Product Liability Playbook - Winter 2019/2020

WINTER 2019/20

PRODUCT LIABILITY A biannual magazine on emerging developments, decisions, and defenses in professional-negligence law and claims management

WELLSPRING OF HOPE

—AND LAWSUITS Page 10

ALSO INSIDE: Which Product-Safety Data Is Admissible? • Sending Smoke Signals • When Where Is More Important Than What Attorney Advertising

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FOLLOW THE LEADER. Goldberg Segalla’s Product Liability practice group leads the way for analysis and discussion of the trends, decisions, and breaking news impacting the management and professional liability community nationwide.

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WINTER 2019/20

PRODUCT LIABILITY A biannual magazine on emerging developments, decisions, and defenses in professional-negligence law and claims management

Contents Q&A

PRODUCT LIABILITY PRACTICE GROUP CHAIR David J. O’Connell doconnell@goldbergsegalla.com

EDITOR Steven S. Vahidi svahidi@goldbergsegalla.com

CONTRIBUTORS Dean J. Balaes dbalaes@goldbergsegalla.com Jessica P. Butkera jbutkera@goldbergsegalla.com Jennifer L. Fletcher jfletcher@goldbergsegalla.com James W. Ozog jozog@goldbergsegalla.com Cheryl A. Possenti cpossenti@goldbergsegalla.com Steven S. Vahidi swahidi@goldbergsegalla.com

5 | What Manufacturers, Sellers Need to Know about Product-Safety Reporting, Recall INSIGHTS

6 | Which Product-Safety Data Is Admissible?

8 | ‘As Ubiquitous as Cigarettes and Advil’ As a consumer good, cannabis now subject to product liability claims

COVER STORY

10 | Wellspring of Hope—and Lawsuits The stem cell’s reputation as a cure-all creates product-liability concerns SPOTLIGHT

12 | Sending Smoke Signals SPOTLIGHT

14 | When Where is More Important than What Pennsylvania wrestling anew with an old question: Where should lawsuits be filed?

CROSSOVER

17 | Court Dismisses Suit against Museum by Woman Who Tripped and Fell

Concurrent Employment of Injured Lyft Driver Not Included in Claimant’s Wages

MANAGING EDITOR Robert L. Kaiser

COPY EDITOR Nicolette Clark

DESIGN LEAD Jeremy Dolph

DESIGN ASSISTANT Darren Canham

Cover Photo: Getty Images

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Winter 2019/20 | 3

Attorney Advertising

Cybersecurity and Data Privacy Practice Group DATA IS EVERYWHERE AND EVERYTHING. It is a resource and a currency; it is a lock and a key; it makes up environments and identities. Businesses in every industry recognize data as an endless stream of opportunity.

Too often, they fail to recognize the risk.

The Goldberg Segalla Cybersecurity and Data Privacy practice group is a multidisciplinary team of attorneys working across the country to counsel, train, and defend clients facing all conceivable cybersecurity and datarelated matters. With verdict-tested trial lawyers, preeminent intellectual property litigators, and leading regulatory attorneys collaborating to provide 360-degree cyber counsel, our team helps industry-leading companies, their executives and IT professionals, and their insurers: • Assess and address data security risks and cyber coverage • Prepare for cyberattacks and data breaches

STAY UP-TO-DATE ON THE LATEST CYBERSECURITY AND DATA PRIVACY TRENDS, DECISIONS, AND NEWS: Data Privacy and Security Blog Complex data security and privacy threats are widespread.

Goldberg Segalla’s Data Privacy and Security blog is an essential tool for understanding—and avoiding—newly emerging risks. » Read more at dataprivacyblog.com

• Create policies and procedures to mitigate risk and minimize liability

California Consumer Privacy Act Fact Sheet

• Respond quickly and comprehensively to data security incidents

Applications, obligations, and pathways to compliance—what you need to know about the CCPA and how Goldberg Segalla can help you navigate your obligations.

• Defend against post-breach claims and legal proceedings, as well as legal challenges to data-related business practices • Navigate regulatory, statutory, and contractual requirements at every level • Anticipate the future flashpoints that will define the fields of cybersecurity, data privacy, and intellectual property Our approach is comprehensive: By providing counseling and training on how to anticipate risks, assess coverage needs, prepare for breaches, and execute response plans, we’ve been able to help our clients avoid serious incidents, limit liability, and implement the best workplace cybersecurity policies and practices.

When attacks or breaches do occur, we help clients respond and recover quickly and efficiently. Our attorneys are ready to spring into action at a moment’s notice to oversee or assist a client’s internal incident-response team.

TO LEARN HOW OUR TEAMS CAN WORK TOGETHER, CONTACT: Marc S. Voses Cybersecurity and Data Privacy Practice Group Chair mvoses@goldbergsegalla.com

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» To request a copy, email Marc Voses at mvoses@goldbergsegalla.com

Q&A

What Manufacturers, Sellers Need to Know about Product-Safety Reporting, Recall

BY CHERYL A. POSSENTI AND JAMES W. OZOG On November 6, 2019, Goldberg Segalla partners Cheryl A. Possenti and James W. Ozog presented their webinar, “Consumer Product Safety Commission Reporting and Recall Obligations,” an update for manufacturers and sellers relating to CPSC reporting obligations. We have highlighted the presentation’s main concepts and significant information in a Q&A format.

If you have any questions on CPSC reporting and recall obligations, please reach out to: Cheryl at 716.566.5444 or cpossenti@goldbergsegalla.com and James at 312.572.8406 or jozog@goldbergsegalla.com.

Q: What are the areas in which mandatory reporting is required under the Consumer Product Safety Act (CPSA)?

A: Under the CPSA, lawsuit results (Section 37), choking incidents (Section 102), and substantial product hazards (Section 15) require mandatory reporting to the CPSC. We have expanded on these requirements and obligations below.

Q: When does Section 37 mandatory reporting kick in for civil lawsuits under the CPSA? A: If a particular product model is the subject of at least three lawsuits involving death or grievous bodily injuries within a 24-month period, resulting in the entry of a final settlement or court judgment for the plaintiff, the manufacturer must report this information to CPSC within 30 days after the final settlement or judgment in civil action and within 30 days after any subsequent settlement or judgment within that 24-month period occurs.

upon which the commission has relied under Section 9, contains a defect which could create a substantial product hazard or creates an unreasonable risk of serious injury or death.

Q: When should a report be made to the CPSC? A: A company must report to the commission within 24 hours after the person who is responsible for reporting to the CPSC receives reportable information. However, if a company is unclear of the incident’s circumstances and chooses to investigate further, that time should not exceed 10 working days, unless a reasonable need for additional time is demonstrated and approved. A company may not take more than 5 working days for the information to be sent to the chief executive officer or official assigned responsibility for complying with reporting requirements.

Q: What are the penalties for failing to report an incident?

• Necessity of the product • Population exposure to the product and its risk of injury • The CPSC’s experience and expertise • Caselaw interpreting federal and state public health and safety statutes • Caselaw in the area of product liability Q: How does one determine if a present defect creates a substantial product hazard?

A: Steps to consider when analyzing whether a defect caused a substantial product hazard include: • Pattern of defect, including the design, manufacture, and manifestation • Number of defective products distributed in commerce • Severity of the risk

Q: When does Section 102 mandatory reporting kick in for choking incidents under the CPSA?

A: Up to $110,000 per product within the marketplace and up to a maximum fine of $16,025,000

Q: Will the CPSC allow a manufacturer or company to keep reporting confidential from the public?

A: Section 102 requires that companies report choking incidents on small parts of toys and games, balls with a diameter of 1¾ inches or less, latex balloons, or other small parts, if a child, regardless of age, died, suffered serious injury, ceased breathing for any length of time, or was treated by a medical professional. These reports must be filed within 24 hours of injury notice.

Q: How does a manufacturer or company determine if its product creates a substantial product hazard?

A: Litigation result reports and choking incident reports are kept confidential by the CPSC. Substantial product hazard reports are sometimes kept confidential if confidentiality is requested, but confidentiality can be lost if corrective action is accepted in lieu of the filing of an administrative complaint. However, Section 6 of the CPSA, which regulates disclosure of information by CPSC, does not prevent disclosure of information submitted to commission in context of a discovery request by a private litigant in a civil lawsuit.

Q: When does Section 15 mandatory reporting kick in for substantial product hazards under the CPSA? A: Section 15 of the CPSA establishes reporting requirements for manufacturers, importers, distributors, and retailers of consumer products.

Each manufacturer or company must immediately notify the CPSC if it receives information that reasonably supports the conclusion that a product distributed in commerce fails to comply with an applicable consumer product safety rule or a voluntary consumer product-safety standard

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A: A manufacturer or company needs to determine whether the product contains a defect that could create a substantial risk of injury to the public or if the product fails to comply with an applicable consumer product safety rule which creates a substantial risk of injury to the public.

When in doubt, the regulations urge a company to report.

Q: What are some factors that determine whether a product contains a defect?

A: Relevant factors for determining whether a potential product defect exists include: • Utility of the product involved • Nature of risk of injury that the product presents

Cheryl A. Possenti is a founding partner of the firm and has more than 35 years of experience in the defense of complex personal-injury actions.

James W. Ozog has more than four decades of experience in product-liability defense and commercial litigation.

Winter 2019/20 | 5

INSIGHT

Which Product-Safety Data is Admissible?

BY STEVEN S. VAHIDI AND DEAN J. BALAES It starts with an emergency room patient linking an injury to a certain product.

A Consumer Product Safety Commission coder assigns a code that best fits the accident.

Then the information is used to estimate the number of ER visits associated with the product.

Plaintiffs in some product-liability actions use such estimates and “other accident” data from the National Electronic Injury Surveillance System to show that manufacturers know their products were dangerous.

Such evidence is crucial in proving that manufacturers should have redesigned or stopped selling their products, but often is irrelevant and unreliable because it fails to consider the exceptional circumstances behind each individual’s use of the product. And even when such evidence is relevant its value is substantially outweighed by its prejudicial effect and the likelihood that it will confuse or mislead the jury. And then there are hearsay concerns.

With product-liability litigation often massive and expensive and capable of having far-reaching effects on defendants, attorneys should be aware of CPSC limitations. Those who are can more effectively and fairly argue their cases on the merits.

Here are some contingencies to keep in mind.

WHEN NEISS DATA IS RELEVANT Rule 403 of Article IV of the Federal Rules of Evidence provides a balancing test for excluding relevant evidence in product liability cases.

“Relevant evidence” is defined as “evidence having any tendency to make the existence of any fact that is of consequence to the determination of the action more probably or less probable than it would be without the evidence.”

The 403 balancing test is strongly weighted toward the admission of evidence. There must be a danger of unfair prejudice that substantially outweighs the probative value of the evidence.

Unfair prejudice is not the same thing as prejudice. Almost all relevant evidence is prejudicial to one side or the other. Proving unfair prejudice is often difficult. Proving the balance is even more so.

Then there’s the fundamental problem with 403 objections: They concede the relevance of the evidence.

A 403 objection is usually the last objection a lawyer makes when seeking to exclude evidence.

6 | Product Liability Playbook

WHEN NEISS DATA IS NOT RELEVANT Federal Rule of Evidence 402 often renders “other accident” data irrelevant, making it inadmissible.

For example, one should be keenly aware that if no dispute as to a fact or issue exists, “other accident” data deployed as proof of that issue or fact is not relevant because it does not make the existence of the issue or fact “more probable or less probable than it would be without the evidence.” If the evidence is not relevant, courts should not find it admissible.

In the case of Rye v. Black & Decker Manufacturing Co., John Rye was injured when a portable 7¼-inch Black & Decker circular saw he was using became bound up and kicked back as he was trimming a piece of wood from the end of a treated pine board, amputating part of his right hand.

The saw was not equipped with a riving knife, a device used to prevent such accidents.

Rye used 17 “prior complaints” to show Black & Decker knew of problems with the design of the chainsaw, including letters from customers, civil complaints, and published court opinions. But the defendant already had admitted that such a kickback could occur. So the court found that Rye “was not harmed by the [trial] court’s refusal to allow in the prior incidents as evidence that appellee had notice that its saws could kick back.”

A plaintiff’s desire to introduce into evidence proof of other accidents is circumstantial evidence, or evidence in which “even if the circumstances depicted are accepted as true, additional reasoning is required to reach the proposition to which it is directed.”

McCormick on Evidence notes that “circumstantial evidence ... can be offered to help prove a material fact, yet be so unrevealing as to be irrelevant to that fact.”

In many cases, the dissimilar and exceptional nature of “other accidents” can make the evidence “unrevealing” in nature. As the court in Nachtsheim v. Beech Aircraft Corp. notes, “As the circumstances and conditions of the other accidents become less similar to the accident under consideration, the probative force of such evidence decreases.”

WHEN NEISS DATA CONSTITUTES HEARSAY Hearsay is defined in Federal Rule of Evidence 801 as “a statement, other than one made by the declarant while testifying at the trial or hearing, offered in evidence to prove the truth of the matter asserted.”

Established hearsay principles likely render NEISS data inadmissible because of its untrustworthy nature.

NEISS data is untrustworthy because it involves multiple layers of hearsay. The first layer arises when a patient provides medical personnel information about the nature and cause of an accident. The questions a doctor or nurse asks a patient about an accident are not designed to elicit truthful statements for determining liability; they are instead de-

AN EXCERPT FROM THE JANUARY 2019 NEISS CODING MANUAL “A consumer product is any article, or part thereof, produced or distributed for use by a consumer in or around a home, school, or recreational area. Product-related is defined to include: • All poisonings and chemical burns to children under five years of age • All injuries where a consumer product, sport, or recreational activity is associated with the reason for the visit or related to a condition treated • Illnesses only if a consumer product, sport, or recreational activity is associated with the onset of the illness

• Injuries associated with stairs, ramps, floors, walls, elevators, escalators, etc., wherever available for use by consumers • Injuries that mention any kind of infant or nursery equipment • Injuries associated with toys and games • Injuries that result from fires of fabrics, household goods, home heating and cooling equipment, etc.

• Injuries associated with house fires, even if no products are identified • Injuries associated with hot water from an unknown source

Some specific examples of scenarios which qualify for NEISS and should be reported are listed below:

• Injuries associated with carbon monoxide from an unknown source

• Poisonings (ingestions) and chemical burns to children under age five associated with drugs, medications or any other substances

• Injuries associated with gas fumes or vapors from an unknown source

• Injuries that occur during sports or recreational activities

• Injuries involving non-consumer products that qualify for special studies. For example, injuries involving firearms qualify for a special study by the Centers for Disease Control and Prevention.”

• Injuries associated with bicycles, even if a motor vehicle was involved

signed to find out how the patient characterizes his ailments so that he may be treated accordingly. A patient’s account of an accident is often vague, self-serving, or inaccurate.

danger of unfair prejudice, confusion of the issues, or misleading the jury, or by considerations of undue delay, waste of time, or needless presentation of cumulative evidence.”

The second layer of hearsay arises when the hospital functionary arbitrarily chooses which of the patient’s information to truncate for purposes of furnishing a report to a NEISS coder. A hospital functionary’s choices of what information to exclude or include is not guided by expertise in law and fact analysis, but that person’s one-sided description.

It is no more appropriate for a hospital official to discern and truth than it is a lawyer to pick up a scalpel.

Unfair prejudice in this rule means “an undue tendency to suggest decision on an improper basis, commonly, though not necessarily, an emotional one.”

A third layer of hearsay arises when the NEISS coder receives and interprets that information, paraphrasing an already restated account into the NEISS database. Here, the pursuit of trustworthiness is further compounded by a summary limit of 600 characters.

At its essence, the NEISS coder’s role is not designed to provide accuracy.

Entries are often made up of incomplete sentences and keywords. This relay of information from patient to hospital functionary to coder is synonymous with the childhood game of telephone.

The abovementioned concerns were acknowledged by the court in McKinnon v. Skil Corp., where the First Circuit excluded evidence that was based on CPSC data on the grounds that the evidence “in the reports is simply a paraphrasing of versions of the accidents given by the victims themselves who surely cannot be regarded as disinterested observers.”

From the first description of the accident, the quest for reliable evidence is influenced by “double hearsay in many instances.” The court observed that CPSC data is derived from a CPSC investigator, which constitutes the first level of hearsay, and an accident victim interviewee, which constitutes the second hearsay level.

WHEN “OTHER ACCIDENT” EVIDENCE IS UNDULY PREJUDICIAL Under Federal Rule of Evidence 403, even evidence that is relevant “may be excluded if its probative value is substantially outweighed by the

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Uitts v. General Motors Corp. illustrates the potential for unfair prejudice from the introduction of “other accident” evidence. In this case, a plaintiff sought the introduction of 35 reports of supposedly similar accidents. The court stated that “[p]roof of prior accidents or occurrences are [sic] not easily admitted into evidence, since they [sic] can often result in unfair prejudice, consumption of time and distraction of the jury to collateral matters.”

The court continued that, to minimize the prejudicial effect of the reports, the defendant “would have had to go through each one individually with the jury. The result would have been a mini-trial on each of the 35 reports offered by plaintiffs. This would lengthen the trial considerably and the minds of the jurors would be diverted from the claim of the plaintiffs to the claims contained in these reports.”

The court in Uitts also acknowledged hearsay concerns, noting that permitting reports containing hearsay into evidence “would be tantamount to allowing the persons making the statements to testify against defendant without being subject to cross-examination or required to take an oath. Therefore, any probative value these reports might have is outweighed by their prejudicial nature.”

Steven S. Vahidi is a civil litigator and trial attorney with over 15 years of experience handling complex product-liability cases, matters involving catastrophic injury and wrongful death, class-action litigation, and consumer fraud.

Dean J. Balaes concentrates his practice on product-liability matters, including complex civil actions, class actions, and mass torts.

Winter 2019/20 | 7

SPOTLIGHT

‘As Ubiquitous as Cigarettes and Advil’ As a consumer good, cannabis now subject to product-liability claims It was on a June morning in 2017 that Goldberg Segalla partner Adam R. Dolan came across an article on Medical Marijuana Inc.’s news website that changed his career.

The article, “Bipartisan Group of U.S. Senators Reintroduce the CARERS Act,” sparked an interest in cannabis law that led Adam to read voraciously and write prolifically on the subject.

Eventually, he stepped up to co-chair the innovative and interdisciplinary Cannabis and Hemp Law practice group with Los Angelesbased partner David Y. Choi.

“We already had more than half the country’s states enacting laws that allowed for the medical use of cannabis, and the federal government continued to say it had no accepted medical uses,” Adam says.

As the marijuana industry grows, Goldberg Segalla expects to see an ever-expanding range and number of clients and cases, including product-liability litigation.

While cannabis is still a Schedule I substance under the federal Controlled Substances Act— the same as heroin—33 states, Puerto Rico, and the District of Columbia have legalized marijuana or certain components of it for medical or commercial use.

Among the cannabis-related product-liability cases is a 2017 Colorado lawsuit in which an insurer refused to cover a marijuana-candy company for selling a product that allegedly caused

8 | Product Liability Playbook

a 49-year-old man to become psychotic and murder his wife. The man pleaded not guilty by reason of insanity but then changed his plea and is now serving 30 years in state prison for his wife’s death. In what is believed to be the first wrongful-death claim against a recreational marijuana company, the man’s children sued the candy’s maker.

“Down the line, once cannabis is de-scheduled and can move freely across state lines and becomes as ubiquitous as cigarettes or Advil, you’ll likely see product-liability cases or mass torts actions similar to those we see currently, such as cigarette class-actions or asbestos cases,” Adam says. “The cannabis industry is like any other industry. Once it matures and becomes as accepted as other products, we will likely see all types of litigation arise. The main thing is making sure companies are aware of the pitfalls and are prepared for the future.”

Already an entire sub-industry is growing around the production, distribution, and sale of so-called edibles that mix components of cannabis with other ingredients. Such products may account for the majority of the cannabis market.

“There’s more and more interest in edibles, more and more people are looking to get into that,” Adam says.

‘STILL IN ITS INFANCY’ The emergence of cannabis as a product coincides with the transformation of its image.

“There’s still this idea linking cannabis use to a stoner-culture,” Adam says. “But I think a lot more people now are interested in cannabis for food products and not necessarily for a high.

It’s an amazing plant that we’re only just beginning to fully understand. The industry is still in its infancy, but its growth and the passion which people involved in it bring is incredible. I look forward to working in this field for the rest of my career.”

Adam’s writing on cannabis law began with a June 20, 2017, post on the firm’s Life Science Matters blog—the one for which he was seeking story ideas when he ran across Medical Marijuana Inc.’s piece on the Compassionate Access, Research Expansion and Respect States (CARERS) Act, a bill that would end the prohibition of medical marijuana. Adam’s regular articles on Goldberg Segalla’s life-sciences blog became a trusted resource for industry professionals, lawyers, and journalists interested in covering the evolving area. Soon Adam was being quoted in the New York Law Journal and National Law Journal.

As co-chair of the Cannabis and Hemp Law practice group, Adam helps lead attorneys from across the firm’s footprint commanding a diverse range of skills—from transactions and commercial disputes to employment and intellectual property law. Crucially, the group includes a deep bench of litigators and legal counselors in Goldberg Segalla’s Los Angeles

and Orange County offices, ready to service established companies and clients in the cannabis industry, as well as numerous attorneys in New York and other states, where businesses are grappling with the likelihood of imminent regulatory and statutory changes regarding cannabis and related products.

“I recognized that we were looking at a point in law that doesn’t come around very often—a brand-new area, completely open to interpretation and in need of great attorneys to help develop it. I believed we could play a part, that I could play a part,” Adam says.

Now clients from all parts of the burgeoning national cannabis industry rely on Goldberg Segalla for a geographic reach and bench depth rivaling other top-tier firms. But they don’t choose the firm for the numbers alone; they choose it because understanding each client’s business is the firm’s first priority. Goldberg Segalla tailors legal teams and cost-effective strategies to meet clients’ immediate needs as well as their long-term goals.

This tailored, cross-practice approach positions Goldberg Segalla to provide exceptional and comprehensive counsel for clients operating in the cannabis industry, handling and advising on virtually any legal need—whether securing funding for a new business venture, adapting to the industry’s ever-changing regulatory landscape, or defending diverse and complicated claims.

The firm’s cannabis-industry capabilities span the full range of the cannabis supply chain, including directors and officers (D&O), dispensaries and retailers, distributors, growers, hydroponics suppliers, and investors.

‘IT SEEMED LIKE THE PERFECT TIME’ Adam has become an emerging authority and thought leader in the rapidly changing cannabis field, writing articles on liability and cannabis law and advising other attorneys on developing aspects of this relatively new and growing area of law. In June 2019, he co-chaired the high-profile Perrin conference, Emerging Legal Trends in the Cannabis Industry, which brought together industry leaders, innovators, and advocates as well as attorneys.

Among the topics conference speakers discussed were employment, insurance issues, industry innovation, and changes in the federal landscape wrought by passage of the 2018 Farm Bill. Besides giving opening remarks, Adam moderated a panel on “Employer/Employee Relationships and the Proliferation of Medical Cannabis Use.” Fellow Goldberg Segalla

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partner Joseph J. Welter moderated the panel, “Developing a State of the Art: Current Science in Cannabis Products.”

Adam and Joe’s participation in the Perrin conference showed how Goldberg Segalla’s Cannabis and Hemp Law practice group helps educate those affected by changes in the landscape of the industry. Adam shared that educating clients is a big part of what cannabis-practice attorneys at the firm do.

Among those affected by all the growth and change in the cannabis industry are insurance companies, growers, dispensary owners, and medical providers. Some of the issues they face are:

substance and as such has no accepted medical uses. But a 2002 Ninth Circuit ruling in a class-action suit by a group of California doctors affirmed the right of physicians to recommend medical marijuana—a decision that cited the First Amendment right of patients to hear accurate information from their doctors and California’s right to make its own laws without federal subversion. The ruling set a precedent protecting doctors, patients, and state medical marijuana programs in the nine states of the Ninth Circuit: Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, and Washington.

• Crop insurance: Climate change and the increasingly heavy storms and tornados that it’s causing pose a challenge for outdoor growers. Indoor growers’ worries include mold and fungus.

In New York state, where Adam is based, medical marijuana has been legal since 2014, and marijuana possession was decriminalized in 1977, but arrests for having small amounts continued for decades. There are 10 registered organizations in the state allowed to cultivate, manufacture, and dispense medical marijuana.

Each is allowed to operate four dispensaries.

• Workers’ compensation insurance: As growers build their operations and hire more people, employee issues will arise just as they do in other industries. For example, a worker at an indoor growing facility might develop Legionnaire’s disease.

Though legalization advocates in the state— including many farmers who want to grow marijuana—are hopeful that New York will fully legalize it this year, Gov. Andrew Cuomo says that won’t happen because too many members of the state senate still oppose it.

• Errors and omissions (E&O) insurance: If your cannabis-related business performs any professional service for another party, such as processing, consulting, marketing, hosting, or developing, you’re at risk of being hit with a claim alleging financial losses suffered because of a failure in your services.

Adam learned of Cuomo’s remarks right after settling in at his desk for another day of work on the morning of June 4. “I wasn’t surprised,” he says. “When it didn’t get put into the budget, many people, myself included, did not believe adult-use legislation would occur this year in New York.”

“A lot of these companies are raising a lot of money,” Adam says. “To the extent they don’t survive, you may want to be insured should an investor decide to sue.”

The news did, however, start Adam thinking about the cannabis landscape in the Northeast, where states such as Maine and Massachusetts have legalized the drug. He thought it was a missed opportunity for New York to create a sizable tax-revenue stream. Just from the clients he sees in his own practice, he knows that in New York the industry is ready to take off as soon as the state legalizes marijuana. Clients in other states are already profiting from legalization, he says.

PRESCRIPTION, NO. RECOMMENDATION, YES. Insurance coverage in the industry is complicated by the disconnect between federal and state laws that create an odd risk for major carriers. Many of the nation’s largest insurers aren’t offering cannabis-related policies yet for fear of being accused of money laundering. Since cannabis, as a controlled substance, is not allowed to be transported across state lines, national insurance carriers that accept payment from out-of-state producers fear they may run afoul of federal laws enacted to prevent cartels from laundering drug money through interstate commerce.

The fault line between state and federal laws poses a conundrum for medical providers, too.

Doctors in every state are prohibited from prescribing cannabis because it is a Schedule I

Keeping up with what’s legal when marijuana laws continue changing state by state is a challenge, Adam says. “When I’m preparing to give a presentation, I can spend hours researching the laws, case rulings, and discrepancies across various jurisdictions to make sure my presentation is as well-rounded as possible.”

“I usually just try and read my automatic news updates on a daily basis,” Adam says. “As the practice grows, this may change.”

Winter 2019/20 | 9

COVER STORY

Wellspring of Hope —and Lawsuits The stem cell’s reputation as a cure-all creates product-liability concerns

BY JENNIFER L. FLETCHER

T

hey’re not much to see. Greatly magnified, some look like old Nerf balls—round, soft, and spiky. But stem cells are heralded as the beall, end-all, and cure-all for every human condition from disease to aging, and there’s an ongoing tug of war between those who would exploit their promise for profit and the gathering forces that would rein them in—including the U.S. Food and Drug Administration, which has sought to increase oversight and enforcement of the stem-cell industry.

In June 2019, a Florida federal court entered a permanent injunction against U.S. Stem Cell Clinic and U.S. Stem Cell Inc., requiring an ex-manager of the former, Theodore Gradel, to notify the FDA if he intends to re-enter the biologics industry and to comply with any corrective actions the FDA orders. A 2017 FDA inspection found U.S. Stem Cell was administering its stem-cell product intravenously or by other means in purportedly treating an array of serious diseases or conditions, including Parkinson’s disease, amyotrophic lateral sclerosis, chronic obstructive pulmonary disease, heart disease, and pulmonary fibrosis.

10 | Product Liability Playbook

The FDA never approved the biological products U.S. Stem Cell Clinic had manufactured for any use. The FDA cited U.S. Stem Cell for its failure to establish and follow appropriate written procedures to prevent microbiological contamination of products, which puts patients at risk for infection. The agency issued U.S. Stem Cell a warning letter in 2017 for marketing stem cell products without FDA approval and for significant deviations from current good manufacturing practice requirements.

Also in 2019, in April, the New York state attorney general filed suit against Image Plastic Surgery, Park Avenue Stem Cell, and a doctor named Joel B. Singer for allegedly engaging in fraudulent and illegal advertising regarding its stem cell procedures. This stem cell clinic markets adipose (fat) stem cell injections for a variety of health conditions. Cell Surgical Network owns Park Avenue Stem Cell. Cell Surgical, which has over 100 stem cell clinics across the nation, is facing a federal lawsuit and a number of patient lawsuits of its own.

According to the New York attorney general’s complaint, the New York defendants’ website led patients to believe that by undergoing their stem cell procedures, they were part of an “FDA-approved,” patient-funded clinical trial. But the FDA does not approve the types of preliminary trials touted on the site, and most clinical trials do not receive funding from patients.

Other misleading aspects of the website included testimonials from National Football League player Darrel Reid and radio show host Curtis Sliwa, founder of the New York City volunteer citizen safety-patrol force called the Guardian Angels. Available scientific evidence failed to back the claims Reid and Sliwa made, and the defendants failed to disclose that both men received free treatments in exchange for their testimonials.

The attorney general’s complaint seeks to permanently enjoin the defendants from engaging in the allegedly fraudulent, deceptive, and illegal acts, and practices, and directs the defendants to render an accounting of the name,

address, and money received from each former and current customer. It also directs the defendants to make full monetary restitution and pay damages to all injured persons or entities; produce an accounting of profits and disgorge all profits resulting from the alleged fraudulent and illegal practices alleged herein. And it directs defendants to pay a civil penalty to the state of New York of up to $5,000 for each violation of state business law; awards the plaintiff additional costs of $2,000 against each defendant pursuant to state Civil Practice Law and Rules; and grants such other and further relief as the court deems just and proper.

Although this lawsuit is still pending, the message is that clinics can face legal ramifications from the FDA, the FTC, state attorney generals, state medical boards, patient lawsuits, attorneys investigating the clinics in anticipation of certifying class actions, and more.

MASTER CELLS Stem cell experimentation harkens back to the 1960s. It was then that two scientists, Dr. James ‘Wellspring’ continued on page 16

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Winter 2019/20 | 11

SPOTLIGHT

Sending Smoke Signals

BY JESSICA P. BUTKERA This article is a special reprint from CLM Magazine. Entire contents copyright 2019 by CLM Magazine, a publication of the CLM and The Institutes.

All rights reserved.

Whether you know them as e-cigarettes, vape pens, or Juuls, electronic cigarettes have grabbed the nation’s attention. As research into the short- and long-term health effects of e-cigarettes develops, alleged predatory advertising to youths captured the government’s attention, and recent reports of vaping-related illness and death have dominated the news. As of October 22, 2019, 34 deaths in patients with vaping-related lung injury had been reported to Centers for Disease Control.

Predictably, this is all leading to a launch of lawsuits, and the next mass tort is on the horizon.

WHAT ARE E-CIGARETTES? E-cigarettes, developed for commercial use in China in 2003 and first sold in the United States in 2007, deliver nicotine and often flavoring in

12 | Product Liability Playbook

vapor instead of smoke. Composed of an internal cartridge called a cartomizer (which holds a liquid solution containing varying amounts of nicotine, flavorings, and other chemicals) and a vaporizer (which heats the solution), e-cigarettes are activated when users puff or inhale from the device, vaporizing the liquid into an aerosol or vapor. The user breathes in this vapor, hence the term vaping. E-cigarettes are commonly used to inhale nicotine but also are used to deliver tetrahydrocannabinol (THC), cannabidiol (CBD), and butane hash oils.

fective smoking cessation aid because there is “no scientific evidence to confirm the product’s safety and efficacy.”

E-cigarettes are small, sleek devices often designed to look like USB flash drives and can be used indoors virtually undetected, as the vapors are often odorless. Because e-cigarettes eliminate tobacco, including the tar and carbon monoxide produced in cigarettes, they are advertised as safer alternatives. The Food and Drug Administration, however, has not actually approved e-cigarettes as smoking-cessation devices, in large part due to the lack of longterm research and studies on which it could soundly base such a decision. The World Health Organization slammed e-cigarette companies for claims that e-cigarettes are a safe and ef-

The “Big 3” tobacco companies—Altria, Lorillard, and Reynolds American—have been purchasing independent e-cigarette companies and may share as much as 75 percent of the profit pool in 10 years.

In addition to containing nicotine, which is well-known to be highly addictive, some e-cigarettes have been shown in early testing to produce vapor containing known carcinogens and toxic chemicals that have known health effects, including cancer. Also, the FDA found nicotine in some cartridges labeled as nicotine-free.

BIG BUCKS, BIG BUSINESS

Mordor Intelligence estimates the e-cigarette market was worth $11.26 billion in 2018 and may reach $18.16 billion by 2024. E-cigarette sales in the United States increased by 132 percent from 2012 through 2016. According to the CDC, unit sales increased from 667 units per 100,000 people in 2012 to 1,547 units per 100,000 people in 2016. According to figures from global market research firm Nielsen Corporation, e-cigarette

sales in the U.S. reached $4.5 billion by the end of 2019’s third quarter. Wells Fargo Securities LLC predicted 2019 sales could reach $7 billion.

Juul’s domination of the e-cigarette landscape—it has a 75.8 percent market share— attracted Philip Morris-owner Altria’s to purchase a 35 percent stake in the company for $13 billion. From 2015 to 2016, its aggregated annual e-cigarette retail sales increased 16 percent, from $775 million to $896 million. From 2016 to 2017, it saw a 47 percent increase, from $896 million to $1,318 million.

YOUTH VAPING EPIDEMIC This large market growth is partly due to the number of youths using e-cigarettes. Vaping has reached epidemic proportions. Ignorant of the addictive qualities of nicotine, attracted to harmless sounding flavors like “bubble gum,” “cloud cookie,” “huggy bear” and “super strudel,” and influenced by typical peer pressure, youths are using e-cigarettes in droves. Since 2014, they have been the most commonly used tobacco product among U.S. youths. According to the CDC, the number of middle and high school students actively using e-cigarettes went from 2.1 million students in 2017 to 3.62 million students in 2018 to a staggering 4.9 million students as of February 11, 2019.

The most recent National Institute of Health “Monitoring the Future” research survey found that 26.7 percent of all high school seniors vape, as well as 16.1 percent of 10th graders and 10.9 percent of 8th graders. The devices are not difficult to obtain, either. While many states have banned the sale to minors of vape pens and associated products, the perceived availability of vaping products for students is quite high; 45.7 percent of 8th graders and 66.6 percent of 10th graders surveyed indicated the devices are “fairly easy” or “very easy” to get.

THE FDA’S AGGRESSIVE RESPONSE The FDA believes that the e-cigarette industry, especially Juul, engaged in predatory advertising to youths and responded in kind. Over the past year, it issued several warning letters to dozens of e-cigarette companies demanding information on how they will address youth access to, and use of, their products, as well as seeking information about whether products are being illegally marketed, in circumvention of its current compliance policy. In September of 2018, the FDA even raided Juul’s San Francisco headquarters and seized thousands of pages of documents relating to marketing practices.

Keeping the pressure on, the FDA issued another warning letter to Juul in September of 2019

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expressing concern with Juul’s presentations made directly to students during which its representatives referred to Juuls as “99 percent safer” than cigarettes, “much safer” than cigarettes, “totally safe,” and “a safer alternative than smoking cigarettes.”

In addition to investigating the industry, the FDA is also reaching out directly to youths. In October of 2018, the FDA launched “The Real Cost” youth e-cigarette prevention campaign.

Modeled after its 2014 “The Real Cost” anti-smoking campaign—a $247 million antismoking campaign that studies show prevented nearly 350,000 youth from becoming cigarette smokers, saving the nation $31 billion in mortality, earnings loss, and other costs—this updated campaign seeks to educate teens about the dangerous effects of using electronic cigarettes. From television commercials to posters in thousands of school bathrooms, the public-service campaign targets nearly 10.7 million young people ages 12 to 17 who have used e-cigarettes or are open to trying them.

VAPING-RELATED ILLNESS While the FDA is optimistic its ad campaign will be effective in the long-term, the health effects of vaping are already pervasive in almost daily national news reports of a vaping-related illness. All of the identified patients have a reported history of e-cigarette product use, but no consistent evidence of an infectious process has been discovered. As of now, there are three primary diagnoses: chemical pneumonitis; alveolar hemorrhage; and lipoid pneumonia. The patients’ presentations include chest pain, coughing, shortness of breath, difficulty breathing, and, to a lesser extent, chills and gastrointestinal symptoms such as nausea and vomiting. Most patients reported a history of using e-cigarette products containing THC, some reported using THC and nicotine, and some reported use of e-cigarette products containing only nicotine. No consistent e-cigarette or vaping product, substance, or additive has been identified in all cases, nor has any one product or substance been conclusively linked to lung disease in patients.

While the CDC and doctors across the country search for an answer, federal and state agencies and governments, as well as private retailers, are responding quickly and aggressively.

The CDC, American Medical Association, American Academy of Pediatrics, and American Lung Association have all urged the public to stop using all e-cigarette devices until a cause is identified. As of October 8, 2019, Michigan, New York, Massachusetts, Rhode Island, Montana,

Washington, Oregon, and San Francisco have all enacted legislation banning or drastically limiting online and retail sales of all marijuana and tobacco vaping products, flavored or otherwise. Illinois, New Jersey, and Delaware are currently considering similar legislation. In addition, the following retailers are discontinuing sales of electronic cigarettes in their stores: Rite Aid, Walmart, Sam’s Club, Kroger, Harris Teeter, Ralphs, Fred Meyer, and Walgreens.

The e-cigarette industry’s response was to blame illegal THC oils and black-market products. However, what was thought to be an automatic reaction could be valid. The New York State Department of Health’s lab tests showed extremely high levels of vitamin E acetate in nearly all the cannabis products it analyzed but not in any of the nicotine products tested.

The CDC also suggests that products containing THC, particularly those obtained off the street or from other informal sources, may play a major role in the outbreak.

In addition, a September 5, 2019, raid by officials in Wisconsin uncovered a million-dollar black-market vape empire run by two brothers, ages 20 and 23. Police uncovered 31,200 vape cartridges with liquid THC, 98,000 empty vape cartridges, and 57 mason jars filled with liquid THC. Given that the initial outbreaks were reported in Wisconsin, Minnesota and Illinois, federal authorities are now offering assistance and investigating whether this large-scale black market operation could be connected to the outbreak.

PENDING LAWSUITS AND AN IMPENDING MASS TORT Prior to the vaping-related illness outbreak, numerous product liability lawsuits stemming from exploding e-cigarettes were litigated. In addition, Juul was already facing five consumer-protection class-action lawsuits across the country, based on allegations that its nicotine vaping solution contained benzoic acid and more nicotine than advertised.

Since the outbreak, dozens of individual and class-action lawsuits are now being filed across the country. For example, in August of 2019, Ethan Kocourek filed a product liability and negligence suit against Juul, alleging he suffered numerous seizures after the using the product for three years. He contends he was unaware Juul contained nicotine and asserts that Juul knowingly designed a dangerous product, marketed it to underage consumers, and failed to warn consumers of the risks.

‘Smoke’ continued on page 18

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SPOTLIGHT

When Where is More Important than What Pennsylvania wrestling anew with an old question: Where should lawsuits be filed?

The quiet suburban street where Jesse Duke fell to his death from a bucket truck while painting a streetlight is in Delaware County, Pennsylvania.

So is the place where Duke’s wife was living when she sued over the accident, alleging an unsafe parking brake caused her husband’s death.

And the automobile repair business where Duke’s employer has the truck serviced is in Chester County.

But Tara Duke’s attorneys filed her product-liability lawsuit in Philadelphia County—and there it stayed, although Goldberg Segalla associate Michael W. Aceto argued that Philadelphia had nothing to do with the case. The judge denied a change-of-venue motion by Mike and Goldberg Segalla partner Christopher McGowan, complicating their defense of one of the businesses named in the multi-party suit—the shop that maintains and performs regular state inspections on the truck Duke was using at the time of the accident.

14 | Product Liability Playbook

Chris and Mike knew their client would take a big chance stepping into a courtroom in plaintiff-friendly Philadelphia—so big that once the judge ruled out moving the case the idea of settling it out of court began figuring more prominently in their calculus. Tara Duke was asking for millions in damages from every defendant. The parking brake was not safe for use on an incline such as the 10-percent grade on which the big Ford F650 was parked at the time of the accident, the suit alleged. With Jesse Duke three stories up in the truck’s bucket, the strain on the homemade wood chock behind the driver’s-side front tire grew too great. The chock broke in two and the truck rolled a short distance and hopped the curb, ejecting the 32-year-old Duke.

The accident would not have happened had the truck been properly designed, made, and maintained, Tara Duke alleged. Mike and Chris didn’t lack evidence to counter that claim. In fact, they had an expert-witness engineer who found the only problem with the truck’s parking brake to be that Duke hadn’t properly set it. They also had what Mike calls “the big reveal”—an eye-opening statement by the tow-truck driver who hauled the bucket truck away from the scene of the accident. But in October 2019, they negotiated a settlement that shielded their client from the expense of a trial—one in another county, no less—and the risk of a high jury award.

“If the change in venue motion had been granted, the value of this case drops significantly and the potential for an outright defense verdict rises significantly,” Chris says.

As it was, Chris and Mike were left to defend against a sympathetic plaintiff, Tara Duke, in a venue difficult for defendants.

malpractice occurred. As a result, the number of malpractice suits filed in Philadelphia decreased by half.

“Ultimately, this case came down to managing risk,” Mike says. “The main factor driving settlement for us was that the case was venued in Philadelphia County, which had no connection to the case and can be an extremely difficult jurisdiction for defendants.”

“Certain venues in Illinois, such as Cook County or Madison County, are nationally known for being areas in which high verdicts have been awarded,” according to the National Law Review.

“Depending on the facts of the case and the parties involved, there may be great advantage or disadvantage in a case being filed in the ‘home base’ of one of the parties involved.”

VENUE-SHOPPING HITS HOME The Duke case is not uncommon. The important, if seemingly mundane, question of where lawsuits should be filed and adjudicated informs litigation across the country every day, from product-liability cases such as Chris and Mike’s to toxic tort claims over asbestos exposure.

Perhaps nowhere else today is the question of venue more fraught than in Pennsylvania.

Although the idea of Philadelphia as a legal vortex is nothing new—attorneys from across the state and beyond have long “venueshopped” into Pennsylvania’s largest city with many lawsuits having virtually nothing to do with it—the state Supreme Court has injected fresh urgency into the debate over how many cases are filed there. In 2019, the court proposed a controversial rule change that would eliminate a ban on venue-shopping in medical-malpractice cases.

The Legislative Budget and Finance Committee of the Pennsylvania General Assembly is expected to issue a report on the proposed measure’s anticipated impact in January 2020, but critics of the proposal say the writing’s on the wall. Before the ban on venue-shopping in medical-malpractice cases was enacted, in 2002, the tactic created a medical-liability crisis in Pennsylvania. With plaintiffs’ attorneys using business ties to seek and score big payouts in Philadelphia’s high-verdict court system, many doctors in high-risk specialties left the state, countless family practices struggled, and people from Pittsburgh to Philadelphia had a hard time finding doctors. For Pennsylvanians who never had set foot in a courtroom and likely thought of a legal venue as a quibbling detail if they thought of it at all, the odd question of where cases should be adjudicated hit home.

The state Supreme Court ultimately addressed the crisis by requiring medical-liability suits to be filed only in the county where the alleged

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‘MAY BE VERY EXPENSIVE’ The careful attention paid to venues shows how important it is to a case.

Venues can also affect the convenience and expense associated with litigating a case.

“Litigation that occurs far from a business’s primary location may be very expensive to that business,” according to the National Law Review.

In product-liability cases such as Chris and Mike’s, questions of venue can be especially complicated. Does a plaintiff sue the manufacturer in the state where she bought the product or in the home state of the distributor or manufacturer? Or does she file suit where the real-world event that led to the dispute occurred? Or can she, in the words of the U.S. Supreme Court, sue wherever the “stream of commerce” has carried the product?

The Supreme Court has twice deadlocked on the “stream of commerce” theory of personal jurisdiction, notes Daniel Klerman, the Edward G. Lewis chair in Law and History and director of the Center of Law & Social Science at the University of Southern California Gould School of Law, in the Southern California Law Review.

If lowering litigation costs is a priority, Klerman concludes, then “[suing] in the distributor’s state is clearly inferior.”

“Neither witnesses to the design or manufacture of the product nor witnesses to the accident itself are likely to be located in the distributor’s state,” Klerman writes. “Similarly, neither the plaintiff’s nor the defendant’s preferred lawyers are likely to be located near the distributor, so litigating in the distributor’s state is likely to require both costly travel and the duplicative expense of local counsel.

“As between suit where the product was sold (which is usually plaintiff’s home state and where the product caused injury) and suit in the defendant’s home state (which is usually where the product was designed and manufactured), it is unclear which will minimize total litigation costs. Suit in the plaintiff’s home state is likely

to reduce the plaintiff’s litigation costs, but increase the defendant’s litigation costs.

“Conversely, suit in the defendant’s home state is likely to lower defendant’s litigation costs, but increase plaintiff’s.”

‘SOMETHING UNUSUAL IN PHILADELPHIA’ Philadelphia is among the venues most popular with plaintiffs nationwide, according to the defendant-friendly American Tort Reform Foundation (ATRF).

Medical-malpractice lawsuits aren’t the only kind of case venue-shopped into that Philadelphia Common Pleas Court, which the ATRF ranks sixth on its list of “jurisdictions where judges in civil cases systematically apply laws and court procedures in an unfair and unbalanced manner, generally to the disadvantage of defendants.”

The Philadelphia Court of Common Pleas “continues to be a national epicenter for product-liability litigation,” ATRF states. “The court’s Complex Litigation Center hosts a masstorts program that attracts drug, medical-device and asbestos cases from across the county.”

According to a 2011 International Center for Law & Economics report, “Are Plaintiffs Drawn to Philadelphia’s Civil Courts? An Empirical Examination,” Philadelphia courts historically “have been the subject of considerable controversy, including accusations of structural biases in favor of plaintiffs, leading to disproportionately large shares of litigation and verdicts relative to Pennsylvania and the United States in general. … [S]omething intrinsically unusual is occurring in Philadelphia.”

Philadelphia County is so popular with plaintiffs and their attorneys it has been known to have twice as much litigation per capita than other Pennsylvania counties, some of it from well beyond the state’s borders and much of it like Tara Duke’s product-liability suit—cases with virtually no connection to Philadelphia.

Though in medical-malpractice cases questions of venue may ultimately affect more people, even those who never have set foot in a courtroom, questions of venue in productliability cases can be uniquely puzzling.

‘THE BIG REVEAL’ Many lawsuits can seem to have little or no connection to where they’re filed. Such was the case with Tara Duke’s claim. “There was no relationship to Philadelphia County,” Mike says.

“The accident occurred in Delaware County, Duke and his family lived in Delaware County, ‘Where’ continued on page 18

Winter 2019/20 | 15

‘Wellspring’ continued from page 11

Till and Dr. Ernest McColluch, discovered injecting bone marrow cells into mice caused the mice’s spleen cells to multiply and grow. From there, stem cell uses in regenerative medicine proliferated.

a Biologics Licensing Application. The FDA also

What caused the stem cell industry to explode, and the reason we hear so much about it today, is because modern science isolates and generates pluripotent stem cells. Pluripotent stem cells are “master” cells, which can theoretically produce any cell or tissue the body needs to repair itself. Pluripotent stem cells can also self-renew, meaning they can perpetually create more copies of themselves. This is significant because not all stem cells are pluripotent. Some stem cells can only be one kind of cell or tissue. But these master cells can make cells from all layers of the body.

In November 2017, the FDA announced a com-

Of course, with any promising scientific advancement comes the opportunity for profit— and for exploitation. Some providers market stem cell treatments as regenerative therapies for cosmetic procedures and serious medical conditions without FDA review or approval.

ucts that raise safety concerns, even before

In many cases, there is no evidence to support these providers’ claims. Without FDA or other regulatory oversight, patients could be susceptible to unsafe and expensive treatments, as they are often not covered through insurance.

Since these products and treatments are widely available through stem cell clinics, hospitals, chiropractors and doctors, there are many avenues for contaminated treatments or unscrupulous practitioners to harm the general public.

As a remedy, the FDA sought to increase oversight and enforcement of the industry. The FDA regulates human cells, tissues, and cellular and tissue-based products, or HCT/Ps. As the FDA considers stem cell products to be HCT/ Ps, it regulates them under the Public Health Service Act. The Federal Food, Drug, and Cosmetic Act could also regulate HCT/Ps as biological products, drugs, or devices that require pre-market approval. Such products must be studied in human subjects under an investigational new drug, or IND, application and approval under

16 | Product Liability Playbook

reviews how each product will be manufactured to ensure the product’s safety, purity, and potency. prehensive policy for HCT/Ps involving regenerative medicinal products and novel cellular therapies. The policy involves certain provisions of the 21st Century Cures Act, including establishing a legal threshold for when a product is subject to FDA premarket approval. As part of its announcement, the FDA informed stem cell firms and providers about its enforcement discretion until November 2020.

This gives stem cell treatment providers and manufacturers time to comply with the new premarket approval policies. However, prod2020, will trigger FDA action.

On November 29, 2018, the FDA issued a warning letter to Genetech, a company that processed umbilical cord blood into unapproved human cellular products for allogeneic use, and subsequently distributed by Liveyon, LLC. The FDA cited Genentech for marketing stem cell products without FDA approval and for significantly deviating from current Good Manufacturing Practices (cGMP) and current Good Tissue Practices (cGTP) for manufacturing HCT/Ps. The FDA indicated Genetech’s violations could have led to microbial contamination, which potentially caused serious blood infections in patients. The FDA’s warning letter cited 19 violations, including deficient donor-eligibility practices; uncontrolled environment; unvalidated manufacturing processes; lack of defined areas or a control system to prevent contamination and mix-ups; lack of control over the components used in production; and failure to establish and implement quality control systems and processes.

Genetech voluntarily recalled its product, and suspended shipments, pending resolution of the FDA investigation. However, the FDA warned Genetech that failure to take corrective action

and cure its deficiencies could result in regulatory action, including seizure and/or injunction.

As in Genetech’s case, where the company is defunct, and its insurance policy is likely insufficient to settle claims with plaintiff-patients, attorneys all over the country are generating class actions against providers who administered contaminated stem cell infusions or injections under theories of medical malpractice or product liability.

Another example is StemGenex, an operator of a La Jolla, California, clinic that received warnings from the FDA that its stem cell treatments were illegal. Although the clinic filed for bankruptcy in September 2019, they still face a class-action lawsuit in San Diego federal court by several former customers who claim they were misled by its advertising and marketing.

In addition to ensuring FDA compliance to avoid regulatory consequences, companies should remember that, without FDA approval, they cannot assert any bars to product-liability claims and consequently expose themselves to an entirely other area of litigation.

Even the most well-intentioned could face FDA scrutiny or looming litigation. Recent FDA warning letters and lawsuits provide insight as to how companies and providers can minimize the risk of regulatory noncompliance and productliability litigation.

In December 2018, the FDA sent letters to a number of stem cell product manufacturers and treatment providers. These letters underscored the FDA’s current policy and encouraged reaching out to the FDA well in advance of November 2020 to determine whether their products were subject to premarket approval requirements.

Stem cell providers would do well to heed the FDA’s guidelines and bring their companies into compliance immediately. However, FDA regulations are not the only concerns.

Jennifer L. Fletcher is a seasoned litigator with both in-house and private-practice experience handling a wide variety of claims for clients in the retail, food and beverage, manufacturing, and transportation industries, among others.

Success stories from other Goldberg Segalla practice groups CROSSOVER

Court Dismisses Suit against Museum by Woman Who Tripped and Fell

Concurrent Employment of Injured Lyft Driver Not Included in Claimant’s Wages

The New York Supreme Court has dismissed a woman’s lawsuit against a museum in which she allegedly was injured when she fell while stepping through an interior doorway with an elevated threshold. The building at issue was on the national historic register and was itself a part of the exhibit.

A New York state man who had to take time off after he was injured in a collision while driving for Lyft in May 2019 isn’t eligible for additions to his weekly wages for a second job, according to a workers’ compensation administrative ruling October 19, 2019.

The October 23, 2019, ruling is a victory for the museum and its defense attorney, Goldberg Segalla associate James F. Faucher II. James successfully argued that the height differential between the floors on either side of threshold over which the woman allegedly fell wasn’t dangerous because it was “open and obvious” and that the museum had duly warned visitors with diagonal yellow-and-black stripes on the floor.

The court didn’t agree with the defense’s argument that the woman was “the sole cause of her fall because she observed the warnings and failed to take heed of them.” But it did decide that additional warnings would have been “highly unlikely” to prevent the accident, as the plaintiff claimed, because she had failed to heed the warnings that were in place.

The case’s dismissal averted a scheduled trial.

MORE ABOUT GOLDBERG SEGALLA’S GENERAL LIABILITY PRACTICE GROUP With a roster stacked with seasoned litigators and nationally recognized authorities in a number of critical legal disciplines, Goldberg Segalla brings exceptional strength and savvy to the defense of a wide range of liability claims. The firm’s attorneys have a wealth of experience defending companies of all sizes in various industries, along with municipalities, school districts, and other public entities, in a broad spectrum of matters.

The decision is a victory for Goldberg Segalla associate Mark A. Hauck, a member of the firm’s Workers’ Compensation practice group, who was defending a New York-based nonprofit organization that provides Workers’ Compensation insurance for for-hire drivers.

Mark’s experience defending complex claims paid off. Because of the nature of the Lyft driver’s other work—he’s also a linguist for a government contractor that got its start providing translators and interpreters—Mark had to navigate the vagaries of New York law and what sorts of employment it covers. He also had to understand compensation coverage and exclusivity under the Defense Base Act, a federal law that extends workers’ compensation protection to civilians doing military or defense work overseas for the U.S. government.

The claimant, who allegedly injured his head and back in a motor-vehicle accident in Rochester, required medical treatment and had to take time off from work. Because of his overseas work, he sought to add $800 a week to his Lyft wage of $1,423.08 in his workers’ compensation claim. At risk of having to cover those extra wages was Mark’s client.

But Mark successfully argued that the claimant’s other employment was not covered under New York state workers’ compensation law and also not concurrent with the employment of record.

MORE ABOUT THE WORKERS’ COMPENSATION PRACTICE GROUP The mission of Goldberg Segalla’s Workers’ Compensation practice group is to achieve significant and sustainable reductions to the overall expense of each client’s workers’ compensation program. The firm’s commitment to this mission—and its success in efficient file handling as well as long-range strategic risk-management—has earned it a national reputation for exceeding its clients’ expectations and driving positive change in the practice of workers’ compensation law.

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Winter 2019/20 | 17

‘Smoke’ continued from page 13

On September 13, 2019, an attorney for Adam Hergenreder, an Illinois student-athlete, announced that Hergenreder is suing Juul because doctors told him he now has lungs similar to those of a 70-year-old. This announcement, during which Hergenreder’s attorney referred to vape pens as “toxic time bombs,” came just eight days after Hergenreder’s hospitalization was profiled on the Today Show.

agent and that black-market THC may very well be to blame. As evidenced by recent mass tort litigations surrounding talc and ovarian cancer or glyphosate and non-Hodgkin’s lymphoma, litigation does not wait on settled science to advance claims. Add in a provocative 24/7 news culture and lawyers’ advertising for e-cigarette victims online and it is clear the next mass tort is upon us.

On October 11, 2019, Montgomery County in Maryland filed a class-action lawsuit against Juul alleging violations of the Maryland Consumer Protection Act, negligence and unjust enrichment. Montgomery County contends it has incurred costs to control vaping, police underage sales, and launch an anti-vaping advertising campaign within Montgomery County Public Schools.

Unlike consumer class-action lawsuits in which certified groups of plaintiffs assert massive aggregate harm, personal injury claims arising from e-cigarette use are too individualized to bind plaintiffs to a class. Each plaintiff’s unique use pattern of e-cigarettes, coupled with his symptoms, injury, and damage, requires an individual lawsuit. In addition, target defendants can vary for each plaintiff, who can assert claims against the manufacturer, distributor, marketer, or retailer or any combination of the same. With so many variables in play, it is inevitable that this headline-dominating product will generate a mass of tort suits for the foreseeable future.

On October 15, 2019, the first wrongful death lawsuit against Juul was announced. Lisa Vail filed suit on behalf of her son, David Wakefield, who died in his sleep in August of 2018. She contends he was addicted to Juul and hospitalized three times for breathing complications and alleges it caused his death.

Also on October 15, 2019, four Indiana residents filed suit against Juul, alleging it violated the Indiana Deceptive Consumer Sales Act, failed to warn its users of the risks of the e-cigarettes, and intentionally misrepresented its products.

Jessica P. Butkera is an experienced trial attorney who focuses her practice on general liability, product liability, and toxic tort matters. She represents a wide range of clients across various industries including property management, hospitality, retail, amusement parks, stadiums, construction, automobile, and trucking.

The trend is apparent and growing. This is, of course, despite the fact that there is no scientific or medical consensus on a specific causative

‘Where’ continued from page 15

the defendants were located in Chester County, the truck was purchased in Chester County, the mechanical work and inspection procedures occurred in Chester County, and the plaintiff didn’t treat or have any medical providers in Philadelphia County.

“One defendant, who was based in Chester County, had conducted a small fraction of its business in Philadelphia County. Although that fraction of business was wholly unrelated to the substance of the operative facts, the response at oral argument from the court on this issue was that a party must be completely immobilized for the court the court to grant a venue transfer to any of the surrounding counties bordering Philadelphia.”

Because the Duke lawsuit played out in Philadelphia County, Chris and Mike were wary of the direction it might take if it went to trial, even though they had compelling evidence to show that the truck’s brake worked just fine.

18 | Product Liability Playbook

Among the defense team’s evidence was the testimony of an engineer who served as an expert witness. He visited the accident site and then recreated inside a storage facility all the same conditions, including the 10-percent grade, and concluded the truck’s driveline-style brake worked.

So did two other witnesses: a certified third-party mechanic and the man who towed the truck away from the site of the accident the day it occurred.

Mike calls the tow-truck driver the defense team’s “big reveal.” In his deposition, the tow driver said he would not have risked crawling under the vehicle to hook it up to his own if had thought the parking brake unsafe.

“That’s my—my body up under the front of that truck, my—my safety is on the front of that truck,” he said in the deposition. “I adjusted the knob, pulled it up, it held. … I would not have crawled underneath the Ford F650 if the parking brake was not functional.”

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