conduct of his business; and it is not unreasonable, where a cause of action arises from alleged defects in his product, to say that the use of such products in the ordinary course of commerce is sufficient contact with this State to justify a requirement that he defend here. Id. at , 176 N.E.2d at 761. Page 2 of 7

3 The Saia court also discussed the District Court of Kansas case of Wessinger v. Vetter Corp., 685 F.Supp 769 (D.Kan.1987), as another example of the situation presented in Oswalt and Gray. In Wessinger, the plaintiff sued Honda Research and Development Co. (Honda R&D) alleging injury caused by the negligent design of a Honda motorcycle. Honda R&D moved to dismiss for lack of personal jurisdiction, admitting that it designed the motorcycle in question, but denying that it manufactured or distributed motorcycles. The court in Wessinger held that it would be fundamentally unfair to allow a foreign manufacturer to insulate itself from the court s jurisdiction by use of an exclusive distributor. Wessinger, 685 F.Supp at 776 (citing Cunningham v. Subaru of America, Inc., 631 F.Supp 132, 136 (D.Kan.1986)). The court also stated that the interests of the plaintiff in obtaining relief and of Kansas in protecting its citizens from injury by inadequately designed products are substantial and outweigh any inconvenience to the defendant. Wessinger, 685 F. Supp. at 778. The Saia court pointed out that, as in Wessinger, the plaintiff alleged that the defendant s design caused the injury. Tokai, like Honda, sought to profit from its design through the manufacture and sales, by its subsidiaries, of the products it designed. Saia, 2006 WL , at * 5. Tokai, like Honda, admitted that it designed the product in question and that JMP manufactured it and Scripto distributed it to various customers. A Tokai officer also swore that Tokai did not directly profit from sales in Illinois, similar to the position of the defendants in Oswalt and Gray. In fact, Tokai argued that the court could not conclude, based on the record that Tokai profited in any way from the sales of its product in Illinois. Tokai relied on a federal case from the District of Connecticut, Savage v. Scripto-Tokai Corp., 147 F.Supp.2d 86 (D.Conn.2001), in support of this argument. In Savage, a fire caused by an Aim n Flame lighting rod injured the plaintiffs. The court held that there was no jurisdiction over Tokai. Savage, 147 F. Supp.2d. at 95. The court stated that Tokai did not manufacture the product or ship it to Scripto and that no evidence was offered showing Tokai had knowledge of or any role in the nationwide scope of Scripto s distribution of Aim n Flames. Savage, 147 F. Supp.2d. at 93. The court went on to say: It is undisputed that Tokai has no specific connections to the State of Connecticut. * * * The mere fact that Tokai is designer of the subject product is insufficient to create personal jurisdiction; accepting such a theory would allow for the exercise of jurisdiction over every basement inventor in the world, simply because a product he or she conceived was manufactured and ended up in Connecticut. In the absence of any contract spelling out the terms of their arrangement, or any other evidence describing the nature of any operational relationship between Scripto and Tokai, plaintiff s record is insufficient to allow the constitutional exercise of jurisdiction over Tokai. Savage, 147 F. Supp.2d. at Although the Saia and Savage cases are very similar, the Saia court disagreed with the Savage court and held that Illinois had personal jurisdiction over Tokai. Saia, 2006 WL , at * 6. The court held that under the reasoning of Gray and Oswalt, where the defendant does not claim that the use in Illinois is an isolated instance, it is a reasonable inference that its commercial transactions, like those of other [product designers], result in substantial use and consumption in this State. Gray, 22 Ill. 2d at 442, 176 N.E.2d 761. Since Tokai owned all shares of the distributor, Scripto, and Scripto owned the manufacturer, the court found that Tokai obtained all profits from the manufacture and sale in Illinois of the product it designed. Saia, 2006 WL , at * 6. Tokai argued that Illinois had no interest in jurisdiction over Tokai because Scripto had submitted to the jurisdiction of Illinois courts, and it had sufficient insurance coverage to compensate the plaintiff. In Samuels v. BMW of North America, Inc., 554 F. Supp (E.D.Tex.1983), the court found that it lacked jurisdiction over the foreign manufacturer of the allegedly defective car, because Page 3 of 7

4 the court had jurisdiction over the domestic distributor of the car. But in that case, the distributor gave the plaintiff a warranty covering the automobile, and the plaintiff presented no issue the parties could not fully litigate in the lawsuit against the distributor. Here, the Saia court observed that if Scripto succeed(s) in persuading the trial court that it has no responsibility for the negligent design, the plaintiff may not have any domestic forum for litigating her negligence claim. Saia, 2006 WL , at * 6. The court further reasoned that Illinois had an interest in providing its citizens effective redress for negligent design of products distributed here, and Illinois cannot protect this interest unless it exercises jurisdiction over foreign designers that use subsidiaries to distribute the products they design. Saia, 2006 WL , at * 6. The Saia decision demonstrates that the Illinois appellate courts will push the limits of their jurisdiction to the full extent permitted by the Due Process Clause of the Fourteenth Amendment. Under Saia, it is difficult to conceive of a situation where an Illinois court might not have personal jurisdiction over a foreign manufacturer or designer which distributed products through a domestic subsidiary, knowing those products might make it to the Illinois market place. Thus, based on the Saia decision, a foreign manufacturer s or designer s defense of lack of personal jurisdiction will, in most cases, be unsuccessful. Manufacturer s Liability for Overseeing the Installation of a Medical Device Kennedy v. Medtronic, Inc., 2006 WL ( 1st Dist. June 6, 2006) In Kennedy v. Medtronic, Inc., 2006 WL , at * 9 (1st Dist. June 6, 2006), the First District Appellate Court held that a medical device manufacturer was not liable for overseeing or monitoring the installation of a cardiac pacemaker by a licensed and experienced physician. The decision appears to insulate medical device manufacturers from liability for both hospital and physician malpractice which might occur while a medical device is being installed in the presence of a manufacturer s representative. Sharon Kennedy, as administrator of the estate of her father, Ralph G. Studzinski, brought a negligence action seeking damages for the alleged injury and wrongful death of her father following the implantation of a cardiac pacemaker and lead manufactured by the defendant, Medtronic, Inc. The trial court granted Medtronic s motion for summary judgment. The plaintiff appealed. On July 16, 1999, Joshua Salvador, a licensed medical doctor, surgically implanted a Medtronic pacemaker and lead into the aorta and left ventricle of decedent s heart. Mr. Studzinski was 75 years old at the time of the procedure. Dr. Salvador testified that Mr. Studzinski had been his patient for over 15 years and had various health problems. Mr. Studzinski was afraid of hospitals and refused to have the implantation procedure performed on an inpatient basis. Dr. Salvador had inserted hundreds of pacemakers during the course of his career, but had retired from hospital surgery and given up his surgical privileges at Thorek Hospital in Dr. Salvador performed Mr. Studzinski s procedure at his clinic. It was the first such procedure Dr. Salvador had performed at the clinic and he released Mr. Studzinski on the same day. A clinical specialist provided by Medtronic was handed the wires from the pacemaker and checked them prior to insertion. Sometime after the pacemaker surgery, it was discovered the electrode to the pacemaker had been placed in the left ventricle of the heart and determined it would need to be relocated to the right ventricle. On December 26, 1999, the device was removed and a new pacemaker implanted properly. On April 24, 2000, Mr. Studzinski died of acute renal failure and congestive heart failure. Dr. Salvador subsequently admitted he deviated from the standard of care. Page 4 of 7

5 The cardiac pacemaker and leads are prescription medical devices which Medtronic sells only to licensed physicians. Heather Friedman, who had worked as a certified clinical specialist for Medtronic for approximately eight years, was present during the surgery. She provided technical support to ensure the lead parameters were correctly calibrated and the lead was functioning properly. She was a registered nurse and while working for Medtronic she provided technical support for one to three pacemaker insertion procedures per day, five days a week. Friedman s primary responsibility was to ensure that when the doctor put the lead into the ventricle, she paced the heart and determined whether it was capturing or sensing appropriately. She did not assist the doctor in inserting the pacemaker and lead and could not make a judgment as to whether the lead was placed in the appropriate ventricle. Dr. Kathleen Ward testified that she had participated in many invasive surgical procedures, including pacemaker implants, and was familiar with the role of the device maker s technical representative. Dr. Ward opined that Friedman should have refused to participate in the insertion of the decedent s pacemaker. Her opinion was based on the fact that the procedure was not done in a hospital, but in an office structure, and that she should have noticed there were no recovery room facilities and personnel to supervise the patient after the surgery. Dr. Ward testified the procedure could not have gone forward or been completed without Friedman. Dr. Harvey Alpern, a cardiologist with a background in pacemaker implant procedures, testified that a reasonable standard of care would require the doctor to monitor and record the various vital signs during the pacemaker implant surgery. Dr. Alpern opined that an inpatient admission to a monitored bed, whether it be in the hospital or as part of the hospital complex, is necessary. When asked what criticisms he had of Friedman, he replied: [S]he went to a facility that was not a full-fledged medical center or associated with any major hospital and it was an outpatient facility and since she testified that she had never seen this before, my criticism is that she should have either left or called her superiors to find out what to do. In her wrongful death and survival causes of action against Medtronic, the plaintiff alleged that her father suffered severe complications due to the improperly inserted pacemaker lead which resulted in his death. The plaintiff also alleged that Medtronic was negligent in selling the pacemaker to Dr. Salvador and through its participation and assistance in the pacemaker implant procedure. The plaintiff alleged that the trial court erred in granting Medtronic s motion for summary judgment. The plaintiff specifically contended that Medtronic owed the decedent the following three duties: (1) to refrain from providing a pacemaker to Dr. Salvador and from participating in the insertion of the pacemaker when she knew he intended to proceed in an inadequate facility without qualified personnel present and without monitoring any of the patient s vital signs; (2) to warn of the dangers inherent in proceeding with the surgery under the conditions present; and (3) to assist with the insertion in a reasonable manner once it voluntarily undertook to participate. Kennedy, 2006 WL , at * 3. Medtronic replied that it had no duty to prevent physician malpractice or to guarantee against it. Medtronic also asserted that under the learned intermediary doctrine it was exempt from having to warn decedent or his family of any dangers in proceeding with the surgery. Id. In determining whether Medtronic owed a duty, the court evaluated the following: (1) the reasonable forseeability of injury; (2) the likelihood of injury; (3) the burden of guarding against Page 5 of 7

6 injury; and (4) the consequences of placing that burden on the defendant. Kennedy, 2006 WL , at 3, (citing Brewster v. Rush-Presbyterian-St. Luke s Med Ctr., 361 Ill. App. 3d 32, 35-36, 836 N.E.2d 635 (2005); City of Chicago v. Beretta U.S.A. Corp., 213 Ill. 2d 351, 391, 821 N.E.2d 1099 (2004)). A duty to warn exists where there is unequal knowledge, actual or constructive of a dangerous condition, and the defendant, possessed of such information, knows or should know that harm might or could occur if no warning is given. Happel v. Wal-Mart Stores, Inc., 199 Ill. 2d 179, 186, 766 N.E.2d 1118 (2002). In Kirk v. Michael Reese Hospital & Medical Center, 117 Ill. 2d 507, 525, 513 N.E.2d 381 (1987), cited by Medtronic, the learned intermediary doctrine was adopted by the Illinois Supreme Court. Pursuant to that doctrine, manufacturers of prescription drugs have a duty to warn prescribing physicians of the drugs known dangerous propensities, and the physicians, in turn, using their medical judgment, have a duty to convey the warnings to their patients. Id. The doctrine s rationale is that a doctor is in the best position to prescribe drugs and monitor their use because he is knowledgeable of the propensities of the drugs he is prescribing and the susceptibilities of his patient. Kirk, 117 Ill. 2d at 518, 513 N.E.2d at 381. Consequently, in selling prescription drugs, the manufacturer is only required to warn the prescribing doctor, who then acts as a learned intermediary between the manufacturer and the consumer. Id. Illinois courts considered the learned intermediary doctrine with regards to a medical device manufacturer in Hansen v. Baxter Healthcare Corp., 309 Ill. App. 3d 869, 723 N.E.2d 302 (1st Dist. 1999). In Hansen, the court found that a medical device manufacturer has no duty to warn physicians of a device s dangers which the medical community generally appreciates. Id. That appears to be applicable to the instant case, given the widespread use of pacemakers in the medical community. The plaintiff, however, argued that the learned intermediary doctrine applied in this case, relying on Happel v. Wal-Mart Stores, Inc., 199 Ill. 2d 179, 186, 766 N.E.2d 1118 (2002). In Happel, a regular customer of the defendant s pharmacy was injured when she was prescribed medication to which she was allergic. Id. at , 766 N.E.2d at It was the pharmacy s policy to inquire as to the known drug allergies of its customers. Id. The pharmacy computer system, which was designed to alert the pharmacist when a contradiction arose, failed in this case. Id. The Illinois Supreme Court in Happel concluded that the scope of protection provided to pharmacists by the learned intermediary doctrine is limited, particularly in situations where a pharmacy has knowledge that a prescribed medication is contraindicated for a specific customer. Id. The learned intermediary doctrine, therefore, did not relieve the defendant s pharmacy of a duty to warn either the customer or her doctor that the prescribed drug was contraindicated because the pharmacy knew of the customer s allergies and knew that she was placed at risk of serious injury or death by taking the medicine. Id. at 197, 766 N.E.2d at In Fakhouri v. Taylor, 248 Ill. App. 3d 328, 618 N.E.2d 518 (1st Dist. 1993), cited by Medtronic, the plaintiff brought a wrongful death action against the defendant pharmacists who filled the prescriptions on which the decedent overdosed. In this case, the court found that the pharmacist had no duty to warn. The court found that pharmacists, like drug manufacturers, do not have a duty to warn customers of a drug s potential adverse effects where the pharmacists did nothing more than fill the prescriptions as ordered by the doctor and to hold otherwise would be to insert the pharmacist into the doctor-patient relationship. Id. Fakhouri was dissimilar to Happel in that the pharmacists could not control whether the overdose occurred or not. The court in Kennedy noted that the cases relied upon by the parties were instructive, but ultimately decided none were directly on point. The court concluded that the four factors laid out in Brewster did not weigh in the plaintiff s favor. It went uncontroverted, the court noted, that Dr. Salvador admitted his negligence as to the insertion of the pacemaker nodes. Furthermore, the injury to the decedent could not be reasonably foreseeable to Medtronic or likely based upon the surgery at being performed Page 6 of 7

7 at the clinic. The same error could have occurred at a full-fledged hospital. The court also stated: Moreover, in Happel, in stark contrast to this case, the defendant had all of the knowledge it needed that plaintiff was allergic to the medication which had been prescribed and would be placed at risk of serious injury if she took the prescription. Kennedy, 2006 WL , at * 5. In granting Medtronic s motion for summary judgment, the court found that imposing the duty proposed by the plaintiff on Medtronic would violate the learned intermediary doctrine. Applying the doctrine to this case, the court stated that a licensed physician such as Dr. Salvador had the knowledge of the patient s medical history and was in a better position to determine the patient s needs. Kennedy, 2006 WL , at * 5. It would be unreasonable, and potentially dangerous, to require a clinical specialist like Friedman to delay or prevent medical procedure simply because she believes the setting is not appropriate. Id. To hold otherwise would place a medical device manufacturer, like Medtronic, in the middle of the doctor-patient relationship. Id. Kennedy is a clear victory for medical device manufacturers. In effect, the plaintiff attempted to hold the device manufacturer responsible for the treating physician s malpractice. Because public policy requires that the treating physician be ultimately responsible for the patient, the court refused to impose a duty upon the manufacturer to second guess the physician s decisions and practices. The application of this decision could be limited to medical device manufacturers since the treating physician will almost always have superior knowledge about the patient. That may not be true in the case of the installation of non-medical products. In such situations, where a manufacturer supplies a representative to monitor or assist in the installation, the representative s knowledge may be equal to or even superior to that of the installer. Whether a duty exists under those circumstances will depend upon the unique facts of each case. ABOUT THE AUTHOR: James W. Ozog is a partner in the Chicago firm of Wiedner & McAuliffe, Ltd. He received his undergraduate degree from Northwestern University and law degree from Washington University in Mr. Ozog concentrates his practice in product liability defense matters and commercial litigation. In addition to his Illinois defense practice, he is National Trial Counsel for several product manufacturers. He has appeared as lead defense counsel in over twenty states and tried cases to verdict in seven states besides Illinois. He also represents clients on a regular basis in matters before the United States Consumer Products Safety Commission. He is a member of the American Bar Association, DRI, IDC and the Propane Gas Defense Association. Page 7 of 7