Though the October Term at the Supreme Court does not officially start until October 6, the Justices are meeting today at the “Long Conference” to consider the enormous quantity of motions and petitions that have been submitted to the Court.  One motion under consideration is petitioners’ motion to file Volume II of the joint appendix under seal in Kellogg Brown & Root Services, Inc., et al. v. United States ex rel. Carter, No. 12-1497, which is the first case specifically addressing the False Claims Act that the Supreme Court has accepted since its 2011 decision in Schindler Elevator Corp. v. United States ex rel. Kirk, 131 S. Ct. 1885 (2011).

Kellogg Brown’s petition, which was accepted on July 1, 2014, asked the Court to decide two questions:  first, whether the Wartime Suspension of Limitations Act (“WSLA”)—a criminal code that tolls the statute of limitations for offenses involving fraud perpetrated against the government when the United States is “at war”—applies to claims of civil fraud such as those brought under the False Claims Act and is triggered without a formal declaration of war; and second, whether the False Claims Act’s “first-to-file bar” allows relators to file duplicative claims so long as no prior claim is pending at the time of filing.  Practically, if the Court was to decide that the WSLA applied in the given context of the wars in Iraq and Afghanistan, any claim involving fraud against the government since 2001 would not be precluded by the False Claims Act’s statute of limitations.

Given that both of the questions before the Court involve matters usually decided at the very outset of the case—the statute of limitations and the jurisdictional “first-to-file” bar—the Court’s decision in this case is likely to have a huge impact on the amount of False Claims Act cases that are filed, as well as the percentage of those cases that are then moved past the initial motion to dismiss stage.  However, as expected, the Kellogg Brown case is not the only exciting case that the Court may hear this coming term.  Indeed, included among the cases on the Court’s docket are Oneok Inc. v. Learjet, Inc., No. 13-271, which involves the preemptive reach of the Natural Gas Act; United States v. Wong, No. 13-1074, which is set for argument on December 10, 2014 and asks whether the six-month time bar for filing suit in federal court under the Federal Tort Claims Act is subject to equitable tolling; United States v. June, No. 13-1075, which is also set for argument on December 10 and asks whether the two-year time limit for filing an administrative claim with the appropriate federal agency under the Federal Tort Claims Act is subject to equitable tolling; and lastly, Warger v. Shauers, No. 13-517, which is set for argument on October 8, 2014 and involves the ability of a party to introduce juror testimony about statements made during jury deliberations that tend to show the alleged dishonesty of a juror during voir dire.  As always, we will keep our eye on the High Court as these cases develop.

Nearly thirty years after asbestos products were removed from the market, industrial manufacturers still face ongoing litigation for personal injuries resulting from this toxic substance.  Asbestos-related illness can be a major source of liability for any company connected to the historical manufacture or distribution of asbestos-contaning products, and it is common for parties to seek ways to limit their liability exposure into the future.   Earlier this month, however, the Third Circuit ruled on a case where rather extraordinary – and unethical – measures were allegedly taken to conceal the truth about a business’ asbestos history.

In a class action against BASF Catalysts, as well as  its predecessor-in-interest and its attorneys, plaintiffs alleged that the defendants conspired to withhold information from thousands of asbestos-related injury claimants, thus preventing them from recovering damages in court.  Specifically, the defendants are accused of destroying or hiding documents which showed that talc products sold by BASF’s predecessor had contained asbestos.  Additional allegations include producing fraudulent documents to deny the presence of asbestos in these products, and then arguing in courts and during settlement negotiations nationwide that in the absence of any evidentiary showing that the talc products contained asbestos, it was impossible for their talc products to have caused the victims’ asbestos disease or death.

In the lawsuit, plaintiffs sought - in additional to punitive damages –  injunctive and declaratory relief that would allow victims to file or refile suit against BASF - regardless of whether their past claims were already settled or voluntarily dismissed - without being barred by defenses such as res judicata and statute of limitations, defenses they argue would not have been available had the plaintiffs not been dissuaded by the alleged fraud from vigorously pursuing their claims in the past.  At the district court, the plaintiffs’ fraud claims were dismissed on the grounds that the New Jersey litigation privilege banned the claims and that plaintiffs did not meet the pleading requirements.  The New Jersey litigation privilege is intended to protect litigants and attorneys from civil liability for representations made during judicial proceedings.  The Third Circuit reversed the finding that the privilege applied, holding that the privilege was not intended to cover allegations of systematic schemes to defraud.  Moreover the Third Circuit held that allowing the litigation privilege to protect defendants in this type of action would run counter to the privilege’s goals, which are to encourage open communication and to facilitate the uncovering of the truth among adversaries.  The district court also dismissed fraudulent concealment and spoliation claims on the grounds that they were not pled sufficiently; and again the Third Circuit reversed, finding that the plaintiffs’ allegations sufficiently touched on all elements of the claims.  Where the district court held that to support a spoliation claim, plaintiffs were required to demonstrate that they would have prevailed in the underlying action, the Third Circuit found this to be too high a bar, and held instead that spoliation may occur whenever the destruction of evidence leads to any effect on the size of a damage award or the expenses and efforts needed to litigate a claim.

Finally, the Third Circuit reversed the district court’s finding that injunctive relief would be an improper interference with state court proceedings.  Because there is no currently pending state court action involving BASF’s asbestos products, the Third Circuit held that it is proper for the federal district court to issue a ruling that may affect future state court cases, as the federal court is an appropriate forum to decide the issue at this time.  The Third Circuit did, however, refuse to issue declaratory relief in the form of prohibiting the defendants from raising res judicata or statute of limitations defenses in the future, on the grounds that such issues are not yet ripe and therefore the plaintiffs do not have standing to argue the merits of such hypothetical future defenses.  The injunctive relief allowed by the Third Circuit would therefore only prohibit future acts of spoliation and fraud, and the case was remanded for further proceedings consistent with these instructions.  The issue of punitive damages was not addressed by the Third Circuit.

This is an interesting case that highlights the complexities that can sometimes be involved in uncovering the evidentiary history of a personal injury action.  It should go without saying that it is never worthwhile – no matter the extent of the potential liability – for a party or its attorneys to expose themselves to the fallout that accompanies allegations of fraud or spoliation of evidence, a prospect far more costly than facing and defending the truth from the outset.  But, this opinion offered some additional insight on the ability of federal courts to be involved in issuing judgments related to state court misconduct, including the limitations on their ability to issue declaratory relief.  This is likely not the end of asbestos litigation against BASF and its predecessors, who will have to find a way to defend not only the underlying personal injury claims but also these new allegations of misconduct in state courts around the nation.  We will continue to follow this matter to see how it plays out, both substantively and procedurally, and what the final costs will be to plaintiffs and defendants alike.

 

Children’s toys continue to capture the attention of federal regulators. The Consumer Product Safety Commission spent the summer issuing nearly 200 safety violations to domestic importers of children’s toys, almost all of which were manufactured in China. Just last month, the Department of Justice announced that it has secured a guilty plea from two individuals accused of importing more than 100,000 toys from China with a host of alleged safety problems, such as excessive lead levels, choking and ingestion hazards, and easily-accessible batteries. Not surprisingly, there is no shortage of plaintiffs’ firms soliciting clients in connection with “unsafe toy lawsuits.” These lawsuits can mean big money for plaintiffs and serious exposure for United States importers.

Aleo v. SLB Toys USA, Inc. et al, 995 N.E.2d 740 (Mass. 2013), is a reminder of the uphill, and at times arguably unfair, battle importers face when defending lawsuits involving foreign made toys that allegedly do not comply with US federal safety regulations. Aleo was a wrongful death case resulting from a tragic accident involving an inflatable swimming pool slide – The Banzai Falls In-Ground Pool Slide – imported from a vendor in China and sold by Toys R Us. While there was a dispute in the case about whether decedent slid head first down the slide or dove off the slide, she ultimately struck her head on the concrete deck of the swimming pool and died the next day. The jury found Toys R Us grossly negligent, awarding compensatory damages in the amount of $2,640,000 and punitive damages in the amount of $18 million, both of which were upheld on appeal. The size of the verdict, as well as the evidentiary rulings sanctioned by the appellate court, reveal just how difficult these cases can be to defend.

The evidence in Aleo established that Toys R Us commissioned an independent testing laboratory to test the slide prior to importing it from China. At trial, the laboratory produced certificates evidencing that the slide complied with US regulations regarding lead content, flammability, soluble heavy metals content, labeling, sharp points and edges and more. However, there was no evidence that the slide was tested for compliance with federal design requirements promulgated to reduce or eliminate the risk of death or injury associated with swimming pool slides. As a result, the trial court allowed plaintiffs to argue in opening and closing statements that the slide was “illegal” – a devastating and prejudicial ruling that one can only conclude may have proven outcome determinative.

Toys R Us was further hindered by several additional rulings that: (1) excluded as hearsay statements in a police report about potential misuse of the slide; (2) excluded as hearsay statements in the medical records about potential misuse of the slide; and (3) excluded as unreliable expert testimony that decedent could not have been injured by sliding down the slide, but rather must have been injured diving off the slide. As a result, Toys R Us was left with little admissible evidence to defend against the “illegal” slide.

Even though the appellate court determined that the issue of whether there was sufficient evidence of gross negligence was not preserved on appeal, the court in its discretion addressed it anyway. Incredibly, the appellate court reasoned that evidence of an indemnification agreement between Toys R Us and the Chinese vendor could have allowed the jury to find that Toys R Us was indifferent to the safety of the slide because it would not have been financially responsible for any defects. That indemnification agreements cannot, as a matter of public policy, indemnify against gross negligence appears to have been of no moment to the court. Indeed, the Court’s effort to twist a standard feature of global commercial transactions into something sinister is further evidence of the difficulty importers face in these emotionally charged cases involving foreign made toys. Unsurprisingly, the appellate court upheld the constitutionality of the amount of the punitive damages award, which was more than 7 times the compensatory award, underscoring the incredible exposure importers can face in “unsafe toy lawsuits.” For now, the issue does not appear to be going way – the spotlight remains on foreign made toys, both from a regulatory and litigation perspective.

Roundup of Recent “Fracking” Studies Still Shows No Consensus

September 16, 2014

Here at Weil’s Product Liability Monitor, we keep a close eye on scientific developments related to hydraulic fracturing, or “fracking.”  It’s an exciting topic to follow given the number of ongoing studies on a host of issues–from seismicity and earthquakes, to air and groundwater contamination, to traffic accidents near drilling sites.  Despite the number of […]

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Eleventh Circuit Toughens Up Rule 15 Standard for Motions to Amend

September 15, 2014

If plaintiffs’ counsel has ever frustrated you during the course of a mass torts case, this one’s for you. Last week, the Eleventh Circuit issued its decision on plaintiffs’ consolidated appeals arising from a Florida federal district court’s orders dismissing 750 Engle progeny complaints with prejudice.  See In re Engle Cases, Nos. 13-10839, 13-12901, 13-14302, […]

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