ON COLOR BACKGROUND QUARTERLY€¦ · Laura A. Turbe-Capaz is a Senior Associate at Butler Pappas....

VOL. 62, NO. 3 SPRING, 2012

UARTERLY

Multiple ClaiMants and insuffiCient liMits: Can insurers lessen their exposure to Bad faith ClaiMs? John W. Weihmuller and Laura A. Turbe-Capaz

Best praCtiCes for the defense of Corporate depositions

Thomas R. Jayne

lessons froM the lorax: Jury seleCtion in diffiCult Cases

John R. Mitchell, John Hofstetter and Conor A. McLaughlin

preeMption in MediCal deviCe litigation: What has Changed sinCe Riegel? Marisa A. Trasatti and Jhanelle A. Graham

ON COLOR BACKGROUND

ON WHITE BACKGROUND

Q

BroWse this edition

FEDERATION OF DEFENSE & CORPORATE COUNSEL

FDCC QUARTERLY EDITORIAL OFFICEMarquette University Law SchoolEckstein Hall, PO Box 1881Milwaukee WI, 53201-1881414-288-5375414-288-5914 [email protected]

EDITOR-IN-CHIEFPatricia C. BradfordAssociate Professor of Law

ASSOCIATE EDITORAlison E. JulienProfessor, Legal Writing

STUDENT EDITORSElizabeth P. DurkinE. Carolina Rodriguez-AlfaroBrett D. Schnepper

PUBLICATIONSLATHA RAGHAVANGoldberg Segalla LLPAlbany, [email protected]

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CLE COORDINATORFRANCIE BERG3714 22nd Avenue SouthMinneapolis, MN, [email protected] Fax

EDITOR-WEBSITEDAVID M. FUQUAFuqua Campbell, PALittle Rock, [email protected]

FDCC HISTORIANSTEPHEN P. PATEFulbright & Jaworski lLPHouston, [email protected]

DIRECTORSEDWARD J. CURRIE, JR.Currie Johnson Griffin Gaines & Myers PAJackson, MS [email protected]

ANDREW B. DOWNSBullivant Houser Bailey, PCSan Francisco, CA [email protected]

WALTER DUKESDukes Dukes Keating Faneca PA Gulfport, [email protected]

MICHAEL T. GLASCOTTGoldberg Segalla, LLPBuffalo, NY [email protected]

SUSAN B. HARWOODBoehm, Brown, Harwood, Kelly & Scheihing, P.A. Maitland, [email protected]

ELIZABETH F. LORELLGordon & Rees LLPFlorham Park, [email protected]

HOWARD M. MERTENPartridge, Snow & HahnProvidence, [email protected]

LESLIE C. PACKEREllis & Winters, LLPRaleigh, [email protected]

W. MICHAEL SCOTTBeirne, Maynard & Parsons, LLPHouston, [email protected]

SENIOR DIRECTORSBRUCE D. CELEBREZZESedgwick LLP San Francisco, [email protected]

STEVEN E. FARRAR Smith Moore Leatherwood LLP Greenville, SC [email protected]

H. MILLS GALLIVAN Gallivan, White & Boyd, PA Greenville, SC [email protected]

J. SCOTT KREAMERBaker, Sterchi, Cowden & Rice, LLC Kansas City, [email protected]

DEBORAH D. KUCHLER Kuchler Polk Schell Weiner & Richeson, LLC New Orleans, [email protected]

DONALD L. MYLES JR.Jones, Skelton & HochuliPhoenix, [email protected]

KENNETH J. NOTA Dryvit Systems Inc. West Warwick, RI [email protected]

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PRESIDENT-ELECT TIMOTHY A. PRATT Boston Scientifc Corporation Natick, MA 508-650-8616 [email protected]

SECRETARY-TREASURER VICTORIA H. ROBERTSMeadowbrook Insurance Group Scottsdale, [email protected]

BOARD CHAIR MICHAEL I. NEILNeil, Dymott, Frank, McFall & Trexler APLC San Diego, CA619-238-1712 [email protected]

EXECUTIVE DIRECTORMARTHA (MARTY) J. STREEPER11812 N 56th StreetTampa, FL [email protected] Fax

Spring, 2012 Volume 62, number 3

Contents

QUARTERLYFDCC

Cite as: 62 FED’N DEF. & CORP. COUNS. Q. ___ (2012).The Federation of Defense & Corporate Counsel Quarterly is published quarterly by the Federation of Defense & Corporate Counsel, Inc., 11812 North 56th Street, Tampa, FL 33617. Readers may download articles appearing in the FDCC Quarterly from the FDCC website for their personal use; however, reproduction of more than one copy of an article is not permitted without the express written permission of the FDCC and the author.

Copyright, 2012, by the Federation of Defense & Corporate Counsel, Inc.

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multiple ClaimantS and inSuffiCient limitS: Can inSurerS leSSen their expoSure to bad faith ClaimS? John W. Weihmuller and Laura A. Turbe-Capaz .......................................................224

beSt praCtiCeS for the defenSe of Corporate depoSitionS

Thomas R. Jayne .......................................................................................................248

leSSonS from the lorax: Jury SeleCtion in diffiCult CaSeS

John R. Mitchell, John Hofstetter and Conor A. McLaughlin ..................................254

preemption in mediCal deViCe litigation: What haS Changed SinCe Riegel? Marisa A. Trasatti and Jhanelle A. Graham ..............................................................263

FDCC Quarterly/Spring 2012

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Multiple Claimants and Insufficient Limits:Can Insurers Lessen Their Exposure

to Bad Faith Claims?†

John W. WeihmullerLaura A. Turbe-Capaz

i.introDuCtion

Whentherearemultipleclaimantsvyingforinsufficientpolicylimits,howshouldtheinsurerdistributethepolicyproceeds?Thisproblemisnotnew.1 Crafting fair settlement payoutsthatminimizebadfaithexposurewhentherearenotenoughfundstocompensateallclaimantsischallenging.Asoneauthorwrotewhenaddressingthesituationin1952,

[c]onsiderationoftheproblembythecourtshasbeenrelativelyscanty,whichinitselfisatributetothemenwhocounselliabilityclaimdepartments,forthoughtheweightofauthorityseemstogivetheinsureragreenlight,thereremainssomedoubt, and it canonlybedue topatience, fairmindedness and ingenuity in theadjustmentofclaimsthattherehasbeensolittlelitigation.2

Whiletheremaybemorecaselawtodaythanwhenthosewordswerewritten,insurersstillmustdealwiththeproblemsofmultipleclaimantsandinsufficientlimitsbyengagingina

† SubmittedbytheauthorsonbehalfoftheFDCCExtra-ContractualLiabilityandtheInsuranceCoveragesections. 1 RobertE.Keeton,Preferential Settlement of Liability-Insurance Claims,70Harv.L.Rev.27(1956);see also JohnW.Weihmuller&RobertC.Weill,Multiple Claims Exceeding the Policy Limits, Mealey’S litig. rep. inS. BaD Faith,Aug.17,1999,at 13.2 C.L.Fischer,Multiple Claims Under the Automobile Liability Policy,19inS. CounS. J.419,419(1952).

Multiple ClaiMantS anD inSuFFiCient liMitS

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John W. Weihmuller is a partner at Butler Pappas and is a member of the firm’s extracontractual and insurance cover-age practice groups. Mr. Weihmuller’s practice is devoted to defending statutory and common law bad faith cases and complex coverage disputes. Having successfully defended more than twenty-five insurance companies over the years, Mr. Weihmuller has a reputation for winning legally signifi-cant summary judgment motions for insurers. He has also appeared before Florida legislative committees addressing bad faith litigation issues and reform measures, and he is a frequent lecturer in the field of insurance claims handling, bad faith, and insurance coverage litigation. Mr. Weihmuller

is a member of The Florida Bar and is admitted to practice before the United States Court of Appeals for the Eleventh Circuit, as well as the United States District Courts for the Northern, Middle, and Southern Districts of Florida. He is a member of the Federation of Defense & Corporate Counsel, the Defense Research Institute, the Tort Trial and Insurance Practice Section of the American Bar Association, the Florida Defense Lawyers Association, and the Hillsborough County Bar Association.

comprehensivefactualanalysisthattakesintoaccountallofthefactsandcircumstancesandtheapplicablelaw,whichvariesfromstatetostate.Eachsolutiontotheproblemscreatedbyinsufficientliabilityinsurancemustbeweighedandbalancedagainsttheotherproblemsasolutionmightcreate.Forexample,theinsurermustconsiderthefactthatasettlementofsome,butnotallclaims,canexhausttheavailablepolicylimitsandexposetheinsuredtoongoinglitigationwithoutinsurancecoverage.Yet,ifallexistingandpotentialclaimsmustbesettledbeforeanysingleclaimissettled,aplaintiffwhoisunwillingtowaitforaglobalresolutionmayviewtheinsurer’sstanceasapotentialbadfaithfailuretosettleclaim.Evenifaglobalsettlementiseventuallyachieved,otherplaintiffsmaybringbadfaithclaimsiftheyaredissatisfiedwiththesizeoftheirshares. Toassistcounselandclaimprofessionalswhomustmakedecisionsregardinghowtosettlemultipleclaimswhenthereisariskofexcessexposurefortheinsuredorapotentialbadfaithclaim,PartIIofthisArticleexplainstheapproachescourtshaveendorsedwhentherearemultipleclaimantsandinadequateinsurancecoverageforalloftheclaims.Next,PartIIIexplainshowcourtshavetraditionallydeterminedwhetheraninsurerwhosettledwithmultipleclaimantsactedingoodfaith.PartIIIalsoincludesmorerecentdecisionsexaminingtheinsurer’sobligationsinmultiple-claimantcases.Recognizingthatthereisnoclear-cut“rightway”tohandleamultiple-claimantcasewherepolicylimitsareinadequate,PartIVconsiderstheadvantagesanddisadvantagesoffilinginterpleaderactionsaswellasotherpracticesthatinsurersshouldemploytodemonstratethatsettlementagreementsarereasonableandthattheinsurerhasactedingoodfaith.


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ii.the inSurer’S oBligationS For hanDling

Multiple-ClaiMant ClaiMS

Whenanaccidentoccurs,andseveralpersonssuffersignificantcompensableinjuriesthatresultinclaimsexceedingtheliabilityinsurancepolicylimits,insurersdecidehowtoallocatetheproceedsamongtheclaimants,takingintoaccounttheuniquefactsofeachcase,theinsurer’sobligationstoitsinsured,andtheapproachescourtshaveendorsedwhenrulingonbadfaithclaimsarisinginsimilarsituations. Somecourtsfollowthefirst-come-first-servedapproach,andothercourtsfollowtheproratarule.Whentheprorataapproachisused,thecourtproratesthepolicyproceedsamongallclaimantsbasedupon the lossordamagessustainedbyeachclaimant.Somecourtsthatfollowthefirst-come-first-servedapproachapplythe“firsttojudgment”rule:thefirstclaimanttosecureajudgmentisentitledtobepaidfirst.Othercourtsapplythe“firsttosettle”rule:thoseclaimantswhoacceptsettlementswillbepaidintheorderofsettlement.Determiningwhichruletoapplyisthefirststep,andperhapsthemostimportantstep,whenpayingoutclaimsinamannerthatsatisfiestheinsurer’sdutytoactingoodfaith.

A. First-Come-First-Served Approach Asageneralrule,insurancecompaniesmaydistributeproceedsofapolicyonafirst-come-first-servedbasiswhenconfrontedwithmultipleclaimants,clearliability,andlowinsurancelimits.Thisrulehasbeeninplaceforasignificantamountoftimeandhasbeenadoptedbymanyjurisdictionsinthecountry. Thefirst-come-first-servedapproachtosettlingliabilityclaimsappearstohavebeenderivedfromtwosimilar,butdistinct,linesofcases.Onelineofcasesheldthat,where

Laura A. Turbe-Capaz is a Senior Associate at Butler Pappas. She practices primarily in the areas of third-party liability, coverage, and extracontractual claims. Prior to joining the firm in 2007, Ms. Turbe-Capaz served as a judicial staff at-torney for the Second District Court of Appeal in Lakeland, Florida. Ms. Turbe-Capaz is a 2004 cum laude graduate of Stetson University College of Law. As a member and editor of the Stetson Law Review, she was honored for the best student work published in 2003-2004. Ms. Turbe-Capaz is a member of The Florida Bar and the Hillsborough County Bar Association. In 2009, 2010, and 2011, she was recognized as a “Rising Star” by Florida Super Lawyers.


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thirdpartiesobtainedjudgmentsorwereabouttoobtainjudgmentsagainstaninsuredindifferentactions,thepolicyproceedsshouldbedistributedonafirst-come-first-servedbasisaccordingtothepriorityofthejudgments.3Thisapproachiscalledthefirsttojudgmentrule.Mostjurisdictionsdisfavorthisoutdatedmethodasitisnowseenmoreasa“racetothecourthouse,”whichunderminesthepublicpolicyofencouragingsettlement.4 Asecondlineofcasesfollowsthefirsttosettlerule,whichisthemajorityposition.Underthisrule,aninsurerneednotsettlewiththefirstclaimantwhopresentsanoffertosettlewithinthepolicylimits.Instead,therulerecognizesthatinsurersshouldbeabletosettlewithanyoneorseveralofmultipleclaimants,withoutincurringbadfaithliabilityinconnectionwithanyoftheremainingclaims,eventhoughwhenallsettlementsarecom-bined,theymaydepleteorexhaustthepolicylimits.5Individualsettlementsmustbefairandreasonableundertherelevantcircumstances.6Somecourtsgoastepfurtherandrequiretheinsurerstoattempttosettleasmanyclaimsaspossiblewithintheapplicablepolicylimits.7 InContinental Casualty Insurance Co. v. Peckham,8theFirstCircuitCourtofAppealsanalyzedthefirsttosettleruleinrelationtoaninsurer’sdutyofgoodfaithandfairdealing.Thecourtexplainedthat,inamultiple-claimantcase,theinsurershouldtrytosettleallorsomeoftheclaimssothattheinsuredcouldberelievedfromasmuchliabilityasisreason-ably possible.9Indoingso,theinsurerisentitledtoexercise“honestbusinessjudgment”aslongasitattemptstoresolvethemultipleclaimsingoodfaith.Thecourtfurtherrecognizedthatwhentheinsurerismakingagood-faithattempttoresolvemultipleclaimswithintheinadequatepolicylimits,theinsurerisnotrequiredtomakeperfectjudgmentsandisnotautomaticallyfoundinbadfaithiftheinsuredincursliabilitybeyondthepolicylimits.10

3 SeeSampsonv.CapeIndus.,Ltd.,540N.E.2d1143(Ill.App.Ct.1989);Goadv.Fisher,257A.2d433(Md.1969);Davidv.Bauman,196N.Y.S.2d746(App.Div.1960).4 DouglasR.Richmond,Too Many Claimants or Insureds and Too Little Money: Insurers’ Good Faith Dilemmas,44tort trial & inS. praC. l.J.871,880(2009).5 See, e.g.,Cont’lCas.Ins.Co.v.Peckham,895F.2d830,835(1stCir.1990)(Massachusettslaw);Voc-ciov.RelianceIns.Co.,703F.2d1,2-4(1stCir.1983)(applyingRhodeIslandlaw);ElliotCo.v.LibertyMut.Ins.Co.,434F.Supp.2d483,499(N.D.Ohio2006)(interpretingConnecticut,Delaware,NewYork,Ohio,andPennsylvanialaw);Gen.Sec.Nat’lIns.Co.v.Marsh,303F.Supp.2d1321,1325-1326(M.D.Fla.2004)(Floridalaw);Farinasv.Fla.FarmBureauGen.Ins.Co.,850So.2d555,561(Fla.Dist.Ct.App.2003)(Floridalaw);Tex.FarmersIns.Co.v.Soriano,881S.W.2d312,315(Tex.1994)(Texaslaw);StateFarmMut.Auto.Ins.Co.v.Murphy,348N.E.2d491(Ill.App.Ct.1976)(Illinoislaw);Liguoriv.AllstateIns.Co.,184A.2d12(N.J.Super.Ct.Ch.Div.1962)(NewJerseylaw).6 Farinas,850So.2dat561.See alsoRichmond,supra note4,at882(“Forexample,aninsurercouldnotunilaterallydecidetopayasingleclaimantadisproportionateshareofthepolicylimitsbecausetheclaimantwassomehowsubjectivelyfavored,orthelawyerforthatclaimantwasexceptionallyaggressive.”).7 Farinas,850So.2dat561.8 895F.2d830(1stCir.1990).9 Id. at835.10 Id.


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Thefirsttosettlerulepromotespromptclaimsandencouragessettlement;however,ithasnothinderedbadfaithcasesarisingfrommultiple-claimantclaims.Allegationsofbadfaithinthecontextofmultiple-claimantcaseswillbediscussedinPartIII.

B. Pro Rata Distribution Whenmultipleclaimshavebeenjoinedinonelawsuit,andtheliabilitypolicylimitsareinadequatetofullycompensateeachclaimant,somecourtshaveappliedthe“prorata”ruleanddistributedthepolicyproceedsbasedupontheamountofdamagessufferedbyeachclaimant.11 Allstate Insurance Co. v. Ostenson12involvedamultiple-vehicleaccident,threeinjuredclaimants,andinadequateliabilitypolicylimitsof$25,000perperson/$50,000peraccident.Thecourtannounceda“generalrule”thatwhereseveralclaimsarisingfromthesamein-cidentareassertedinonelawsuitorinterpleaderagainstaninsurerwithinadequatepolicylimits,“theproceedsaretobedistributedonaproratabasisinaccordancewiththeamountofdamagesufferedbyeachclaimant.”13Thecourtfurtherheldthateachclaimant’sportionoftheproratarecoverywouldbelimitedbythemaximumperpersonpolicylimit.14

Theprorataapproachhasalsobeenappliedwhentheclaimsarenotjoinedinonelaw-suit.15However,theinsurermaybedisadvantagedbythisapproachbecauseitmayhavetodefersettlementpayment(s)untilitreceivesconfirmationthatallclaimshavebeenpresentedoruntilthestatuteoflimitationshasrun.Thiswouldlikelybecomeanissuewhenaclaimantwantsto“wait-and-see”astotheseverityandpermanencyofhisinjuries.Accordingly,undertheproratarule,thetimedelaymayresultinmissedsettlementopportunities,unresolvedclaims,andpossibleexcessexposure.

C. Proposed Solutions Wheninsuranceproceedsaretheonlysourceofcompensationforclaimants,andtheirclaimsexceedthepolicylimits,eachofthethreeapproacheswillhavedrawbacks.Fromthepointofviewof the injuredparties, thefirst-come-first-servedapproaches,whetherbasedonwhoisfirsttojudgmentorwhoisfirsttosettle,donotseemtobebasedupontherelativedamageseachsustained.Butbothapproachesleadtoamorepromptpayoutforinjuredpartieswhoarewillingtoactswiftly.Althoughtheprorataapproachseemstoleadtomoreequitabledisbursements,therearemorepayoutdelayswhencomparedtothe

11Christliebv.Luten,633S.W.2d139,140(Mo.Ct.App.1982);AllstateIns.Co.v.Ostenson,713P.2d733,735(Wash.1986);Wondrowitzv.Swenson,392N.W.2d449(Wis.Ct.App.1986).12 Ostenson, 713P.2d733.13 Id.at735.14 Id.15 See, e.g.,Burchfieldv.Bevans,242F.2d239(10thCir.1957)(Oklahomalaw);StateFarmMut.Auto.Ins.Co.v.Hamilton,326F.Supp.931(D.S.C.1971);UnderwritersforLloydsofLondonv.Jones,261S.W.2d686(Ky.1953);CenturyIndemnityCo.v.Kofsky,161A.101(Conn.1932).


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first-come-first-servedapproachessinceaproratapayoutcannotbemadeuntilallclaimantshavesubmittedtheirclaims,andthedamageshavebeeninvestigatedandverified.16 Recognizingtheinherentdefectsbuiltintothecommonlawapproaches,especiallywhenthetortfeasorisjudgmentproof,avarietyofsolutionshavebeensuggestedinscholarlyarticles over the years.17Butasolutionthatissatisfactorytoallofthestakeholdersseemsimpossibletoachieve.AsRobertKeetonwrotein1956,

thebestsolutiontotheproblemofpreferentialdispositionoflimitedpolicyproceedswouldbetorecognizethatanyoneamongmultipleclaimantswhosetotalclaimsexceedthepolicylimitperaccidenthasarighttoobtainanorderallocatingcover-age.Theweightiestobjectionstoitsrecognitionareconcernedwiththedangerofincreasedlitigationanddoubtsaboutpracticabilityofenforcement.Alesscomplexsolutionwould be preferable, but is not possiblewithout sacrificing importantinterestsofsomeofthevariousparties–claimants,insured,orinsurancecompany. Neitherlegislationnorpolicychangesshouldberequiredtoaccomplishtherecognitionof sucha right.Though there isyetnodecisioneitherdeclaringordenyingitsexistence,analogiestoremediespreviouslyrecognizedforprorationoffundsagainstwhichmultipleclaimsareoutstandingopenthewayforjudicialrecognitionofthisrightofprorationofpolicylimits.Judicialdevelopmentoftherightwouldbepreferabletostatutorydevelopment,sinceitsscopeandlimitationscouldbedevelopedcasebycaseinthelightofspecialproblemswhichappear,notallofwhichwouldbeforeseenbystatutorydraftsmen.If,however,thecourtsdeclinetorecognizesucharightwhenappropriatecasesarepresented,legislationandchangesinpolicyformsshouldbeconsidered.18

InMarch2011,alegislativesolutionwasproposedinFlorida.Thebillwasintendedtoprotectinsurersfrombadfaithliabilityinsituationsinvolvingmultiplethird-partyclaimsarising out of a single occurrence totaling more than the available policy limits if the insurer eitherfiledaninterpleaderactionorpaidforbindingarbitration.Specifically,theproposedbillstatedthefollowing:

(3)Notwithstandingstatutoryorcommonlawrequirements,iftwoormorethird-partyclaimantsmakecompetingclaimsarisingoutofasingleoccurrence,

16 SeeV.H.Cooper,Annotation,Basis and Manner of Distribution Among Multiple Claimants of Proceeds of Liability Insurance Policy Inadequate to Pay All Claims in Full,70a.l.r. 2d416,418(1960).17 See, e.g., SamuelZelkowich,Note,Insurance―Multiple Claim Cases,28ill. l. rev.576(1933); Note, Reduction of Insurer’s Liability by Preferential Settlements in Multiple Claim Cases,43yale l.J. 136 (1933); M.MannisNeumann,Note,Insurance―Multiple Claims Against Liability Insurer―Problem of Apportionment,11 n.y.u. l. Q. rev. 447 (1934); Keeton,supra note 1.18Keeton,supranote1,at59-60.


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whichintotalexceedtheavailablepolicylimitsofoneormoreoftheinsuredpartieswhomaybeliabletothethird-partyclaimants,aninsurerisnotliablebeyondtheavailable policy limits for failure to pay all or any portion of the available policy limitstooneormoreofthethird-partyclaimantsif,within90daysafterreceivingnoticeofthecompetingclaimsinexcessoftheavailablepolicylimits,theinsurer:

(a)FilesaninterpleaderactionundertheFloridaRulesofCivilProcedure.Iftheclaimsofthecompetingthird-partyclaimantsarefoundtobeinexcessofthepolicylimits,thethird-partyclaimantsareentitledtoaproratedshareofthe policy limitsasdeterminedbythetrieroffact.Aninsurer’sinterpleaderactiondoesnotalteroramendtheinsurer’sobligationtodefenditsinsured;or (b)Pursuanttobindingarbitrationagreedtobyallparties,makestheentireamountof thepolicy limits available forpayment to thecompeting third-partyclaimantsbeforeaqualifiedarbitrator selectedby the insurerat theexpenseoftheinsurer.Thethird-partyclaimantsareentitledtoaproratedshareofthepolicylimitsasdeterminedbythearbitrator,whoshallconsiderthecomparativefault,ifany,ofeachthird-partyclaimant,andthetotallikelyoutcomeattrialbaseduponthetotaloftheeconomicandnoneconomicdamagessubmittedtothearbitratorforconsideration.Athird-partyclaimantwhoseclaimisresolvedbythearbitratorshallexecuteanddeliverageneralreleasetotheinsuredpartywhoseclaimisresolvedbytheproceeding.19

Althoughthisbillattemptedtoaddressconcernsthataninterpleaderactionwouldleadtoincreasedlitigation(andconcomitantdelays)byprovidingbindingarbitrationasanalterna-tive,thebilldidnotpass.20

iii.BaD Faith ClaiMS FroM Multiple-ClaiMant CaSeS

Priortothe1960sand1970s,verylittlecaselawaddressedtheinsurers’obligationswhenattemptingtosettlemultiple-claimant/excessexposurecases.Themostsignificantolder cases includeBrown v. United States Fidelity & Guaranty Co.,21 Liberty Mutual Insurance Co. v. Davis,22andVoccio v. Reliance Insurance Co.23Thesecasesheldthatinexcessexposurecasesinvolvingmultipleclaimants,theinsurerisobligatedtominimizethe

19Fla.CStoSB1592,§1(2011)(proposedamendmenttoFla. Stat.§§624.155,627.311,and627.727),available athttp://www.flsenate.gov/Session/Bill/2011/1592;Fla.HB1187,§1(2011),available athttp://www.myfloridahouse.gov/Sections/Bills/billsdetail.aspx?BillId=46277.20 Id.21314F.2d675(2dCir.1963).22412F.2d475(5thCir.1969).23703F.2d1(1stCir.1983).

http://www.flsenate.gov/Session/Bill/2011/1592

http://www.myfloridahouse.gov/Sections/Bills/billsdetail.aspx?BillId=46277

http://www.myfloridahouse.gov/Sections/Bills/billsdetail.aspx?BillId=46277


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insured’sexposureandthatthecourtswillexaminethereasonablenessofsettlementswhenascertainingwhethertheinsurerhasactedingoodfaith.Duetothefact-intensivenatureofthisstandard,rulesregardinghowinsurersshouldhandlesettlementsofmulti-claimantcasesinordertoavoidbadfaithexposurearefarfromcertain.

A. Brown v. United States Fidelity & Guaranty Co. Brown v. United States Fidelity & Guaranty Co.24 hasbeenreferredtoasakeycaseonbadfaithinthecontextofmultiple-claimantclaims.InBrown,theSecondCircuitCourtofAppealsheldthataninsurercouldbefoundinbadfaithforthe“overeager”settlementofaclaimindisregardoftheinsured’spotentialpersonalliabilitytotheplaintiff.25Thenamedinsured’ssonnegligentlyoperatedhisvehicleandstruckataxicab,causinginjurytothethreeoccupantsofthetaxicabandtheinsuredpassenger.Theapplicablepolicycontainedliabilitylimitsof$10,000perperson/$20,000peraccident.Theinsurerresolvedtheclaimsof the insuredpassengerand taxicabdriver fora totalamountof$14,000, leavingonly$6,000toresolvetheclaimsofthetwoinjuredtaxicabpassengers.Thepassengersfiledsuitandobtainedexcessjudgmentsof$25,000and$20,000,respectively,andthensuedtheinsurerforbadfaith,claimingthattheinsurerconductedsettlementnegotiationsinbadfaithandabandonedtheinsured’sinterests.26Asitturnedout,theinsuredpassenger(withwhomtheinsurerreachedasettlement)hadbeendrinkingandcouldhavebeenfoundtobecomparativelyatfault,andthetworemainingclaimantshadsustainedmoresevereinjuriesthan the settling passenger. TheSecondCircuitexaminedtheinsurer’sconductbaseduponthetotalityofthecir-cumstancesandthereasonablenessoftheinsurer’sapparent“overeagersettlement”withtwoofthefourclaimants.Thecourtdeterminedthattherewassufficientevidenceofinsurerbadfaithtosendthecasetoajury.27Thecourtnotedthat,regardlessofthebasisforthebadfaithallegation,theissuetobeadjudicatediswhethertheinsurer’sconductrevealedabadfaithdisregardfortheinsured’sfinancialinterests.28 The Browndecisionmakesitclearthataninsurercannotbeinsulatedfrombadfaithliabilitybysimplysettlingclaimsonafirst-come-first-servedbasis.Instead,theinsurermustconsideralloutstandingclaims,theseriousnessofallrelevantinjuries,theextentofalldamages,thetotalclaimvalue(s),andthepossibleeffectthatsettlementofcertainclaimsmighthaveontheinsured’spotentialpersonal liability.29

24 Brown,314F.2d675.25 Id. at682.26 Id. at676.27 Id.28 Id.29 See Carterv.Harrison,684So.2d546,547-558(La.Ct.App.1996)(althoughtheinsureronlysettledwithtwooffiveclaimants,itwasnotliableforbreachofthedutytosettlebecause(a)itfirstattemptedaglobalpolicylimitsettlement,and(b)itdidnotenterintothepartialsettlementhastily).


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B. Liberty Mutual Insurance Co. v. Davis Liberty Mutual Insurance Co. v. Davis30 isoneofthemostcitedanddiscussedmultiple-claimant/excessexposure/badfaithcaseseverdecided.Theopinionservesasanexamplethat an insurer cannot protect itself by refusing to settle any one claim in an attempt to achieve a global or comprehensive agreement. InDavis, the insured’s negligent opera-tionofhisvehicleresultedinadoublecollisionandseriousinjurytofiveoccupantsofthe “Davisvehicle”andtwooccupantsofthe“Rawlsvehicle.”31Itwasclearthatthevalueoftheclaimswouldexceedthe$10,000/$20,000policylimitsandthattheinsuredwasunabletocontributefundstoanysettlement. Counselfortwoofthe“Davisclaimants”presentedanoffertosettleforthe$20,000policylimits.Theinsurerrejectedthesettlementofferbaseduponitsfearthatitmightbeliabletotheremainingclaimantsifitdepletedtheentireamountoftheinsuranceproceedsbysettlingonlytwoofthesevenclaims.TheDavisclaimantsproceededwithlitigationandobtainedanexcessjudgmentfor$48,500.AftertheinsurerfailedtoactupontheDavisclaimants’subsequentoffertocompromiseforthe$20,000limits,theyfiledabadfaithac-tiontocollectontheexcessjudgment.32

Thetrialcourtdeterminedthattheinsurerwasliablefortheexcessverdict,andonap-peal,theFifthCircuitCourtofAppealsaffirmed.33 The Daviscourtstatedthatwhenmultipleclaimantsareinvolvedandminimalpolicylimitsareavailable,thepolicyproceedsshouldnotbeexhaustedwithoutanattempttosettleasmanycasesaspossible.34However,wherethepolicylimitsaresominimalincomparisontothetotalityoftheclaimssoastoprecludeanychanceofacomprehensivesettlement,theinsureddoesnotbenefitwhentheinsurerinsists on a global or comprehensive settlement.35Thecourtconcludedthat

effortstoachieveaprorated,comprehensivesettlementmayexcuseaninsurer’sreluctancetosettlewithlessthanalloftheclaimants,butneednotdoso....Inmanycases,effortstoachieveanoverallagreement,eventhoughentailingarefusaltosettleimmediatelywithoneormoreparties,willaccordwiththeinsurer’sduty.Inothercases,useofthewholefundtocanceloutasingleclaimwillbestservetominimizethedefendant’sliability.Considerableleeway,ofcourse,mustbemadefortheinsurer’shonestbusinessjudgment,shortofmismanagementtantamounttobadfaith.36

30 Davis,412F.2d475.31 Id. at477.32 Id.at479.33 Id. at 482.34 Id. at 481.35 Id.36 Id.


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With respect to the Daviscase,thecourtdeterminedthatajurycouldhavereasonablyfoundthat(1)theinsurerfailedtoexerciseproperdiligencetodeterminedamages;(2)theinsurerfailedtoexplorethepossibilityofsettlingwithalloftheclaimants;and(3)thein-surerfailedtosettlewiththeDavisclaimantswhentheinsurerhadconcededliabilityandknewtheinsured’spersonalexposurewouldexceedthepolicylimits.37 The Daviscasemakesitclearthatthereisnohard-and-fastruleastomultiple-claimantclaims.Insurersshouldapproacheachclaimseparatelyandwithoutsoleregardtohowtheyhandledothercases.

C. Farmers Insurance Exchange v. Schropp Farmers Insurance Exchange v. Schropp38involvedpolicylimitsof$25,000perpersonand$50,000peraccident,andanaccidentthatresultedinthedeathoftheinsureddriverandinjurytofivesurvivingclaimants.Mr.Schroppsufferedthemostsevereinjuriesandthemostdamages;however,theliabilityinsurerfailedtoadequatelyrespondtoMr.Schropp’spolicylimitdemandandfailedtopresentanysettlementofferstoanyoftheotherfourclaimants.39 Instead,eightmonthsaftertheaccident,theinsurerfiledadeclaratoryjudgmentrequestingthatthecourtdeterminethecompetingclaimants’rights.Theinsurerpaidthe$50,000policylimits to the court.40Mr.Schroppandtheinsured’sestatestipulatedtoaconsentjudgment,andajurylaterdeterminedthattheinsurerhadactedinbadfaith.41

Onappeal,theKansasSupremeCourtconcludedthattherewassubstantialevidencetosupportafindingofinsurerbadfaith.42Thecourtnotedthattheinsurerhadthreealternativestoavoidabadfaithfindingwhenrefusingtosettlewithmultipleclaimants:(1)theinsurercouldhavenotifiedallofthepotentialclaimantsthatthetotalclaimvalueexceededthepolicylimitsandcouldhaveinvitedthemtoparticipateinjointeffortstoreachanagreementastodistributionoftheavailablefunds;(2)theinsurer“couldhaveattemptedtosettleclaimswithinthepolicylimitsastheywerepresented”;or(3)theinsurer“couldhavepromptlyandingoodfaithcommencedaninterpleaderactionandpaiditspolicylimitsintothecourt.”43 The court statedthatthefirstalternativewasthepreferredmethodwheretheclaimantsareallreadilyavailableandlitigationcouldhavebeenavoided.44Unfortunately,theinsurerinSchroppdidnoneoftheseandfailedtofollowthroughwithanyreasonablesettlementattempts.

37 Id. at 482.38567P.2d1359(Kan.1977).39 Id.at1363.40 Id.41 Id.at1364.42 Id.at1367.43 Id.44 Id.


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The Schroppdecisionisgenerallyknownfortheprinciplethatinamultiple-claimantcase,wheretheinsurerhasknowledgeofalltheclaimantsandtheirrepresentatives,thedutyofgoodfaithcompelstheinsurertoattempttoarrangeaglobalresolutionofthecompetingclaimsbeforeattemptingtosettlewithindividualclaimantsorfilinganinterpleaderaction.

D. Voccio v. Reliance Insurance Co. Voccio v. Reliance Insurance Co.45involvedliabilitypolicylimitsof$25,000andanautomobileaccidentinwhichafifty-eight-year-oldwomanwaskilled,andaneleven-year-oldchildlostthelowerpartofbothofhislegs.Theinsurersettledwiththedecedent’sfamilyforone-halfofthepolicylimits($12,500).Theinjuredchildrefusedtoaccepttheremain-ing$12,500andobtainedanexcessverdict.Inthesubsequentbadfaithactionagainsttheinsurer,thetrialcourtgrantedj.n.o.v.infavoroftheinsurer.46 Onappeal,theFirstCircuit(applyingRhodeIslandlaw)affirmedthetrialcourt’sdeci-sioninfavoroftheinsurer.Indoingso,thecourtassertedthatthebadfaithplaintiffhadtoshowthatthe“50-50divisionoftheinsurancepolicyproceedswashighlyunreasonable,recklessorin‘badfaith’–anexceedinglydifficulttask.”47Theinsureralsorebuttedthebadfaithallegationsbecause(a)duringsettlementnegotiations,theinsurermetwithbothclaimantsandsoughtsuggestionsonhowtodividethepolicyproceeds;(b)counselforthechildrefusedtoparticipateinanyequitabledivisionoftheproceedsandconsistentlyrefusedtomakeanysettlementofferbelowthepolicylimits;and(c)thevalueofthedecedent’swrongfuldeathcasewassubstantial.48Iftheinsurerhadrefusedtosettlewiththedecedent,theinsuredcouldhavebeensubjecttotwoexcessjudgments.Accordingly,thecourtfoundthat“[u]nderthesecircumstances,itisdifficulttoseehowsplittingtheinsuranceproceedsandsettling[thedecedent’s]claimfor$12,500couldconstitutebadfaith.”49 The Vocciocourtapprovedthefirst-come-first-servedapproachandplacedtheburdenontheclaimanttoshowthattheinsurer’sdivisionofthepolicyproceedswas“highlyunrea-sonable,recklessorin‘badfaith.’”Thecourtindicatedthatthisburdenofproofwasverydifficult.Furthermore,thedecisiondemonstratesthatacourtwillexaminethereasonable-nessofaninsurer’sdecisiontosettleoneclaimtotheexclusionofanotherclaim.

45703F.2d1(1stCir.1983).46 Id. at 2.47 Id. at 3.48 Id.49 Id.


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E. More Recent Decisions Examining the Insurer’s Obligations in Multiple- Claimant Cases

1. Mirville v. Allstate Indemnity Co. Mirville v. Allstate Indemnity Co.50involvedliabilitypolicylimitsof$25,000perperson / $50,000peraccident,andatwo-caraccidentthatresultedininjuriestothetwoinsuredpassengersandthethreeoccupantsoftheclaimantvehicle.Theamountofdamagesclearlyexceeded theavailablepolicy limits.The two insuredpassengerspresentedpolicy limitdemands;however,theinsurerdidnotwanttosettleanyoftheclaimsuntilithadinforma-tionregardingtheinjuriesanddamagesoftheclaimantvehicleoccupants.51Subsequently,theinsurerpresentedthreeglobalsettlementoffersofthe$50,000policylimitstoallfiveclaimants.Thetwoinsuredpassengersrejectedtheglobalsettlementoffer,butthethreere-mainingclaimants(occupantsoftheclaimantvehicle)acceptedthe$50,000globalsettlementoffer.The$50,000wasapportionedbetweenthethreeoccupantsoftheclaimantvehicle.52 Thetwoinjuredpassengersfiledabadfaithaction,claimingtheinsurerhadactedinbadfaithbyfailingtosettletheirclaimswithinthepolicylimits.53TheUnitedStatesDistrictCourtfortheDistrictofKansasappliedNewYorklawanddeterminedthattheplaintiffshadfailedtoestablishabadfaithfailure-to-settleactionagainsttheinsurer.Inmakingthisdetermination,thecourtstatedasfollows:

AllstaterealizedfromveryearlyoninthiscasethatJosephMirville’s$50,000policylimitwouldbeexhausted.However,ratherthanjumpingintoasettlementwithMarieMirvilleandEclameneMesca,whichwouldhaveexhaustedthepolicylimitsandexposeditsinsuredtojudgmentsfromtheSargents,Allstateattemptedtoinvestigatethematterandtriedtoobtainasettlementwithallfiveoftheclaimantsforthe$50,000policylimit.Clearly,thiswouldhavebeenthebestpossiblesitua-tionforJosephMirville.AlthoughAllstatemayhaveactednegligently,whichwasnotanissuebeforethecourtandwillnotbedecided,theplaintiffshavefailedtoshowthatAllstateactedinbadfaithasthatcauseofactionisdefinedunderNewYorklaw.54

2. Farinas v. Florida Farm Bureau General Insurance Co. InFlorida,ifmultipleclaimsariseoutofoneaccident,theinsurermayexercisediscre-tioninhowitelectstosettletheclaims,anditmaychoosetosettlecertainclaimstotheexclusionofotherclaimsaslongasthedecisionisreasonableandinlinewiththeinsurer’s

5087F.Supp.2d1184(D.Kan.2000).51 Id. at 1188.52 Id.at1187.53 Id. at 1188.54 Id. at1192.


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dutyofgoodfaith.Farinas v. Florida Farm Bureau General Insurance Co.55discussesthegood-faithstandardforinsurerswhenhandlingclaimsinvolvingmultipleclaimantswhoarecompetingforinadequatepolicylimits. The Farinasdecisionarosefromanautomobileaccidentinwhichfiveyoungpeoplewerekilled,andsevenotherindividualswereinjured.Liabilitywasclear,andtheinsured’spolicylimitsof$100,000perclaimand$300,000peraccidentwere“plainlyinadequate.”56 Theinsurerpromptlyexhausteditspolicylimitsandsettledthreeclaims—theclaimoftheclaimantdriver(whowasseverelyinjured)andtwowrongfuldeathclaims. Theinsurerthenfiledanactionfordeclaratoryjudgmenttodeterminewhetherithadanyfurtherdutytodefenditsinsuredafterithadexhaustedthepolicylimits.Theaccidentvictimsandsurvivorsofthedeceasedvictimsintervenedandfiledathird-partybadfaithac-tion,allegingthattheinsurerhadhastilysettledthreeclaimswithoutregardfortheinsured’sinterestsand,asaresult,hadexposedtheinsuredtomultiplemilliondollarjudgments,whichseveralvictimshadalreadyobtained.57 Thetrialcourtgrantedsummaryjudgmentinfavoroftheinsurerrelyinguponestablishedlawthataninsurermaychoosehowtosettlemultipleclaims.Theappellatecourtreversedandheldthatsummaryjudgmentwasnotappropriatebecausewhethertheinsurerhadmetitsgoodfaithdutyandundertakenareasonableclaimssettlementstrategywerequestionsforthejury.58 The Farinascourtheldthataninsurer’s“goodfaithdutytotheinsuredrequiresittofullyinvestigateallclaimsarisingfromamultipleclaimaccident,keeptheinsuredinformedoftheclaimresolutionprocess,andminimizethemagnitudeofpossibleexcessjudgmentsagainsttheinsuredbyreasonedclaimsettlement.”59Thecourtalsoheldthataninsurerhasdiscretionregarding“howitelectstosettleclaims,andmayevenchoosetosettlecertainclaimstotheexclusionofothers.”60But,theinsurer’sdecisionmustbe“reasonableandinkeepingwith itsgoodfaithduty to the insured.”61Consequently,whether the insurer

55850So.2d555(Fla.Dist.Ct.App.2003).56 Id. at557.57 Id.at558.58 Id. at561.59 Id.;see alsoGen.Sec.Nat’lIns.Co.v.Marsh,303F.Supp.2d1321,1325(M.D.Fla.2004)(“Inordertosatisfytheserequirementstheinsurermust:(1)fullyinvestigateallclaimsarisingfromamultipleclaimaccident;(2)seektosettleasmanyclaimsaspossiblewithinthepolicylimit;(3)minimizethemagnitudeofpossibleexcessjudgmentsagainsttheinsuredbyreasonedclaimsettlement;and(4)keeptheinsuredinformedoftheclaimresolutionprocess.”)(citingFarinas, 850So.2dat560-561).60 Farinas,850So.2dat561.61 Id.


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“hasmetitsgoodfaithdutyand[has]undertakenareasonableclaimssettlementstrategyarequestionsforajurytodecide.”62IntheFarinas case,questionsforthejurytoresolveincluded

whether[theinsurer’s]quicksettlementwiththreeofthepossibleclaimantswasreasonable,whether[theinsurer’s]rejectionofglobalandothersettlementoptionscontemplated thebest interestsof the insured,whether [the insurer]adequatelyinvestigatedthefactsofalloftheclaims,andwhether[theinsurer]properlyre-jectedadviceoflegalcounselandsuggestedsettlementstrategiesproposedby[its]employees.63

Giventhefact-specificnatureofmultiple-claimantcases, thediscretionaccordedtoinsurerswhensettlingthesecases,andtheinherentlyambiguousnatureofthestandardofreasonableness,evenifaninsurersincerelybelievesthatithasactedingoodfaith,success-fulmotionsforsummaryjudgmentfortheinsurer,theinsured,orthevictimareextremelyunlikely.

3. Rinehart v. Shelter General Insurance Co. InRinehart v. Shelter General Insurance Co.,64theinsuredwasdrivingdrunkwhenhestruckanothervehicleandcausedseriousinjuriestohispassenger(Adkins)andthetwooccupantsoftheclaimantvehicle(IngramandKrohn).Theapplicablepolicylimitswere$50,000perperson/$100,000peraccident.TheattorneyrepresentingclaimantsIngramandKrohndemandedtenderof$50,000foreachofhisclients.65TheinsurerinformedIngramandKrohnthatitwaswillingtotenderthefullpolicylimits,butthattheywouldhavetoreachanagreementwithinsuredpassengerAdkinsastothedistributionoftheproceeds.ClaimantsIngramandKrohnrefusedtosharethepolicylimitswithAdkins.66 Adkinswasafriendoftheinsureddriver,andheneverretainedcounselorpresentedasettlementdemandtotheinsurer.Atsomepoint,theclaimrepresentativeadvisedAdkinsthat“therewasnothingmorehecoulddoforhim,”whichAdkinsunderstoodtomeanthattheinsurerwouldnotpaycompensationforhisinjuries.67Adkinsneverpresentedaclaim. CounselforIngramandKrohnpresentedanotherpolicylimitsdemand,andtheinsurerrespondedthatitwouldsettletheclaimsfortwo-thirdsofthetotalpolicylimits.68 Claim-

62 Id.63 Id.64261S.W.3d583(Mo.Ct.App.2008).65 Id.at588.66 Id. at589.67 Id. at588.68 Id.at589.


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antsIngramandKrohnfiledsuit,andexcessjudgmentswereenteredformorethan$3.5milliontoIngramandmorethan$1milliontoKrohn.Subsequently,theinsuredfiledabadfaithaction,andajuryawarded$6.25millionincompensatorydamagesand$3millioninpunitivedamages.69 Onappeal,theinsurerarguedthattherewasnoevidenceofbadfaithbecauseitssoleobjectivewastosettleallofthepotentialclaimswithinthepolicylimitsandtherebyprotecttheinsuredfromanypotentialpersonalliability.ThecourtdeterminedthattheevidencedemonstratedthattheinsurerdidnotintendtosettleAdkins’sclaim;therefore,ajurycouldinferthattheinsurerhadattemptedtoescapeitsfullcontractualobligationtotheinsuredbyonlyofferingtopaytwo-thirdsofthepolicylimits.70Furthermore,ajurycouldreasonablyfindthattheinsurerhadactedwithrecklessindifferencetotheinsured’sfinancialinterestsbyrefusingtosettlewithIngramandKrohnforthefullpolicylimits.71 The Rinehartdecisionwasnotarejectionofthefirst-to-settlerule.Instead,thedecisiondemonstratesthataninsurermustactfairly,reasonably,andingoodfaithwhenattemptingtosettlelessthanallofthepotentialclaims.Thesimpleexistenceofmultipleclaimantsinacasedoesnotprovideablanketexcusefortheinsurertoexhibitpoorclaimhandling.

4. McReynolds v. American Commerce Insurance Co. InMcReynolds v. American Commerce Insurance Co.,72theplaintiffsustainedsevereinjurieswhenhewasinvolvedinanautoaccidentwithaninsuredwhomaintainedliabilitylimitsof$25,000perperson.Themedicalcenterwheretheplaintiffreceivedtreatmentfiledalienfortheoutstandingmedicalbills,whichexceededthepolicylimits.Asaresult,theplaintiffmadeapolicylimitdemand,andthentheinsurertenderedareleaseanddraftmadepayabletotheplaintiffandthemedicalcenter.73Theplaintiffrejectedthesettlementcheckbasedupontheinclusionofthemedicalcenterandfiledsuitagainstthedefendant/insured.74 Becausethereappearedtobeadisputebetweentheplaintiffandthemedicalcenteroversatisfactionofthemedicallien,theinsurerfiledaninterpleaderactionandpaidthepolicylimits to the court.75Eventually,theinterpleaderwasdismissed,theunderlyingmatterwenttotrial,andtheplaintiffsecuredanexcessjudgmentfor$469,110.17.76 The plaintiff then

69 Id.70 Id. at596.71 Id. at597.72235P.3d278(Ariz.Ct.App.2010).73 Id.at279.74 Id.75 Id.76 Id.


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filedsuitagainsttheinsurer,allegingtheinsureractedinbadfaithandviolateditsdutyofgoodfaithandfairdealingbyfailingtogiveequalconsiderationtotheinsured’sinterests.77 Thetrialcourtgrantedsummaryjudgmentinfavoroftheinsurer,andtheCourtofAp-pealsofArizonaaffirmed.Onreview,thecourtaddressedtheissueof“whetheraninsurermaymeetitsdutytoequallyconsidersettlementoffers,whenpresentedwithmultipleclaimsinexcessofpolicylimits,bypromptlyandingoodfaithinterpleadingitspolicylimitsandcontinuingtoprovideadefensetoitsinsured.”78ThecourtnotedthatnopriorArizonacasehaddirectlysetforthastandardforaninsurerfacedwithmultipleclaimsinexcessofthepolicylimits.Thecourtheld,asamatterofArizonalaw,that

(1)theprompt,goodfaithfilingofaninterpleaderastoallknownclaimantswith(2)paymentofthepolicylimitsintothecourtand(3)thecontinuedprovisionofadefensefortheinsuredastoeachpendingclaim,actsasasafeharborforaninsureragainstabadfaithclaimforfailuretoproperlymanagethepolicylimits(orgiveequalconsiderationtosettlementoffers)whenmultipleclaimantsareinvolvedandtheexpectedclaimsareinexcessoftheapplicablepolicylimits.79

5. Scott v. Gallacher InScott v. Gallacher,80theplaintiffwasoneofthreeinjuredclaimantsinvolvedinanautomobileaccidentwheretheinsureddrivermaintainedaliabilitypolicyof$25,000perpersonand$50,000peraccident.Theinjuredplaintiff(Scott)remainedinacomafortwoweeksfollowingtheaccidentandsustainedafracturedankle,rib,andclavicle;alaceratedliver;andacollapsedlung.Healsoaccumulatedalmost$100,000inmedicalbills.81Pas-senger2accumulatedapproximately$37,000inmedicalbills,andPassenger3sustainedapproximately$8,000inmedicalbills.82

UponreceiptofademandforPassenger2,theinsurersettledtheclaimforthe$25,000perpersonpolicylimit.Thereafter,theinsurermadeaverbalofferoftheremainingpolicylimits($25,000)toplaintiffScott.Afternoresponsefromtheplaintiff’scounselanduponreceiptofarepresentationletterforPassenger3,theinsurerwithdrewtheoffertoplaintiffScott.The insurer then attempted to settle the two remaining claims for the remaining$25,000.83Aftertheplaintiffrejectedthatoffer,theinsurersettledtheclaimforPassenger3for$6,250.Theplaintifffiledsuitandobtainedanexcess judgment.The insurerpaid

77 Id.78 Id.79 Id. at 284.80No.10-P-209,2011WL93084(MassApp.Ct.Jan.11,2011).81 Id. at *1.82 Id.83 Id. at *2.


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$18,750inpartialsatisfactionofthatjudgmentandthenplaintiffbroughtsuitagainsttheinsurerallegingthattheinsurerengagedinunfairsettlementnegotiationswhenitresolvedthecasesonafirst-come-first-servedbasis. Onappeal,thecourtdeterminedthatthefirst-come-first-servedsettlementwasnotinviolationofthestate’sunfaircompetitionstatute.84Thecourtheldthat“[w]henmultipleclaimsonasinglepolicyexist,eachlikelyorcertaintoexceedthecoveragelimitation,aninsurerisentitledtoexerciseitsbusinessjudgmentinsettlingtheclaims,solongasitactsingoodfaith.”85Further,thecourtrecognizedthatthestatutedidnotrequireaninsurertoattempttoeffectuateaglobalsettlementwithallpotentialclaimants;therefore,theinsurerwasentitledtoexercisegoodfaithbusinessjudgmenttosettletheclaimsintheorderthattheywerepresented.86

6. DeMarco v. Travelers Insurance Co. InDeMarco v. Travelers Insurance Co.,87 theRhodeIslandSupremeCourtstatedthatwhenamotorvehicleaccidentresultsinmultiple,competingclaimsagainsttheinsured,andthetotalamountoftheclaimsexceedstheavailablepolicylimits,thecriticalquestionforthefact-finderiswhethertheinsurerdideverythingitreasonablycouldtominimizetheamountoftheinsured’spersonalliability.88Thecourtheldthat

whenaninsurerisfacedwithmultipleclaimantswithclaimsthatintheaggregateexceedthepolicylimits,theinsurerhasafiduciarydutytoengageintimelyandmeaningful settlement negotiations in a purposeful attempt to bring about settlement ofasmanyclaimsasispossible,suchthattheinsurerwilltherebyrelieveitsinsuredofasmuchoftheinsured’spotentialliabilityasisreasonablypossiblegiventhepolicylimitsandthesurroundingcircumstances.Inmeetingthisduty,theinsurermustnegotiateasiftherewerenopolicylimitsapplicabletotheclaimsandasiftheinsureralonewouldbeliablefortheentireamountofanyexcessjudgment.Theinsurermustexerciseitsbestprofessionaljudgmentthroughoutthisprocess,alwayskeepinginmindthebestinterestsofitsinsuredandthenecessityofminimizingitsinsured’spossibleeventualdirectliability....[I]nordertoshowthataninsurerhasviolateditsfiduciarydutyinamultipleclaimantcase,theinsured(orapartytowhomtherightsoftheinsuredhavebeenassigned)neednotdemonstratethattheinsureractedinbadfaithbutonlythattheinsurerdidnotactreasonablyandinitsinsured’sbestinterestsinlightofthesurroundingcircumstances.89

84 Id.85 Id.(citingPeckhamv.Cont’lCas.Ins.Co.,895F.2d830,835(1stCir.1990)).86 Id. 8726A.3d585(R.I.2011).88 Id. at613.89 Id.at613-14(citationsomitted).


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90 Id.at614.91 See generally Fed.R.Civ.Proc.22(1);28U.S.C.§1335(2006).Moststatesalsohaveaninterpleaderstatuteoracivilprocedureruleregardinginterpleader.

Thecourtnextexplainedhowafact-findershoulddecidewhethertheinsurerhasmetitsburden:

[I]twillbenecessarytoengageinacomprehensivefactualanalysis,takingintoac-countallofthesurroundingcircumstancesinaparticularcase.Suchcircumstanceswouldinclude,inter alia:thenumberofclaimants;therelativeextentofthedam-agessufferedbyeachclaimant;thetimeatwhichtheextentofthosedamageswasmadeknowntotheinsurer;theamountsoftheclaimants’settlementdemands;thewishesoftheinsured;thetimingandnatureoftheinsurer’sattemptsatnegotiatingasettlement;theperceivedlikelihoodoflitigationbeingcommencedbyaparticularclaimant;andtherelativewillingnessofthevariousclaimantstosettle.90

Ultimately,theDeMarco casewasremandedtothetrialcourtforfurtherproceedingsconsistentwiththecourt’sopinion.

iv.SuggeStionS to proMote gooD-Faith hanDling oF CaSeS

involving Multiple ClaiMantS anD inaDeQuate poliCy liMitS

Onethingthatcanbegleanedfromtheapplicablecaselawisthatthereisnoclear-cut“rightway”tohandleamultiple-claimantcasewherepolicylimitsareinadequate.However,therearestepsthataninsurercantaketohelpfulfillitsdutyofgoodfaithandfairdealingandtoreducepossibleexcessexposureto theinsured.Insomejurisdictions, theclaimsprofessional’sgoalshouldbetoextinguishalloftheinsured’sexposureand,failingthat,tominimizetheinsured’sexposurethroughthesettlementprocess.Inthosejurisdictions,thegoaloftheinsurer(inprotectingtheinterestsoftheinsured)istodistributethepolicypro-ceedsinsuchamannertoachievethegreatestpossiblereductionoftheinsured’sexposure.

A. Using Interpleader Actions for Fair and Equitable Distributions Interpleaderactionsallowapartywhopossessesfundstojoinmultipleclaimantsinasinglejudicialproceedingandhavethecourtdecidewhichclaimantsareentitledtothemoneyandhowitshouldbedisbursedamongthem.91Procedurally,interpleaderisfrequentlyavailabletoaninsurer.Byprovidingamechanismforforcingthepartiesintoasinglejudicialproceedinginwhichsettlementproceedscouldbedistributedamongtheclaimantsinafairandequitablefashion,aninterpleaderactionhasthepotentialtolimitaninsured’sexcessexposuretoclaimants.Inaninterpleaderproceeding,thecourtultimatelydistributespolicyproceedsinamannerthecourtdeemsappropriate.However,interpleaderrulesthemselves


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92 SeeSchwartzv.StateFarmFire&Cas.Co.,106Cal.Rptr.2d523(Ct.App.2001);Lehtov.AllstateIns.Co.,36Cal.Rptr.2d814(Ct.App.1994);Bowersv.StateFarmMut.Auto.Ins.Co.,460So.2d1288,1290(Ala.1984).Thecurrenttrendofthelawmakesitunlikelythattheinsurer’sdutytodefendwouldterminateuponinterpleaderofthepolicylimitswithacourt.See, e.g.,EmcascoIns.Co.v.Davis,753F.Supp.1458,1461(W.D.Ark.1990);Cont’lIns.Co.v.Burr,706A.2d499(Del.1998);AmericanStandardIns.Co.v.Basbagill,775N.E.2d255(Ill.App.Ct.2002);Stanleyv.Cobb,624F.Supp.536(E.D.Tenn.1986);Andersonv.U.S.Fid.&Guar.Co.,339S.E.2d660(Ga.Ct.App.1986).But see,CarolinaCas.Ins.Co.v.EstateofStuder,555F.Supp.2d972,987-88(S.D.Ind.2008)(findingthat,underIllinoisandIndianalaw,theinsurer’spaymentofthepolicylimitsintothecourt(withtheunderstandingandintentthatfundswillbedistributed)dischargesthedutytodefendupontheentryofajudgmentintheinterpleaderaction).93JonathanM.Stern,What’s An Insurer to Do? Multiple Claims and Insufficient Limits,For the DeFenSe,Sept.1999,at18.94McReynoldsv.Am.CommerceIns.Co., 235P.3d278,284(Ariz.Ct.App.2010). Afewcourtshaveheldthataninterpleaderactionpreventsaclaimantfromarguingthattheinsurerwasunwillingtopaythefullcoverage amount. SeeMonumentalLifeIns.Co.v.Lyons-Neder,140F.Supp.2d1265,1270(M.D.Ala.2001)(“Becausefilinganinterpleaderactionisequivalenttotheplaintiff’sadmittingthatitiswillingtopaythelegitimateclaimant,aninterpleadingstakeholdercannotlogicallybesubjectedtoaclaimallegingbadfaithrefusaltopay”);Tex.FarmersIns.Co.v.Soriano,844S.W.2d808,833(Tex.App.1992)(Biery,J.,concurring)(“Eventhoughinterpleadingofthefundswouldnotdischargethecarrierofitsresponsibilitytoprovideadefenseandotherwiseremaininvolveduntilthedispositionoftheclaims,itwouldcertainlybe per seevidenceofgoodfaithintentionsandwouldnegateanyinferencethatthecarrierwastryingtoincreaseitsprofitsbynotpayingthefullamountofcoverage.”),rev’d on other grounds,881S.W.2d312(Tex.1994).

almostneverconditionparticipationintheinterpleaderproceedingand/orparticipationintheactualdistributionofthepolicyproceedsuponacompleteandfullreleaseofclaimsagainsttheinsured.Inshort,interpleader,inandofitself,doesnotminimizeorextinguishtheinsured’sexposuretomultipleclaims;itsimplyprovidesameansof“fair”distributionofthepolicyproceedsfromtheclaimants’perspective.Thus,althoughtheactoffilinganinterpleaderactionmayconstituteevidenceofgoodfaith,theexistenceofaninterpleaderactionwillnotprotectorinsulatetheinsurerfromalaterbadfaithclaim.92Moreover,anearlyglobalsettlementofferwouldachievethesameresultasaninterpleaderaction.93 Nevertheless,insomejurisdictions,interpleadercanbeusedasatoolwhenattemptingtoeffectuatethebestpossiblesettlementamongmultipleclaimants.Asdiscussedabove,theCourtofAppealsofArizonarecentlyheldinMcReynoldsthat,whenpresentedwithmultipleclaimsinexcessofpolicylimits,aninsurermaymeetitsdutytoconsidersettlementoffersbypromptlyinterpleadingthepolicylimitsandcontinuingtoprovideadefensetoitsinsured.94Bybringingthepartiesintoasingleproceeding,theinsurercansometimescreatethebestforumforevaluatingandcomparingclaimsandnegotiatingwiththeparties.Thisisespeciallytrueinasituationwheresettlementeffortshavebeenunsuccessful,theclaimswillmaturetojudgmentataboutthesametime,andinterpleaderofthepolicylimitsmightachieveanequitabledistributionofthefunds.


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B. Other Approaches to Fulfill the Insurer’s Duty of Good Faith Mostjurisdictionsdonothavewell-developedlawwithrespecttohowaninsurershouldhandlecasesinvolvingmultipleclaimantsandinadequatepolicylimits.However,thecaselawsuggeststhattheinsurershouldexercisegoodorreasonablejudgmenttobestprotecttheinsuredfrompersonalexposure.Definitiverulesdonotexist.Nevertheless,wesuggestthefollowingguidelinesasastartingpointthatcanbemodifiedandexpandedtotakeintoaccounttheuniquefactsofaparticularcase.

1. ThoroughInvestigationandPromptEvaluationofClaims Obviously,aninsurerisnotinapositiontonegotiatethebestpossiblesettlementsforitsinsuredunlesstheinsurerhasinvestigatedandevaluatedtheclaimsthathavebeenassertedagainsttheinsured,aswellastheclaimstheinsureranticipateswillbeassertedagainsttheinsured.Apromptandthoroughinvestigationofeachclaimisessential.Generally,theinsurer’s investigation should include identifyingpotential claimants and assessing thenatureandextentoftheclaimants’injuriesanddamages.Theextentofthisinvestigationwilldependupontheparticularfactsandcircumstancesofeachcase. Onceaninvestigationhasbeenconducted,theinsurershouldattempttoascertainthesettlementvalueoftheclaims.Eachclaimshouldbeevaluatedonanindividualbasis,takingintoconsiderationwhetherthereisanycomparativenegligenceonthepartoftheclaimant.Theinsurershouldthenattempttoidentifytheclaimswiththegreatestpotential.Eventually,theinsurerwillutilizetheseevaluationsindevelopinganappropriatesettlementstrategy.Inmanyjurisdictions,thefocusofthesettlementstrategyshouldbetoachievethegreatestpossiblereductionoftheinsured’sexposure.

2. SettlementNegotiationstoExtinguishorMinimizeExposure Oncetheinsurerhasinvestigatedandevaluatedtheactualandpotentialclaims,itisnowinapositiontoattempttonegotiatesettlementswiththeclaimants.Onceagain,insomejurisdictions, thegoalof theclaimsprofessional inamultiple-claimant/excessexposuresituationistominimizeoreliminatetheinsured’sexposure.Therefore,unlesstheinsureriscertainthatallclaimscannotbesettledforthepolicylimits,considerationshouldbegiventofirstattemptingtonegotiateacompleteandfullsettlementofallclaimsforthepolicylimits.Oftenthismaybebestachievedbyconductingameetingwithallclaimantsandtheirattorneys.Duringthemeeting,anoffertosettleallclaimsforthepolicylimitscanbemadeandtheclaimants’inputand/oragreementonhowtodistributethepolicyproceedscanberequested. Incaseswheretheclaimantsarereluctanttoreachanagreementregardinghowtodis-tributethesettlementproceeds,itmaybeusefultopointoutthatiftheclaimantsareunabletoreachanagreement,theinsurerwillbeleftwithnochoicebuttonegotiatethebestpossiblesettlementsonanindividualbasis,possiblyexcludingsomeoftheclaimants.Alternatively,itmightbepossibletopersuadetheclaimantstoreachanagreementregardingdistributionofthesettlementproceedsbydraftingaplanforanequitabledistributionoftheproceeds


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andthenrefusingtosettlewithanyclaimantswhorefusetoaccepttheirshare.Obviously,therearepotentialrisksassociatedwiththisparticularstrategy.Claimantsmaybealienatedbytheinsurer’sposturingand,asaresult,mayrefusetonegotiatefurther. Ifattemptstoachieveacompleteandfullsettlementofallclaimsforthepolicylimitshavefailed,theinsurershouldconsidernegotiatingonanindividualorgroupbasistoachievethegreatestpossiblereductionoftheinsured’sexposure. Inmanyjurisdictions,theclaimspresentingthegreatestpotentialexposuretotheinsuredshouldbegivenprioritywithrespecttothesettlementprocess.Ordinarily,settlementofthelargestclaimswillresultinthebiggestreductionoftheinsured’spotentialexposure.Forexample,inacasewhereClaimantA’sclaimisvaluedat$20,000,ClaimantB’sclaimisvaluedat$50,000,andtheinsuredhas$10,000ofliabilitycoverage,thegoaloftheclaimsprofessionalistoattempttosettlethe$50,000claimpriortoattemptingtosettlethe$20,000claim(assumingthattheinsurer’sattemptstoobtainaglobalsettlementhavebeenunsuc-cessful). Itisimportanttokeepinmindthattherearenouniformguidelinesorrulestofollowinattemptingtominimizetheinsured’sexposure.Rulesvaryfromjurisdictiontojurisdiction.Thefactsofeachcaseandthetotalityofthecircumstanceswillalsovary.Therefore,whensettlingmultiple-claimant/excessexposurecases,acase-by-caseapproachisessential.

3. FrequentCommunicationwiththeInsured Goodcommunicationwiththeinsuredisimportantinmultiple-claimant/excessexpo-surecases.Assoonastheinsurerdeterminesthattheaggregateexposuremayexceedtheinsured’sliabilitycoverage,theinsuredshouldbenotified. Lettersconveyingthisinformationtotheinsuredarevaluablewhendocumentingthegoodfaithoftheinsurer.Developingagoodworkingrelationshipwiththeinsuredisalsohelpful.Considerhavingrepresentativesoftheinsurermeetwiththeinsuredtodiscussthesituationattheoutsetofthecase.Althoughthetopicsofdiscussionwillinpartdependuponthelawsofthejurisdiction,generallythefollowinginformationshouldbeconveyed:

(1) thereisapossibility/probabilitythatthevalueoftheclaimants’claimswillexceedthepolicylimits;

(2) theinsurerwillattempttoextinguishtheinsured’sexposureand,failingthat,minimizetheinsured’sexposurethroughsettlement;

(3) theinsurerwillkeeptheinsuredapprisedofmeaningfuldevelopmentsinthecaseincluding,butnotlimitedto,settlementdemandsandoffers;and

(4) the insuredhas theopportunity and right to retain and consultwithhispersonal attorney.

Oncealloftheclaimsassertedagainsttheinsuredhavebeeninvestigated,analyzedandevaluatedbytheinsurer,andtheinsurerhasformulatedasettlementstrategy,thisinforma-tionshouldbesharedwiththeinsured,too.Usuallytheinsurershouldadvisetheinsuredof


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thefollowinginformation:(1)theidentityoftheclaimants;(2)theevaluationstheinsurerhasplaceduponeachclaimant’scase;(3)thebasisfortheevaluations;and(4)thestrategytheinsurerintendstoutilizeinsettlingtheclaims,includinganexplanationofthepotentialbenefitsandrisksassociatedwiththesettlementstrategy.Copiesofmedicalrecordsandotherimportantreportsordocumentsmaybeprovidedtotheinsured. Assumingthattheinsuredhasnoobjectionstotheinsurer’ssettlementstrategy,thestrategyshouldbeimplemented.Theinsuredshouldbekeptinformedofthestatusofthesettlementnegotiations,aswellasanyothersignificantaspectofthesettlementstrategy. Oneof theobjectivesoffrequentandmeaningfulcommunicationswith the insuredistoprovidetheinsuredwithanopportunitytoparticipateintheevaluationoftheclaimsassertedagainsthimandthedevelopmentofasettlementstrategy.Ataminimum,frequentandmeaningfulcommunicationsprovidetheinsuredwithanopportunitytovoiceobjectionstotheinsurer’sevaluationsorsettlementstrategy. Insituationswheretheinsuredobjectstotheinsurer’sevaluationsorsettlementstrat-egy,theinsurershouldcarefullyconsidertheinsured’sobjections.Mostpoliciesprovidetheinsurerwiththeauthoritytocontrolthedefenseandsettlementofclaimsagainsttheinsured.Accordingly,usuallytheinsurerhastherighttoproceedwiththesettlementstrategyitdeemstobeappropriate,keepinginmindthatthegoalinmanyjurisdictionsistominimizetheinsured’sexposure.Eventhoughtheinsurerusuallyhastherighttocontrolsettlementstrategy,counselshouldcarefullyconsiderwhetherdeferringtothewishesoftheinsured,especiallyincaseswheretheinsuredissophisticatedandisreceivinglegaladvicefromhisorherownpersonalcounsel,isthebeststrategy.Iftheinsurerdoesdefertothewishesoftheinsured,theinsurershouldobtainorcreatewrittendocumentationthatthecarrierisdeferringtotheinsured’srequestsregardingsettlement.

4. CommunicationwithClaimants Atthepresenttime,insurersinmostjurisdictionsdonothaveadutytokeeptheclaim-antsapprisedofsettlementnegotiationswithotherclaimants.Nevertheless,counselshouldconsiderwhetherfrequentandmeaningfulcommunicationswithclaimantsandtheirattorneysareinthebestinterestsoftheinsured. Often,communicationswithclaimantsandtheirattorneysarepartofacompleteandthoroughinvestigationoftheclaimsassertedagainsttheinsured.Further,unlesssettlementdemandsarepropoundedbyclaimantsorsolicitedbytheinsurer, theinsurerisnotinapositiontomakeanevaluationofwhichsettlementswillminimizetheinsured’sexposure.Moresimply,onecannotnegotiatethebestsettlementswithoutfindingoutwhatsettlementproposalsareavailable.Last,butnotleast,byapprisingclaimantsofthestatusofsettle-mentnegotiationswithotherclaimants,claimantsmayreducetheirowndemandsforfearofbeingleftoutofadistributionofthesettlementproceeds.

5. DefenseofInsured Mostpoliciesprovidethat the insurer isnotrequiredtodefendits insuredoncetheinsurerhasexhaustedthepolicylimitsthroughthepaymentsofsettlementsofjudgments.


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Theenforceabilityoftheseprovisionsvariesfromstatetostate.Obviously,claimsagainsttheinsuredshouldbevigorouslydefendeduntilsuchtimeasthepolicyproceedshavebeenexhaustedthroughthepaymentofjudgmentsorsettlements.Doingsoiswisebecauseoneofthemostcommonbadfaithclaimsassertedinmultiple-claimant/excessexposurecasesisthataninsurerenteredintoinappropriatesettlementstoexpeditiouslyextinguishitsdutytodefend.Similarly,providingavigorousdefensewillnegateclaimsthattheinsurer’sdefenseoftheinsuredwaslaxorincompletebecausetheinsurerknewthatitwouldbeexhaustingthepolicylimitsintheimmediatefuture. Injurisdictionsthatenforceaninsurer’srighttoterminatethedefenseoftheinsureduponexhaustionofthepolicylimits,theinsurersometimesmaywanttoconsidercontinuingtodefendtheinsured.Thecontinueddefenseoftheinsuredmayextinguishclaimsthattheinsurerenteredintoill-advisedsettlementsofclaimsinordertoavoidthecostsofdefense.Also,thecontinueddefenseofanunsophisticatedinsuredwhohaslimitedfinancialresourceslessensthelikelihoodofacollusivelyhighconsentjudgmentoranexcessivelyhighdefaultjudgment.

v.ConCluSion

In1933,theSupremeCourtofErrorsofConnecticut(nowknownastheConnecticutSupremeCourt)explainedwhythereweresofewcasesandnostatutesdictatinghowaninsurermustdistributeinsuranceproceedseventhoughclaimsfromasingleaccidentexceedtheliabilitypolicylimitsquitefrequently.InBartlett v. Travelers Insurance Co.,95 the court statedasfollows:

Asmultipleclaimcasesarefrequentinalljurisdictionsandtheaggregatenum-bercannotbeotherthanverylarge,theabsenceofreportedcases...mustsignifya generally satisfactory result from the practice of insurers to settle such claims so farasexpedient.Also,althoughstatutoryregulationisthelogicalremedyforunjustorunsatisfactoryconditionsinsuchmatters,...theonlylegislationofwhichweareawarewhichtouchesthesubject-matterofmultipleclaimantsunderlimitedli-abilitypoliciesisaNewYorkstatute...whichineffectprovidesthattheamountofthebondrequiredtobefiledbyproprietorsofmotorvehiclesforhire...shallbeapportionedratablyamongcreditorsunderjudgmentsrecovereduponclaimsarisingoutofthesameaccident.Againstsuchadvantagesasthecoursetherebyprescribedmayaffordmustbesettheweightyconsiderations,abovereferredto,favoringamicablesettlementswithoutthenecessityofreductionofallsuchclaimstojudgment.Thefactthatsimilarlegislationhasnotbeenmoreextensivelyresorted

95167A.180,183-184(Conn.1933).


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toindicatesthatinthegeneralrunofcasesnosuchinjusticeasbetweenclaimantshasdevelopedthroughexerciseoftherightofsettlementastooutweightheobviousadvantages.

Nodoubt importantsafeguards insecuringfairsettlements,madewithdueregardtotheconflictinginterestsofseveralclaimants,consistintheinterestoftheinsurertominimizeitsownexpenditures,anditsdutytotheinsuredwhichatleastdemandsgoodfaithandintelligentaction.Theserestrictions,whichareinherentinthesituation,effectivelymilitateagainstfraud,collusion,orsimilarevils.96

Eventhoughinsufficientliabilityinsuranceformultipleclaimantsisaproblemthatpersists,insurerswhoseclaimsprofessionalssettleclaimsingoodfaithandwithintelligentactionwillcontinuetoavoidexposuretobadfaithclaims.Intelligentactionrequiresknowledgeofdecisionallawandcompanyinvestigation,communication,andsettlementnegotiationpoliciesthatareflexiblyappliedbaseduponthefactsofeachclaimandwiththewisdomofexperiencedcounsel.Ultimately,equitabledistributionsresult,badfaithclaimsdonotariseordecline,andinsurer’sexpendituresonlitigationarediminished.

96 Id.


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Best Practices for the Defense of Corporate Depositions

Thomas R. Jayne

i.introDuCtion

Short of trial, no part of discovery and trial preparation poses a greater risk to corporate clients or is more unnerving to defend than the corporate deposition. Designated witnesses speak “on behalf” of the corporation, and their statements have a weight and finality that make it difficult, if not impossible, to supplement or amend the corporation’s position. Tes-timony of a corporate designee on subjects specified in the notice constitutes an admission.1 Good opposing counsel use the corporate deposition to seek “sound bites” and to document a lack of knowledge rather than to seek information. While a corporate deposition provides counsel with an opportunity to fully understand and prepare defense strategies, the risks from not doing so adequately are high. Nearly every state has a rule permitting a corporate deposition, and most are similar to Rule 30(b)(6) of the Federal Rules of Civil Procedure:

[A] party may name as the deponent a public or private corporation . . . and must describe with reasonable particularity the matters for examination. The named organization must then designate one or more officers, directors, or managing agents, or designate other persons who consent to testify on its behalf. . . . The persons designated must testify about information known or reasonably available to the organization.2

1 See Diamond Triumph Auto Glass, Inc. v. Safelite Auto Glass, 441 F. Supp. 2d 695, 726 n.17 (M.D. Pa. 2006); Mitsui v. P.R.Water Res. Auth., 93 F.R.D. 62, 65-66 (D.P.R. 1981); Protective Nat’l Ins. Co. of Omaha v. Commonwealth Ins. Co., 137 F.R.D. 267, 271 (D. Neb. 1989). See also 23 am. Jur. 2d Depositions and Discovery § 4 (2012); 8a CharleS alan Wright et al., FeDeral praCtiCe anD proCeDure § 2103 (3d ed. 2012).2 F.R.C.P. 30(b)(6).

BeSt praCtiCeS For the DeFenSe oF Corporate DepoSitionS

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Thomas R. Jayne is Senior General Attorney for BNSF Rail-way Company. He is a native Missourian who graduated from Westminster College and the University of Missouri School of Law. After a federal court clerkship, Mr. Jayne joined the St. Louis office of Thompson Coburn LLC, where was a partner for many years. Mr. Jayne is a member of the State Bar of Texas.

This Article outlines the steps necessary to adequately prepare for and defend corporate depositions. Though this Article does not cover sanctions motions, you should be aware that corporate depositions provide a fertile ground for those motions. Your preparation should be “defensive” and anticipate such a conflict.3

ii.motion praCtiCe

The first step to responding to a Rule 30(b)(6) demand is to review the scope and speci-ficity of the notice. You should try to focus and narrow the list of topics through objections and negotiation. While you may not always be able to do so, the effort is almost always worthwhile. You must prepare the witness to testify regarding each matter described in the notice. If the description of subjects is general or vague, preparation can be difficult or impossible. While some courts may relieve the corporation of its obligation to designate a witness to testify on its behalf if the notice is not sufficiently specific, it is generally advis-able to raise the issue in advance of the deposition.4 If possible, list subjects as separately numbered items for ease of reference in the record during the deposition.

Practice Tip: Review the notice with the client before drafting objections. Know what is and what is not possible before going to war to limit the notice. This advice pertains to both the topics listed and documents requested.

3 See, e.g., EEOC v. Thorman & Wright Corp., 243 F.R.D. 426 (D. Kan. 2007).4 See Reed v. Bennett, 193 F.R.D. 689, 692 (D. Kan. 2000) (quashing a Rule 30(b)(6) notice after finding that the notice was overbroad and that the “defendant [could not] identify the outer limits of the areas of inquiry noticed”). See also Hi-Plains Elevator Mach., Inc. v. Mo. Cereal Processors, Inc., 571 S.W.2d 273, 276 (Mo. Ct. App. 1978) (concluding that under Rule 57.03(b)(4) of the Missouri Rules of Civil Procedure (a rule analogous to Rule 30(b)(6)), the corporation was not required to designate a witness when the notice did not adequately describe matters for examination).


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iii.DeSignating WitneSSeS

Selecting the proper people to speak on the corporation’s behalf and defining the role of multiple witnesses are critical steps in the process. Counsel must use good judgment and balance the person’s knowledge and experience against his or her ability as a witness. While it is often a safer course to select the most knowledgeable person, the person’s style and manner of testifying can be critical. If you have sufficient time to prepare the witness, a person with less historical knowledge but more ability as a witness may be a better choice to represent the corporation. Consider using consultants or retired employees to speak for the corporation if the person with the most facts is a poor witness. The witness must be or become knowledgeable about the subject matter.5 A corporation is generally not relieved of the obligation to provide a witness knowledgeable about the subject matter simply because the persons having such knowledge are no longer employed by the corporation or are deceased. In those instances, the corporation must prepare a designee to testify to the extent such information is reasonably available, whether from documents, former employees, or other sources.6 More than one witness is often needed where the notice presents multiple subjects.7 However, the witness need not be a corporate employee or director.8 The federal rules do not require the corporation to designate a person who has personal knowledge or who is most knowledgeable on the matters at issue.9 However, the person designated must be completely prepared to testify not only to his or her knowledge, but to all information that should be known to the corporation.10 In addition, state rules vary. For example, Rule 2025.230 of the California Code of Civil Procedure provides that “the deponent shall designate and produce at the deposition those of its officers, directors, managing agents, employees, or agents who are most qualified to testify on its behalf as to

5 Alexander v. FBI, 186 F.R.D. 137, 141 (D.D.C. 1998). 6 U.S. v. Taylor, 166 F.R.D. 356, 363 (M.D.N.C.) (explaining that the imposition of sanctions may be warranted because “producing an unprepared witness for deposition is tantamount to failure to appear”), aff’d 166 F.R.D. 367 (M.D.N.C. 1996). 7 Alexander, 186 F.R.D. at 141.8 See PPM Finance, Inc. v. Norandal USA, Inc. 392 F.3d 889, 894 (7th Cir. 2004).9 Sanders v. Circle K Corp., 137 F.R.D. 292, 294 (D. Ariz. 1991); Reed, 193 F.R.D. at 692. See also Lapenna v. Upjohn Co., 110 F.R.D. 15, 23 (E.D. Pa. 1986) (explaining it is not a discovery abuse to designate single employee concerning all testing of drug even though employee started employment after the drug received FDA approval).10 Alexander, 186 F.R.D. at 141. See also Buycks-Roberson v. Citibank Fed. Sav. Bank, 162 F.R.D. 338, 342-343 (N.D. Ill. 1995) (explaining sanctions may be warranted for failure to comply with rule where witness could testify only about policies and practices of one unit of the corporation and not other units); Protective Nat’l Ins. Co. of Omaha v. Commw. Ins. Co., 137 F.R.D. 267, 278 (D. Neb. 1989) (stating a corporation must make a “conscientious, good-faith” effort to designate persons having knowledge of the matters specified in the notice).


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those matters”11 and “Person Most Knowledgeable” depositions are common in that state. At least one court has permitted the designation of outside counsel as a witness,12 but this designation could lead to disqualification of counsel at trial. Although a designated witness may report a lack of “corporate memory” with respect to particular subjects, this report must be based on a reasonable investigation directed at both records and witnesses. Further, if the corporation wishes to assert a position with respect to such a subject, it should present testimony explaining its reliance on external facts.

Practice Tip: Witness selection is critical. If the topic is highly technical, you should probably favor a witness with more first-hand knowledge. If the topic is more general, err on the side of the strong witness. Unless state court rules prohibit you from doing so, fight any attempt by the other side to characterize your witness as the “person with most knowledge” about the noticed subject. Consider whether you can have one person testify to several of the categories. There are definite benefits to having fewer people to prepare and present even if presenting fewer witnesses means having to educate your witness in an area about which he or she might not have had much prior knowledge.

iV.FaCtual reSearCh – FinDing the anSWerS to the QueStionS

Preparing for a corporate deposition requires careful and complete research. Rule 30(b)(6) of the Federal Rules of Civil Procedure requires disclosure of discoverable information “reasonably available” to a party. Even where the listed topics are within the experience and expertise of your designated witness, you must conduct enough research to assure that the designated witness’s “knowledge” includes all of the corporation’s “knowledge.” This effort is even more critical where the designated witness has incomplete knowledge of the topics. A complete investigation will probably include locating and reviewing relevant documents, identifying and interviewing past and present employees with potential knowledge, search-ing relevant computer databases, locating stored computer files, and locating and reviewing previous testimony or discovery responses by the company. Often, employees and former employees suggest new avenues of research, and the process becomes more complete as it progresses. Be sure to build enough time into the process.

Practice Tip: Document your search efforts. Make a record of whom you interviewed and where you searched for documents. Log the amount of time expended and the number of calls made. You will be on stronger ground in defending your client’s position, particularly if little information was located.

11 Cal. Code of Civil Procedure § 2025.230 (West 2012) (emphasis added).12 Cartier v. Bertone Grp., Inc., 404 F. Supp. 2d 573, 574 (S.D.N.Y. 2005).


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V.WitneSS preparation

When preparing for the deposition, your goal is to prepare the witnesses to fully and completely answer questions within the scope of the notice.13 In addition to the usual depo-sition preparation advice, counsel should do all of the following:

lExplain to the witness that as the corporate designee, counsel represents him or her in the deposition;

lExplain the role of the deponent as a spokesperson. As part of that task, counsel must explain the difference between the personal knowledge and experience of the witness and her testimony based on documents, conversations, and other research; and

lGive a copy of the notice to the witness and highlight the topics about which the witness will testify. Explain that the notice will probably be the first exhibit at the deposition. Make sure the witness knows which topics belong to her and which will be covered by another witness.

Keep in mind that in federal court and in most state courts, notes made by a witness are discoverable if used by the witness to refresh her recollection if the court, in its discretion, determines that justice requires disclosure.14

Practice Tip: Consider having the witness bring a handwritten or typed set of notes to the deposition setting out his or her “findings” in response to each topic. Doing so gives counsel the opportunity to help shape the company response and gives the witness a reference document so the deposition isn’t a memory test. Opposing counsel often mark this document as an exhibit and use it as their deposition outline.

Vi.DeFenDing the DepoSitionS

The same rules that apply to other depositions also apply to objections made during a corporate deposition. Pay particular attention to two concepts, however. First, be careful to protect discussions with counsel and any investigations conducted at counsel’s direction in preparing for the deposition. To the extent that these subjects are protected (and they are not

13 See Protective Nat’l Ins. Co. 137 F.R.D. at 278.14 Fed. R. Evid. 612(a)(2).


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under some state rules), they will fall under the attorney-client communications privilege and work-product privilege. Second, corporate depositions often include questions argu-ably beyond the scope of the subjects described in the deposition notice. While some courts permit counsel to instruct a witness not to answer such questions,15 most courts require that an answer be permitted subject to the objection.16 Repeat the objection on the record each time the witness is asked a question outside of the scope of the notice.

Practice Tip: Know your local court customs and practices about objections. While objections can be useful to slow or stop an out-of-control opposing counsel, or to calm a panicked witness, some courts strictly limit objections. Those of you who practice in Texas are acutely aware of these limitations. Prepare for the possibility that most courts will permit questions outside the scope of the notice.

15 See Lapenna v. Upjohn Co., 110 F.R.D. 15, 20-23 (E.D. Pa. 1986) (declining to order corporate designee witness to answer question outside of the designation).16 See King v. Pratt & Whitney, 161 F.R.D. 475, 476 (S.D. Fla. 1995) (examining party not limited, and general deposition rules govern questions outside the scope of the notice). See also Cabot Corp. v. Yamulla Enters., Inc., 194 F.R.D. 499, 499 (M.D. Pa. 2000).


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Lessons from the Lorax: Jury Selection in Difficult Cases†

John R. MitchellJohn Hofstetter

Conor A. McLaughlin

i.introDuCtion

Many of us have read Dr. Seuss’s book The Lorax to our children before putting them to bed. The story is a whimsical parable about the virtues of environmentalism, and it features a variety of lovable characters: the eponymous Lorax – the squat, gnomish hero of the tale – who speaks on behalf of all plants and animals; the Brown Bar-ba-loots, who frolic and play in forests populated with colorful “Truffula” trees; and the graceful Humming-Fish, who merrily splash about in pristine rivers and lakes. But, of course, The Lorax has a villain: a mysterious man known as the Once-ler, who is the caricature of a robber-baron industrialist. In his single-minded quest to further his textile business, he deforests the world’s population of “Truffula” trees, displaces the Brown Bar-ba-loots from their woodland homes, and poisons the Humming-Fish with toxic sludge. If this Seussian tale actually unfolded in our own world, the Once-ler would garner a dreadful public image. Moreover, both he and his company likely would have to contend with legions of environmental and mass tort lawsuits. Given the Once-ler’s despicable reputation, securing a favorable jury on his behalf might seem impossible. Anunsympatheticclientcanmakethedifficultartofjuryselectionevenmorechallengingfor a defense lawyer. This Article utilizes The Lorax to illustrate strategies practitioners can use when selecting a jury to minimize the effects of adverse publicity, unfavorable opinions of clients, and challenging forums. It also will demonstrate that, with a well-conducted voir dire, even a cartoonish miscreant like the Once-ler can obtain a fair and impartial jury.

† Submitted by the authors on behalf of the FDCC Toxic Tort and Environmental Law section.

leSSonS From the lorax: Jury SeleCtion in DiFFiCult CaSeS

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John R. Mitchell is a partner in the Product Liability Litiga-tion, White-Collar Crime and Business Litigation practice groups at Thomson Hine, in Cleveland, Ohio. An experienced first-chair trial lawyer, he has extensive trial experience and has first-chaired many significant toxic tort and high-profile criminal matters in federal and state courts throughout the United States. Mr. Mitchell is a member of the Federation of Defense & Corporate Counsel, the International Association of Defense Counsel, the Federal Bar Association, and Defense Research Institute. He is a Life Member of the Judicial Confer-ence of the Eighth Judicial District and has been designated a Barrister by the John M. Manos Inns of Court. Mr. Mitchell

is a member of the Great Lakes Energy Development Task Force and the Judicial Selection Committee for the Cleveland Metropolitan Bar Association.

ii.StrategieS For Jury SeleCtion

A. Step One: Identify Potential Forms of Juror Bias Juror bias has been described as any “preconceived idea generated by life experience and social beliefs that accompanies the juror into the jury box.”1 It is axiomatic that juror bias can cause some jurors to ignore all evidence and decide a case on personal feelings alone.Itisthereforecrucialthatdefenseattorneysidentifywhatspecificviewsandbeliefsarelikelytopervadethejurypooltoprotectagainstharmfuljurorbiasandbenefitfromhelpful juror bias. Doing so will also assist defense attorneys in developing case themes and formulating questions for voir dire. Forexample,itisnosecretthatsomeindividualsviewcorporationsandtheirofficersina generally negative light. In The Lorax, the Once-ler is the CEO of a business that manufac-tures and sells “thneeds,” which “everyone, everyone, everyone needs”– frivolous garments crafted out of the silky leaves of “Truffula” trees.2 This business eventually becomes the Once-ler’s agent of destruction, wreaking havoc on the environment to the detriment of the story’s characters.

1 V. hale Starr & mark mCCormiCk, Jury SeleCtion § 8.04 (3d ed. 2000).2 Dr. SeuSS, the lorax 20 (1971).


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Given the Once-ler’s actions, it is easy to assume that a jury pool would despise him. Yet generally, unfavorable views regarding particular clients are much more nuanced and challenging to predict, particularly where your client is sued in an unfamiliar jurisdiction. Thankfully, there are tools practitioners can utilize to identify prevailing attitudes concern-ing their clients:

lCommunity attitude assessments are typically polls or surveys designed to “measur[e] attitudes or opinions [that] exist within a given community and [that] mayinfluencethewayindividualsrespondtonewinformationorevidence.”3

lDemographic records possess key information that can be used to predict com-munitymember viewpoints concerning specific issues.Census reports, citydirectories, and voting lists tend to be useful in providing background informa-tion.

lFocus groups are collections of individuals, usually from a targeted area. These groupsarebroughttogethertodiscusstheiropinionsaboutaspecificsubject.The opinions elicited can be used to gauge potential juror opinions.4

3 John Charles S. Pierce, Selecting the Perfect Jury: Use of Jury Consultants in Voir Dire, 14 law & pSyCh. reV. 167, 176 (1990). 4 See id. at 176-77.

John Hofstetter is an associate in the Product Liability Litigation practice group at Thompson Hine in Cleveland, Ohio. He focuses his practice on major tort litigation involv-ing automobiles, aviation components, and chemicals. Mr. Hofstetter received his J.D., summa cum laude, in 2011 from Cleveland-Marshall College of Law. During law school, Mr. Hofstetter clerked at the Ohio Attorney General’s Office, Con-sumer Protection Section and at the National Labor Relations Board. He also served as Articles Editor for the Cleveland State Law Review. Mr. Hofstetter is licensed to practice in the state of Ohio and before the United States District Court for the Northern District of Ohio.


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lJury information sheetsseekgeneralinformationregardingajuror’squalificationsfor service and usually contain at least some rudimentary information relevant to prevailing community attitudes.

Perhaps the defense attorney’s most valuable tool for discerning potential juror bias is the supplemental juror questionnaire. These detailed forms often are drafted by agreement with opposing counsel and submitted to the jury pool before jury selection. They can give a defense lawyer keen insights into each prospective juror’s thoughts and pre-conceived notions. Questionnaires are especially helpful in situations where the litigants have high name recognitionornotoriety.Eachsetofquestionsshouldbenarrowlytailoredtofitthespecificfacts of the case. In the Once-ler’s case, questions designed to “smoke-out” strong opinions or personal experiences regarding his company and corporations in general, and attitudes about environmental issues, deforestation, and toxic dumping are ideal. Supplemental juror questionnaires also can be used to explore issues that might be considered too probing or embarrassing if asked in front of the entire venire. Of course, directly questioning potential jurors enables the defense attorney to elicit biasandpotentiallysetupforcausechallenges.Thus,itisimportanttoremainflexibleandbe prepared to deal with unanticipated forms of bias.

Conor A. McLaughlin is an associate in the Business Litiga-tion and Product Liability practice groups at Thomson Hine, in Cleveland, Ohio. He handles a variety of litigation mat-ters, including commercial litigation, professional liability and banker and lender liability. He also represents major corporations in the defense of mass torts, toxic torts, putative class actions, employment-related torts, injuries to persons and property, and premises liability actions. Before joining Thompson Hine, Mr. McLaughlin clerked for the Honorable Alice M. Batchelder of the United States Court of Appeals for the Sixth Circuit. A graduate of Case Western Reserve University School of Law, Mr. McLaughlin received his J.D.,

cum laude, in 2007. He is a member of Order of the Coif. Mr. McLaughlin is a member of the State Bar of Ohio and is admitted to practice before the Sixth Circuit Court of Appeals and the U.S. District Courts for both the Northern and Southern Districts of Ohio. He is a member of Defense Research Institute and an associate in the John M. Manos Inn of Court. In 2012, Mr. McLaughlin was recognized as a “Rising Star” by Ohio Super Lawyers.


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B. Step Two: Determine the Characteristics of Your Ideal Juror and Your Nightmare Juror Onceadefenseattorneyhasidentifiedpotentialattitudesconcerninghisorherclient,thenextstepistoidentifytheidealjuror.Attorneysshouldcraftprofilesofboth“idealjurors”– hypothetical individuals highly receptive to their trial themes – and “nightmare jurors” – hypothetical individuals hostile to their trial message. Determining the ideal juror is even more vital in cases involving polarizing defendants because neutral jury pool members tend to be in short supply. Since the Once-ler is the CEO of a major corporation, his ideal juror would likely possess several characteristics. First, jurors with business experience are typically more sympathetic toward corporate defendants.5 In addition, jurors who are both educated and conservative tend to favor corporate executives in litigation.6 On the other hand, the Once-ler’s “night-mare juror” would, obviously, possess strong environmentalist views or an anti-capitalist outlook.7 Equallyimportantissteppingintotheotherside’sshoesandfiguringoutitsidealandnightmare jurors. They may be mirror opposites of yours, and they may not. Thinking about the strengths of the other side’s case, particularly from a juror’s perspective, is crucial. Given the facts in The Lorax, the Once-ler’s opponent would understandably focus on the environmental impact of the Thneed factories, including deforestation and loss of habitat and pollution. Althoughgeneralizationsareoftenhelpfulincraftingtheprofilesofidealandnightmarejurors, one should not place too much stock in stereotypes. Each potential juror ultimately must be evaluated based on his or her own unique characteristics. For example, although jurors who possess college and graduate-level degrees tend to favor corporate executives in litigation, highly educated individuals also are more likely sympathetic to pro-environ-mentalist themes.8 Thus, in the Once-ler case, relying on any one ideal juror characteristic could prove fatal.

5 Valerie P. Hans, The Jury’s Response to Business and Corporate Wrongdoing, 52 law & Contemp. probS. 177, 178 (1989). 6 See Robert A. Clifford, Selecting a Jury of Cynics, Believers, and Others, litig. newS (Dec. 2, 2011, 3:59 PM), http://apps.americanbar.org/litigation/litigationnews/trial_skills/tips-jury-selection.html (stating that “Pro-business people believe in personal responsibility and are defenders of corporate America. . . . They are informed, educated, and assertive on a jury.”).7 See Joseph J. Ortego & Peter S. Massaro, Defending Goliath: How to Represent a Corporation Before a Jury in a Weakened Economy, A.B.A. (2010), http://apps.americanbar.org/litigation/committees/corporate/docs/2010-cle-materials/02-corporate-america-jury-verdict/02a-defending-goliath.pdf.8 See Matthew E. Kahn, Demographic Change and the Demand for Environmental Regulation, 21 J. pol’y analySiS & mgmt. 45 (2002).

http://apps.americanbar.org/litigation/litigationnews/trial_skills/tips-jury-selection.html

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C. Step Three: Develop Your Theme The central idea of your case, your theme, will be the basis for your voir dire questions. A strong theme will aid in identifying both ideal and nightmare jurors. It is therefore vital that case themes are fully developed prior to jury selection. Try to make your case theme as accessible as possible. The more straightforward a theme is, the easier it will be for potential jurors to grasp it and divulge their opinions. Research also demonstrates that potential jurors are highly responsive to case themes that implicate their personal lives and community affairs.9 Therefore, it is prudent to craft a theme that drives home the local issues involved in a case. For instance, while potential jurors in the Once-ler case will certainly be thinking about the company’s impact on the environment, they also will be contemplating how that company affects their local economy. A large verdict against the Once-ler’s business might bankrupt the company, adversely affecting local jobs and dissuading other companies from doing business in the region. Ratherthanconfusingpotentialjurorswithanoverlyscientificortechnicalcasenar-rative during voir dire, the Once-ler’s attorney should develop a theme that humanizes the Once-ler’s company and tells the other side of the story. Doing so increases the likelihood that potential jurors are not only engaged in questioning, but are actually concerned about the issues at stake. Regardless of how strong the theme is, no case is perfect. An attorney must be prepared to address the problems in her case, thus establishing credibility with the potential jurors, testing the jurors’ responsiveness, and drawing out potentially biased jurors.

D. Step 4: Humanize Your Client Juryselectionisthedefenseattorney’sfirstchancetomoldaclient’simage.WhileclientsliketheOnce-lerandhiscompanymaymakethisadifficulttask,The Lorax demonstrates that all clients possess at least some qualities worth showcasing to potential jurors. For example, in the story, the Once-ler’s textile operation is a family business. The Once-ler operates the company with the help of dozens of “brothers, uncles, and aunts.”10 Thus, the defense attorney does not represent a faceless corporate behemoth, but a family and the people they employ – the workers who make the garments we all wear and the people who design them. Humanizing the company and focusing on the employees who work at the plant can negate the perception that the company is a faceless oligarchy focused solely onprofits.

9 Playing to the Hyper-Local Juror: Successfully Defending Toxic Tort Trials in the Gulf Region, Doar (Mar. 2011), http://www.doar.com/apps/uploads/enews_archive45_Mar-2011-newsletter.pdf.10 Dr. SeuSS, the lorax 29 (1971).

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WhiletheOnce-lerhimselfmaynotbethebestfaceforhiscompany,oneofhisem-ployees might be an outstanding corporate representative. Experts on defending unpopular corporations suggest “hav[ing] a pleasant and knowledgeable corporate representative present throughoutthecourseoftrial,beginningwithjuryselection.Whileitmaynotbepossibleto have a representative beside counsel during the length of the trial, it is important to have a corporate representative present during voir dire.”11 Some jurisdictions also allow attorneys to present mini-opening statements to the entire venire. These statements allow the litigants to give better context to jury selection. They also give the defense attorney another opportunity to frame the jury pool’s perception of his client. If you have the opportunity to present this sort of statement, take time to craft a statement that incorporates your case theme and educates the jurors about the central facts ofthecase.Alsoincludelanguagethataddressesanddeflectsanynegativepublicitythatmay accompany the client. Drive your theme home with potential jurors, and set the tone for the juror questioning. Finally, potential jurors tend to scrutinize the trial lawyers the same way they scrutinize the actual parties to the litigation. Therefore, it is also critical that defense attorneys them-selves project an honest, prepared, and professional demeanor during jury selection. And do not forget to divulge a little information about yourself, which may help gain the potential jurors’ trust and respect and make them more receptive to your trial themes. Remember, you are asking these people to share personal information in front of a group of strangers. It might help for you to do the same.

E. Step Five: Setting Up or Defending Against Cause Challenges Few jurors will enter The Lorax trial without any preconceived notions regarding the Once-ler’s company. As discussed above, those preconceived notions will be part of the puzzleofidentifyingtheidealandnightmarejurors.Thedifficulttaskfortheattorneywillbe drawing the jurors’ preconceived notions out and then formulating the questions to get the desired responses. As you all know, the best way to engage the jury in voir dire is to make them feel com-fortable. A juror openly expressing dislike for the Once-ler is a good thing, not a bad thing. You want to approach that juror respectfully and thank him for being honest, thus using that juror’s openness to make other jurors feel comfortable offering their opinions.12 Most people do not feel comfortable speaking in a public setting, and easing this discomfort can lower this inhibition. Arguing with the juror who expresses negative views about your client will cause other jurors, some of whom may be biased against the Once-ler, to keep quiet.

11 George S. McCall, Jury Bias and the Corporate Client: How to Personalize the Impersonal, FeD’n (2005), www.thefederation.org/documents/18%20-%20McCall.doc.12 Lisa Blue, Robert Hirschhorn & Macy Jaggers, Profile of a Perfect Juror, 47 S. tex. l. reV. 343, 347-48 (2005).

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WhenyouareconfrontedwithjurorswhoadmitabiasagainsttheOnce-ler,youhaveto decide whether the juror can be removed for cause or if you will have to use a peremp-tory challenge. Do not ask a nightmare juror whether he can be “fair and impartial” toward the Once-ler, because (unless he is trying to escape jury duty) the answer will likely be yes. People tend to view themselves as fair, and asking this question may obscure the juror’s truebias.Themore-effectivetechniqueisaskifthejurormighthaveadifficulttimeputtingaside his negative feelings toward the Once-ler. Use the fact that plaintiff’s counsel went firsttoyouradvantage,andaskthejurorif,basedonwhathe’sheard,hethinkstheOnce-lerprobablyisliable.Ifheconfirmsthathedoes,youhavelockedinacausechallenge. Thereverseistrueforyouridealjurors.Ifyouhaveidentifiedanidealjuror,chancesaretheplaintiff’scounselhasidentifiedher,whetherthroughpreparationorduringvoirdire. If the plaintiff’s counsel has drawn out her bias in favor of the Once-ler, you want to rehabilitateyourjuror.Askherquestionstoconfirmthatshewillfollowthelaw,thatshewill be fair and impartial, that she has not made up her mind yet, and that she will vote in favor of the plaintiff if the plaintiff meets his burden of proof.13 Your ideal juror has to agree to decide the case on the facts, the evidence, and the law as instructed by the judge. If she does, you have forced the plaintiff’s counsel to decide whether to use a peremptory challenge on a juror she thought she could exclude for cause. Inmanycircumstances,itmaybedifficulttogetajudgetoagreetoyourcausechallenge.Some judges are reluctant to exclude any but the most blatantly biased jurors for cause, and maybeevenmorereluctantinahigh-profiletoxictortcase.Nevertheless,settingupacausechallengeonanightmarejurorandinsulatingyourdreamjurormaybenefityouinthejuryroom. The other jurors will be more apt to listen to your ideal juror who has demonstrated her willingness to be fair, and less likely to listen to your nightmare juror who has basically concededthathewantedtofindtheOnce-lerliablefromthestart.

F. Step Six: Make Attorney-Conducted Voir Dire a Top Priority After drafting numerous witness outlines, reviewing countless depositions, developing opening statements, and accomplishing every other task necessary to prepare for trial, lawyers often are tempted to expend minimal time planning for voir dire. Coupled with the growing tendency of judges to downplay, limit, or conduct voir dire themselves, voir dire is often given short shrift. Yet attorney-conducted voir dire should be approached as a centerpiece of overall trial strategy. Be aware of your jurisdiction’s rules regarding attorney-conducted voir dire. Some jurisdictions simply do not allow it based on concerns of judicial economy. Other jurisdic-tions leave attorney-conducted voir dire within the sound discretion of the trial judge. Still, ask for it. There is no substitute to looking into the eyes of a prospective juror to gauge the sincerityofheranswers.Counselshould,atthefinalpretrial,gentlypushfortheabilitytoquestion jurors.

13 See id. at 353-55.


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If the judge in the Once-ler case is reluctant to allow attorney-conducted voir dire, try to persuade her otherwise. Research indicates that jurors are more likely to be candid and forthright when voir dire is conducted by the attorneys themselves rather than the judge.14 If the judge refuses to allow attorney-conducted voir dire, ask if she will at least allow the parties to submit supplemental juror questionnaires or allow the parties to suggest follow-up questions to the Court. Doing so will help the parties identify at least some of the more obvious forms of potential juror prejudice and bias.

iii.ConCluSion

Obtaining a favorable verdict on behalf of the Once-ler would be a challenging task even for the most experienced defense attorney. Determining who will hear the litigants’ stories is ultimately just as important as the strength of the stories themselves. As Dr. Seuss mightsay,equippedwiththeseoutlinedtechniques:“Willyousucceed?Yes,youwillindeed. (98 3/4% guaranteed.)”15

14 See Susan E. Jones, Judge-Versus Attorney-Conducted Voir Dire: An Empirical Investigation of Juror Candor, 11 law & hum. behaV. 131 (1987). 15 Dr. SeuSS, oh, the plaCeS you’ll go! 53 (1990).

PreemPtion in medical device litigation: What has changed since Riegel?

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Preemption in Medical Device Litigation:What Has Changed Since Riegel?†

Marisa A. TrasattiJhanelle A. Graham

i. introduction

According to the most recent economic census,1 the medical device industry has seen tremendous growth over the past few decades, with “approximately 5,300 medical device companies in the United States in 2007.”2 Medical device companies are located through-out the country, but states such as California, Florida, New York, Pennsylvania, Michigan, Massachusetts, Illinois, Minnesota and Georgia boast the highest number of medical device companies.3 “Major U.S. medical device companies include Medtronic®, GE Healthcare Technologies®, Johnson & Johnson®, St. Jude®, Boston Scientific®, Baxter®, Becton Dick-inson®, Beckman Coulter®, Abbott Labs® and Stryker Corporation®.”4

In 2007, the total value of industry shipments for medical devices manufactured in the United States was $98 billion and the annual growth in prior years was approximately six percent.5 The medical device industry has also provided significant employment opportuni-ties in the United States to more than 365,000 people in 2007 who earned an average annual

† Submitted by the authors on behalf of the FDCC Drug, Device and Biotechnology section. 1 U.S. Dep’t of Commerce, Bureau of the Census, Manufacturing: Industry Series: Detailed Statistics by Industry for the United States (2007).2 U.S. Dep’t of Commerce, Int’l Trade Admin., Medical Devices Industry Assessment 2, http://ita.doc.gov/td/health/medical%20device%20industry%20assessment%20final%20ii%203-24-10.pdf (last visited August 26, 2012).3 Id. at 3.4 Id.5 Id. at 2.

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Marisa A. Trasatti is a principal at Semmes, Bowen, and Semmes in the Baltimore, Maryland office. Her practice focuses primarily on civil litigation, with an emphasis on products liability litigation including cases involving drugs and medical devices. Ms. Trasatti has significant trial experi-ence in medical malpractice, insurance defense, and products liability cases. She has also defended locally and nationally several large corporations in connection with toxic tort litiga-tion. Ms. Trasatti has served on the Board of the Maryland Defense Counsel as the Young Lawyer Liaison to the Defense Research Institute and she is also Co-Chair of the Judicial Nominations Committee of the Maryland Defense Counsel.

Ms. Trasatti is a member of the Maryland Bar and she is admitted to practice before the Su-perior Court of the District of Columbia, the U.S. District Court for the District of Maryland, the U.S. Court of Appeals for the Fourth Circuit, and the United States Supreme Court. She is a member of the Federal Bar Association, Defense Research Institute, Maryland Defense Counsel, and the Federation of Defense & Corporate Counsel.

wage of approximately $60,000.6 “In addition, the U.S. holds a competitive advantage in several complementary industries upon which the medical device industry relies, namely microelectronics, telecommunications, instrumentation, biotechnology, and software devel-opment.”7

Not surprisingly, the widespread use of medical devices in the United States carries its share of risks and liabilities for device manufacturers and their insurers. Consumers often allege injuries caused by the malfunction of medical devices and request state law remedies, such as monetary damages. When these claims arise, device manufacturers are not defenseless. Rather, the preemption doctrine—rooted in the Supremacy Clause of the United States Constitution8—has been a viable defense to most state tort law claims against medical device manufacturers and applies when federal law expressly or impliedly conflicts with state provisions.9 Although the states traditionally regulated the marketing of medical devices, concerns about device safety in the 1970s prompted Congress to enact the Medical

6 Id.7 Id.8 u.s. const. art. VI, cl. 2. The preemption doctrine derives from the Supremacy Clause of the Constitu-tion which states that the “Constitution, and the Laws of the United States . . . shall be the supreme Law of the Land . . . , any Thing in the Constitution or Laws of any State to the Contrary notwithstanding.” Id. This means that any federal law—even a regulation of a federal agency—supersedes conflicting state law. 9 See infra Part III.


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Device Amendments of 1976 (“MDA”) to the Food, Drug, and Cosmetic Act (“FDCA”),10 which was aimed at ensuring the safety and effectiveness of devices for human use.11 The MDA continues to play an essential role in the federal regulation of medical devices, but the Act’s express preemption provision has been the cause of much debate and has resulted in its inconsistent application to case law. In 2008, the United States Supreme Court sought to clarify its preemption jurispru-dence, specifically as it related to devices that had gained premarket approval (otherwise known as “PMA devices”) by the Food and Drug Administration (“FDA”). The case, Riegel v. Medtronic, Inc.,12 held that the MDA preempted almost all state tort law claims against manufacturers of PMA devices. Nonetheless, Riegel excluded products that were introduced to the market via the FDA’s 510k process, a less rigorous process through which predicate devices are used to expedite FDA approval. Additionally, the decision failed to address the effect of preemption on common law claims that “parallel” federal violations.13

10 See infra Part II.11 Id.12 451 F.3d 104 (2d Cir. 2006), aff’d, 552 U.S. 312 (2008).13 See infra Part III.

Jhanelle A. Graham was a 2012 summer intern at Semmes, Bowen & Semmes in Baltimore, Maryland. She is a 2013 J.D. candidate at the University of Maryland Francis King Carey School of Law. Ms. Graham is a member of the Editorial Board of the Maryland Law Review, currently serving as Manuscripts Editor. She is a Dean’s Award recipient, a Monumental City Bar Foundation Scholar, Vice President of the Class of 2013, and Second Vice President of the Black Law Students Asso-ciation. Ms. Graham was an Asper Fellow for Chief Judge Robert M. Bell at the Court of Appeals of Maryland and a law clerk at the Legal Department of The Johns Hopkins Health System. She is a graduate of the College of Arts and Sciences

at the University of Pennsylvania and was a post-baccalaureate Intramural Research Train-ing Award Fellow at the National Institutes of Health. Ms. Graham is a student member of the Defense Research Institute (DRI).


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The post-Riegel world is one in which device manufacturers are typically insulated from tort liability. Most recently, in Stengel v. Medtronic, Inc.,14 the Ninth Circuit held that a state law failure-to-warn claim premised on FDA regulations was impliedly preempted according to the Supreme Court’s decision in Buckman v. Plaintiff’s Legal Committee.15 The decision in Stengel, when coupled with Riegel’s express preemption of state law claims that add to or change the duties of certain medical device manufacturers under the MDA, leaves little room for a plaintiff to state a cognizable state law cause of action against the manufacturer of a medical device that has been approved by the FDA’s premarket approval process. Thus, in an effort to reverse Riegel and permit consumers to bring state law liability suits against medical device companies with respect to PMA devices, representatives and senators of the United States Congress have lodged legislative attacks to alter or overturn Riegel—none of which have yet succeeded.16 The outlook is promising for medical device manufacturers. The majority of state courts have shown strong support for Riegel and its progeny, and the proposed legislation to re-verse this Supreme Court decision has garnered a relatively small fraction of co-sponsors in Congress.17 Although, to date, thirty-one states co-sponsored the bills in some capacity, only five states, the District of Columbia, and the Virgin Islands wholly support the proposed legislation.18 Thus, as it stands today, Riegel will continue to be controlling precedent for the foreseeable future. To be sure, however, device manufacturers would be well-advised to monitor the progress of legislative efforts to curtail or otherwise limit the pronouncements of Riegel, perhaps opting to aim lobbying efforts and/or settle pending disputes if the bills garner overwhelming support in the coming months.19 Retroactive enactment of the law, if passed as proposed, could prevent manufacturers from successfully asserting a preemption defense to several state tort claims and could cost millions of dollars in adverse verdicts. This Article provides an overview of current state and legislative developments after Riegel. It begins with a history of medical device regulation20 and highlights the recent case of Stengel v. Medtronic,21 in which the Ninth Circuit adhered closely to Riegel to hold state law claims preempted by the MDA.22 Stengel also highlights the uncertainty lower

14 676 F.3d 1159 (9th Cir. 2012), reh’g granted, 686 F.3d 1121 (9th Cir. 2012).15 531 U.S. 341, 344 (2001). 16 See infra Part V.17 Id.18 Id.19 See infra Part V (discussing In re: Medtronic, Inc., Sprint Fidelis Leads Products Liability Litigation, 592 F. Supp. 2d 1147 (D. Minn. 2009), aff’d, 623 F.3d 1200 (8th Cir. 2010)).20 See infra Part II.21 676 F.3d 1159 (9th Cir. 2012).22 See infra Part III.


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courts face in the wake of Riegel when determining which claims are encompassed in the Supreme Court’s 2008 holding. The result has been a variety of interpretations by state and federal courts as to the scope of Riegel in cases where federal and state laws pose similar requirements of device manufacturers.23 Finally, the Article concludes with current legisla-tive attempts to limit Riegel’s future application. As proposed legislation seeks to reverse Riegel and silence device manufacturers’ preemption defense, it appears that the majority of states are not inclined to abandon Riegel without opposition.24

ii.

the history oF medical device regulation

The Ninth Circuit’s decision in Stengel is reflective of the preemption framework crafted by the Supreme Court in prior cases. The Supreme Court has long held a presumption against preemption in areas of traditional state regulation, such that a “strong showing of a conflict [is necessary] to overcome the presumption that state and local regulation can constitutionally coexist with federal regulation.”25 Where state and federal laws do not conflict, state law is regarded as the controlling legal authority absent congressional intent to the contrary.26 But, when there is a conflict between state law and federal law and their objectives, the Court anchors its jurisprudence on the Supremacy Clause of the United States Constitution, which provides that the “Constitution, and the Laws of the United States . . . shall be the supreme Law of the Land . . . , any Thing in the Constitution or Laws of any State to the Contrary notwithstanding.”27 It is this constitutional provision that serves as the foundation for the preemption doctrine.28 The Court defines this “presumption against preemption” as an “assumption that the historic police powers of the States were not to be superseded by the Federal Act unless that was the clear and manifest purpose of Congress.”29 When Congress clearly expresses its

23 See infra Part IV; see also Samuel Raymond, Judicial Politics and Medical Device Preemption After Riegel, 5 n.y.u. J. l. & lib. 745, 766 (2010) (discussing the many factors that yield uncertain judicial rulings in medical device litigation after Riegel).24 See infra Part V.25 Id. (quoting Hillsborough County v. Automated Med. Lab., Inc., 471 U.S. 707, 716 (1985)).26 Traditionally, the Court has acknowledged a presumption against preemption in which “the historic police powers of the States [are] not to be superseded by . . . [a] Federal Act unless that [is] the clear and manifest purpose of Congress.” Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 230 (1947).27 u.s. const. art. VI, cl. 2.28 See Maryland v. Louisiana, 451 U.S. 725, 746 (1981) (asserting that conflicting state laws are “without effect”).29 Rice, 331 U.S. at 230.


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desire to preempt state law—known as “express preemption”—a court is required only to determine whether the relevant state provision is within the ambit of federal law.30 By con-trast, “implied preemption” arises where the relevant federal law does not explicitly indicate congressional intent to preempt a state law provision.31 The Court has limited the defense, however, to instances in which one body of law requires an act that the other prohibits.32 The FDA, a federal agency established in 1930 as a part of the U.S. Department of Health and Human Services (HHS),33 regulates products accounting for roughly twenty-five percent of the United States gross national product.34 The agency is tasked by Congress to “protect[] the public health by assuring the safety, efficacy, and security of . . . medical de-vices,”35 which it accomplishes by overseeing an exhaustive regulatory process for certain medical devices. In 1938, Congress enacted the FDCA to compel manufacturers to demonstrate the safety of new drugs and cosmetics before introducing these products to the consumer market.36 The introduction of new medical devices, however, was left largely for the states to supervise as they saw fit.37 In the 1960s and 1970s, as complex devices proliferated and some failed, tort claims against medical device manufacturers increased dramatically. Most notably, the Dalkon Shield intrauterine device, introduced in 1970, brought about numerous tort suits upon discovering the device’s association with serious infections, several deaths, and a large number of pregnancies.38 In response to the mounting consumer and regulatory con-cern, several states adopted regulatory measures to require premarket approval of medical devices.39 Congress also took action in 1976, enacting the Medical Device Amendments to

30 See 21 U.S.C. § 360k(a) (2006) (exemplifying an “express” preemption provision).31 La. Pub. Serv. Comm’n v. F.C.C., 476 U.S. 355 (1986); Capital Cities Cable, Inc. v. Crisp, 467 U.S. 691, (1984); Maryland v. Louisiana, 451 U.S. 725 (1981); Ray v. Atl. Richfield Co., 435 U.S. 151 (1978).32 See Wyeth v. Levine, 555 U.S. 555 (2009).33 This is the current name of the agency, which was previously referred to as the Department of Health, Education and Welfare until May 4, 1980. See HHS, Frequently Asked Questions, http://answers.hhs.gov/questions/3049/. 34 FDA, Operations in a Global Environment: Fiscal Year 2008, Ch. 9 (2008), http://www.fda.gov/down-loads/ICECI/EnforcementActions/EnforcementStory/UCM129822.pdf35 FDA, What We Do, http://www.fda.gov/AboutFDA/WhatWeDo/default.htm (last visited Aug. 26, 2012). 36 FDA, FDA History – Part II, The 1938 Food, Drug, and Cosmetic Act, http://www.fda.gov/AboutFDA/WhatWeDo/History/Origin/ucm054826.htm (last visited Aug. 26, 2012).37 Riegel v. Medtronic, Inc., 552 U.S. 312, 315 (2008).38 Id. (citing ronald J. bacigal, the limits oF litigation: the dalkon shield controversy 3 (1990)).39 See, e.g., 1970 Cal. Stats. ch. 1573, *316 §§ 26670–26693; see also Robert B. Leflar & Robert S. Adler, The Preemption Pentad: Federal Preemption of Products Liability Claims After Medtronic, 64 tenn. l. rev. 691, 703, n.66 (1997) (identifying thirteen state statutes governing medical devices as of 1976).

http://answers.hhs.gov/

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the FDCA,40 which was passed to ensure the safety and effectiveness of medical devices, including diagnostic products.41 The amendments required manufacturers to register with the FDA and follow quality control procedures.42 Additionally, the MDA required that some products have premarket approval by the FDA while others must meet performance standards before marketing.43

The MDA established three regulatory classes for medical devices, based on the degree of control necessary to assure that the various types of devices are safe and effective.44 The most regulated devices are Class III, which include devices that: (1) support or sustain human life, or (2) are of substantial importance in preventing impairment of human health, or (3) present a potential, unreasonable risk of illness or injury.45 Under Section 515 of the MDA, all devices placed into Class III are subject to premarket approval requirements, including a scientific review process to ensure their safety and effectiveness.46

Additionally, and most relevant to Stengel, the MDA includes an express preemption provision that states:

Except as provided in subsection (b) of this section, no State or political subdivision of a State may establish or continue in effect with respect to a device intended for human use any requirement—(1) which is different from, or in addition to, any requirement applicable under this chapter to the device, and(2) which relates to the safety or effectiveness of the device or to any other matter included in a requirement applicable to the device under this chapter.47

40 Pub. L. No. 94-295, 90 Stat. 539 (codified at 21 U.S.C. §§ 360c-360k (2006)).41 FDA, Medical Devices, http://www.fda.gov/medicaldevices/productsandmedicalprocedures/deviceap-provalsandclearances/pmaapprovals/default.htm (last visited Aug. 27, 2012).42 Id.43 Id.44 Id.45 Id. Class I devices are those that pose little threat to the safety of the consuming public. These devices, such as tongue depressors and acoustic chambers, are subject only to the Act’s generally applicable regu-lations. See 21 U.S.C.A. § 360c(a)(1)(A) (1999). Class II devices are those that pose enough of a safety hazard to require regulation beyond the general controls applicable to Class I devices. Class II devices, like tampons and oxygen masks, are consequently subject to device-specific special controls. See 21 U.S.C.A. § 360c(a)(1)(B) (1999). Examples of Class III devices that require premarket approval include replacement heart valves, silicone gel-filled breast implants, and implanted cerebella simulators. FDA, Medical Devices, http://www.fda.gov/medicaldevices/productsandmedicalprocedures/deviceapprovalsandclearances/pmaap-provals/default.htm (last visited Aug. 27, 2012). 46 Id.47 21 U.S.C. § 360k(a) (2006).

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The exception contained in subsection (b) permits the FDA to exempt some state and local requirements from preemption. The effect of this provision is that any state law that contradicts federal requirements governing safety and effectiveness of devices will be preempted by the MDA and will have no effect. Once a device has received premarket approval, the MDA prohibits the manufac-turer from making, without FDA permission, changes in design specifications, manufactur-ing processes, labeling, or any other attribute that would affect safety or effectiveness.48 If the manufacturer wishes to make such a change, it must submit and await FDA approval of an application for “supplemental premarket approval.”49 This is, essentially, the federal regulatory framework upon which all medical device litigation is based.

iii.the suPreme court’s PreemPtion JurisPrudence

in medical device litigation

A. Medtronic v. Lohr: State Tort Law Claims are Not Preempted by the MDA At the forefront of the Supreme Court’s preemption jurisprudence for medical devices is Medtronic v. Lohr,50 which held that state tort law claims of negligence and strict liability against a medical device manufacturer were not preempted under the MDA. In Lohr, the plaintiff Lora Lohr was equipped with a pacemaker made by Medtronic.51 Three years later, the pacemaker failed due to an alleged defect in the lead, requiring Lohr to undergo emer-gency surgery after experiencing a “complete heart block.”52 In 1994, Lohr and her husband filed an action in a Florida state court, alleging strict liability and negligence in Medtronic’s “duty to use reasonable care in the design, manufacture, assembly, and sale of the subject pacemaker,” and failure to warn or properly instruct Lohr or her physicians about the ten-dency of the pacemaker to fail.53 Medtronic removed the case to the United States District Court for the Middle District of Florida,54 where it filed a motion for summary judgment, arguing that both the negligence and strict liability claims were preempted by the MDA.55 The district court granted Medtronic’s motion and dismissed the Lohrs’ claims on grounds of preemption.

48 21 U.S.C. § 360e(d)(6)(A)(i) (2006).49 21 U.S.C. § 360e(d)(6) (2006); 21 C.F.R § 814.39(c) (2012).50 518 U.S. 470 (1996).51 Id. at 480.52 Id. at 481.53 Id.54 Lohr v. Medtronic, Inc., No. 93–482–CIV–J–20 (M.D. Fla. 1994).55 Id.


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The Court of Appeals for the Eleventh Circuit affirmed the district court’s judgment in part and reversed in part, holding that the Lohrs’ negligent manufacture and failure to warn claims were preempted, but the negligent design and strict liability claims were not preempted.56 Both parties sought review by the Supreme Court, and the Court granted cer-tiorari. In an opinion delivered by Justice Stevens, the Court reversed the Eleventh Circuit’s decision insofar as it held that any of the claims were preempted, and affirmed the decision with respect to the claims that were not held to be preempted. Unanimously, the Court held: (1) the MDA does not preempt state or local requirements that are equal to, or substantially identical to, requirements imposed under federal law; and (2) the Lohrs’ state law defective design claims were not preempted despite federal approval based on substantial equivalency.57 In a separate 5-4 vote, the Court held that: (1) the state law claims were not preempted to the extent that they alleged that the manufacturer negligently failed to comply with duties equal to, or substantially identical to, federal requirements; and (2) the state law claims based on allegedly defective labeling and marketing were not preempted.58 Justice Stevens reasoned that the MDA was not intended to preempt “traditional common-law remedies against manufacturers and distributors of defective devices,” as long as they paralleled federal requirements.59

Although Lohr clearly indicated that state tort law claims against a medical device manufacturer would no longer be preempted, it left open the possibility that a majority of the justices would be predisposed to find design, manufacturing, and labeling claims preempted for a medical device that gained FDA premarket approval. As the second of three opinions in Lohr, Justice Breyer concurred with the Court’s judgment but opined that the MDA of 1976 “will sometimes preempt a state-law tort suit,”60 although he did not articulate the circum-stances under which such preemption could be expected. Justices O’Connor, Thomas, and Scalia together issued an opinion concurring in part and dissenting in part, concluding that “state common-law damages actions do impose ‘requirements’ and are therefore pre-empted where such requirements would differ from those imposed by the FDCA.”61 The lack of clear guidance by the Lohr Court left a sea of confusion in its wake, evidenced by the fact that several state and federal courts declined to extend Lohr to the cases before them.62

56 Lohr v. Medtronic Inc., 56 F.3d 1335, 1338 (11th Cir. 1995).57 Lohr, 518 U.S. at 471.58 Id. 59 Id. at 491.60 Id. at 504 (Breyer, J., concurring in part and concurring in judgment).61 Id. at 509 (O’Connor, J., concurring in part, dissenting in part).62 See, e.g., Anderson v. Dow Agrosciences LLC, 262 F. Supp. 2d 1280, 1287 (W.D. Okla. 2003); Martin v. Medtronic, Inc. 254 F.3d 573, 575 (5th Cir. 2001); In re Orthopedic Bone Screw Products Liability Liti-gation, 193 F.3d 781, 791 (3d Cir. 1999); Weiland v. Telectronics Pacing Systems, Inc., 721 N.E.2d 1149, 1151 (Ill. 1999); Carey v. Shiley, Inc., 32 F. Supp. 2d 1093, 1102 (S.D. Iowa, 1998); Isbell v. Medtronic, Inc., 97 F. Supp. 2d 849, 853, (W.D. Tenn. 1998); Salazar v. Medtronic, Inc., 1997 WL 1704284, at *2 (S.D. Tex. 1997).


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The Seventh Circuit decision in McMullen63 provided greater guidance for medical device cases involving preemption of “parallel” state and federal claims. In McMullen, the United States Court of Appeals for the Seventh Circuit defined “parallel” violations as follows:

In order for a state requirement to be parallel to a federal requirement, and thus not expressly preempted under §360k(a), the plaintiff must show that the require-ments are “genuinely equivalent.” State and federal requirements are not genuinely equivalent if a manufacturer could be held liable under the state law without having violated the federal law.64

McMullen became persuasive authority in the three years following the Seventh Circuit’s decision, due to the absence of Supreme Court precedent addressing the issue of parallel claims in device litigation. Many hoped that the Court would seize the opportunity to clarify the scope of preemption for devices that had gained premarket FDA approval, especially when the plaintiff alleged violations of state and federal law. The Supreme Court’s subse-quent holding in Riegel v. Medtronic would provide a clearer framework upon which future medical device preemption decisions were modeled. Yet, Riegel left state courts longing for greater instruction in the scope of application of preemption doctrine when state and federal laws were not in conflict.

b. Riegel v. Medtronic: A Return to Preemption in Medical Device Litigation In 2008, the Supreme Court decided the seminal case of Riegel v. Medtronic, Inc.,65 holding that the preemption clause of the Medical Device Amendment bars state common law claims that challenge the effectiveness or safety of a medical device marketed in a form that received premarket approval from the FDA.66 In that case, Charles Riegel underwent coronary angioplasty surgery, during which his doctor inserted the Evergreen Balloon Catheter® into Riegel’s coronary artery in an attempt to dilate the artery.67 The device’s label-ing, however, stated that use was contraindicated for patients, such as Riegel, with diffuse or calcified stenoses, and it warned that the catheter should not be inflated beyond its rated burst pressure of eight atmospheres.68 Nonetheless, Riegel’s doctor inflated the catheter five times, to a pressure of ten atmospheres, and on its fifth inflation, the catheter ruptured.69

63 McMullen v. Medtronic, Inc., 421 F.3d 482, 489 (7th Cir. 2005), cert. denied, 547 U.S. 1003 (2006). 64 Id. at 489 (citing Bates v. Dow Agrosciences LLC, 544 U.S. 431, 454 (2005)).65 552 U.S. 312, 312 (2008).66 Id. 67 Id. at 320.68 Id. 69 Id.


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Riegel subsequently developed a heart block, was placed on life support, and underwent emergency coronary bypass surgery.70 In April 1999, Riegel and his wife brought a lawsuit against Medtronic in the United States District Court for the Northern District of New York, alleging that Medtronic’s catheter was designed, labeled, and manufactured in a manner that violated New York common law, and that these defects caused Riegel to suffer severe and permanent injuries.71 The district court held that the MDA preempted the Riegels’ claims of strict liability; breach of implied warranty; and negligence in the design, testing, inspection, distribution, labeling, market-ing, and sale of the catheter, as well as their claim of negligent manufacturing insofar as the claim was not premised on the theory that Medtronic had violated federal law.72 The Second Circuit affirmed.73

The Supreme Court granted certiorari to determine whether the Riegels’ state law claims were expressly preempted by the MDA. The Court stated that the federal government has established “requirement[s] applicable . . . to” Medtronic’s catheter within the meaning of Section 360k(a)(1) of the MDA.74 Citing to Lohr,75 the Court noted that the MDA’s pre-emption provision was “substantially informed” by an FDA regulation,76 which says that state requirements are preempted only when the FDA “has established specific counterpart regulations or there are other specific requirements applicable to a particular device” un-der federal law.77 The Court further explained that premarket approval imposes “specific requirements applicable to a particular device,” and the FDA requires that a device that has received premarket approval must be marketed without significant deviations from the specifications in the device’s approval application.78 Because the FDA had determined that Medtronic’s device specifications provided a reasonable assurance of safety and effective-ness, the Supreme Court held that the Riegels’ common law claims were preempted because they were “based upon New York ‘requirement[s]’ with respect to Medtronic’s catheter that [were] ‘different from, or in addition to’ the federal [requirements and they also related] to safety and effectiveness.”79 Notably, the Court declined to address Riegel’s argument that the lawsuit raised “parallel” claims that were not preempted by Section 360k under Lohr.80

70 Id.71 Id.72 Id. at 312.73 Riegel v. Medtronic, Inc., 451 F.3d 104, 104 (2d Cir. 2006).74 Riegel, 552 U.S. at 312.75 518 U.S. 470 (1996).76 21 CFR § 808.1(d) (2012).77 Id.78 Riegel, 552 U.S. at 313.79 Id.80 Id.


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C. Medical Device Preemption Cases Post-Riegel After Riegel, the question as to whether premarket approval device manufacturers are protected against state claims by preemption was resoundingly answered in the affirmative. Nonetheless, the issue of “parallel” claims, which was raised in Judge Noonan’s Stengel dis-sent, has not been definitively resolved by the Supreme Court. In Riegel, the Court explicitly declined to address the issue of parallel claims and state remedies, primarily focusing its attention on Medtronic’s compliance with FDA regulations. Without further guidance, deci-sions by state courts concerning the application of preemption doctrine to “parallel” violations of federal and state law varied widely. Two views on the scope of federal preemption have emerged since Riegel: one that favors a broad reading of permissible “parallel” tort claims (a more liberal standard), and another that defers to the FDA’s premarket approval process (a more restrictive standard in favor of preemption). The first is exemplified by an Indiana federal court case, Hofts v. Howmedica.81 In Hofts, the United States District Court for the Southern District of Indiana held that the MDA does not prevent a state from providing a damages remedy for claims premised on a violation of the FDCA.82 The court declined “to stretch Riegel beyond recognition by transforming its protection for FDA-approved devices that comply with federal law into a grant of civil im-munity for FDA-approved devices that violate federal law.”83 On this basis, the district court held that the plaintiff could pursue civil claims against Howmedica based on theories that Howmedica failed to comply with federal requirements for manufacturing the replacement hip joint implanted in the plaintiff.84 Therefore, according to the broad reading of permis-sible “parallel” tort claims in Hofts and its limited application of Riegel, a medical device manufacturer could be liable under state tort law for any departure from its premarket ap-proval. That is, under Hofts, common law tort claims that were presumed to be preempted by Riegel—such as strict liability and implied warranties—were allowed to proceed. Other courts have avoided a restrictive application of Riegel to the cases before them. For example, in O’Shea v. Cordis Corporation,85 a Florida circuit court held that true “paral-lel” violation claims, including claims of unauthorized promotion, were not preempted. In Texas, a district court held that the plaintiff’s strict liability and implied warranty claims that the manufacturer sold an adulterated cochlear ear device were not preempted under Riegel.86

81 597 F. Supp. 2d 830 (S.D. Ind. 2009).82 Id. at 832.83 Id.84 Id. at 832-33.85 2008 WL 3139428 (Fla. Cir. May 19, 2008), mandamus denied, 24 So. 3d (Fla. App. 2009). 86 Purcel v. Advanced Bionics Corp., 2008 WL 3874713 (N.D. Tex. Aug. 13, 2008) (adding that the FDA had previously determined that the manufacturer violated FDA’s “Good Manufacturing Practices” require-ments).


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The New York cases of Horowitz v. Stryker Corporation87 and Mitaro v. Medtronic, Inc.88 attempted to classify the state tort claims that qualified as “parallel” violations of federal law, concluding that manufacturing defect claims were presumed to be “parallel” claims and were not preempted.89 Some state courts defined “parallel” violations as those claims involving conduct “forbidden” by the FDCA,90 while others required that the plaintiff spe-cifically plead FDCA violations to merit such consideration by the court.91 Still, after Riegel, the vast majority of state and federal courts have ruled in favor of device manufacturers on grounds of preemption when state tort claims were at issue.92 Although manufacturers applauded the Supreme Court’s decision in Riegel and implored state courts to rule accordingly, plaintiffs’ attorneys, consumer groups,93 and professional organizations94 sought legislative means of reversing the precedential decision. Despite opposition from

87 613 F. Supp. 2d 271 (E.D.N.Y. Feb. 20, 2009). 88 886 N.Y.S. 2d 71, 2009 WL 1272398 (Sup. Ct. 2009).89 Id.; see also Rollins v. St. Jude Medical, 583 F. Supp. 2d 790 (W.D. La. 2008) (finding that manufactur-ing defect claim based on product recall was not preempted).90 Riley v. Cordis Corp., 625 F. Supp. 2d 769 (D. Minn. 2009). 91 See, e.g., Anthony v. Stryker Corp., 2010 WL 1387790 (N.D. Ohio Mar. 31, 2010) (finding that general-ized manufacturing defect allegations that do not mention FDCA violations cannot be recast as parallel violation claims); Kallal v. Ciba Vision Corp., 2010 WL 2330365 (N.D. Ill. June 9, 2010) (stating that a parallel violation claim that Defendant violated FDA-imposed standard was sufficiently pleaded); Gelber v. Stryker Corp., 752 F. Supp. 2d 328 (S.D.N.Y. 2010) (stating that Plaintiff must plead a “device-specific” violation and causation by the violation but failed to sufficiently plead violation of FDA manufacturing requirements with any detail); Horowitz v. Stryker Corp., 613 F. Supp. 2d 271 (E.D.N.Y. 2009) (requiring that a plaintiff must plead the way in which a particular violation caused injury); Troutman v. Curtis, 185 P.3d 930 (Kan. 2008) (concluding that Plaintiff barely pleaded, and failed to prove, any “parallel” violation claims against manufacturer of suturing device).92 E.g., Duggan v. Medtronic, Inc., 840 F. Supp. 2d 466 (D. Mass. 2012); Stevens v. Pacesetter, Inc., 2008 WL 2637417 (D.S.C. April 1, 2008); Despain v. Bradburn, 282 S.W.3d 814 (Ark. 2008); Mattingly v. Hub-bard, 2008 WL 3895381 (Ky. Cir. July 30, 2008); McCutcheon v. Zimmer Holdings, Inc., 586 F. Supp. 2d 917 (N.D. Ill. 2008); Parker v. Stryker Corp., 584 F. Supp. 2d 1298 (D. Colo. 2008); Lake v. Kardjian, 874 N.Y.S.2d 751 (Sup. Ct. 2008).93 Supporting consumer groups include the National Association of Consumer Advocates, Public Citizen, National Consumers League, Consumers Union, and the Consumer Federation of America, among others. http://www.opencongress.org/bill/111-h1346/show.94 Supporting organizations include the American Bar Association, National Organization for Women, New York Times, American Association for Justice, Medical Device Safety Institute and the New England Journal of Medicine. http://www.opencongress.org/bill/111-h1346/show.

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several well-established device manufacturing companies95 and associations,96 there have been efforts by the federal legislature to curtail the application of Riegel in future cases.

iv.PreemPtion in the ninth circuit:

Stengel v. MedtRonic

In 2000, Richard Stengel had a SynchroMed EL Pump® and intrathecal catheter surgi-cally implanted in his abdomen and spine, respectively, to infuse prescription medication into his intrathecal spinal cavity to help control severe pain.97 The pain pump and catheter were manufactured by Medtronic Incorporated and approved by the FDA in 1999.98 In 2005, Stengel began experiencing ascending paralysis in his lower extremities caused by a granuloma (a type of inflammation) in his spine that had formed at the tip of the catheter.99 Stengel’s doctors surgically removed the pain pump, catheter, and most of the granuloma, but the surgery was too late to prevent the granuloma from causing permanent paralysis of Stengel’s lower extremities.100 Stengel and his wife sued Medtronic in the United States District Court for the District of Arizona, alleging negligence, breaches of express and implied warranties, and strict li-ability.101 The Stengels later amended their complaint to re-allege the four claims under the newly-proffered theory that Stengel’s injury was caused by Medtronic’s failure to properly evaluate complaints about the pump and its failure to report information to the FDA, as was required by FDA regulations.102 Specifically, the Stengels contended that if Medtronic had complied with the FDA regulations, Medtronic would have warned physicians about the newly-discovered danger that the pump might cause inflammation, which would have al-lowed a quicker diagnosis of Stengel’s symptoms and prevented his paralysis.103 In response, Medtronic argued that the Stengels’ state law claims were barred by the express preemption provision of the FDCA, which provides, in relevant part:

95 The list of opposing manufacturers is extensive, and includes: Eli Lilly and Company, Bayer, Abbott, GE Healthcare, Johnson and Johnson, Medtronic, Inc., Roche Diagnostics, and St. Jude Medical, Inc. http://www.opencongress.org/bill/111-h1346/show.96 These associations include: Advanced Medical Technology Association, National Association of Manu-facturers, American Health Care Association, American Insurance Association, and the Medical Device Manufacturers Association. http://www.opencongress.org/bill/111-h1346/show. The bill is also opposed by the United States Chamber of Commerce. Id.97 Stengel v. Medtronic, Inc., 676 F.3d 1159, 1160–61 (2012).98 Id. 99 Id. at 1161.100 Id. 101 Id. 102 Id. 103 Id.





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[N]o State or political subdivision of a State may establish or continue in effect with respect to a device intended for human use any requirement (1) which is dif-ferent from, or in addition to, any requirement applicable under this chapter to the device, and (2) which relates to the safety or effectiveness of the device or to any other matter included in a requirement applicable to the device under this chapter.104

The district court found that the Stengels’ state law claims were expressly preempted by the FDCA, and denied the Stengels’ motion for leave to amend on the ground that the new “failure-to-warn” claim was impliedly preempted.105 First, the trial court cited Riegel v. Medtronic, Inc.,106 in which the Supreme Court addressed the meaning of the FDCA express preemption provision and held that to the extent a state common law duty imposes requirements “different from, or in addition to” the requirements imposed by the FDCA, those state common law duties are expressly preempted by § 360k(a).107 Applying Riegel, the district court held that Stengel’s four state tort law claims would impose a higher duty upon Medtronic than was required of the manufacturer under the FDCA.108 Because a state law claim may only survive preemption if it imposes the same duty as that imposed by the FDCA, the court found that Stengels’ state law claims were expressly preempted by the MDA.109 Second, the court relied upon Buckman v. Plaintiff’s Legal Committee,110 stating that even a parallel state law claim that is not expressly preempted may still be impliedly pre-empted by federal law.111 Next, the court explained that “there is no private right of action for violations of the FDCA as 21 U.S.C. § 337(a) makes clear that the United States is the only party that has standing to bring such a claim.”112 Additionally, Buckman required that any state law claims not subject to express preemption must rest on conduct that is action-able even if the federal law did not exist.113 On these grounds, the district court concluded

104 21 U.S.C. § 360k(a) (2006); Stengel v. Medtronic, Inc., 2010 WL 4483970, at *2 (D. Ariz. Nov. 9, 2010).105 Id. at *3 (“As previously stated, Plaintiff’s state law claims are expressly preempted . . . [and] Plaintiff’s new claim is impliedly preempted.”)106 451 F.3d 104 (2d Cir. 2006), aff’d 552 U.S. 312 (2008).107 Riegel, 552 U.S. 312 at 315. 108 Stengel, 2010 WL 4483970, at *2 (finding express preemption of state law claims where “[d]efendants necessarily fulfilled their duty under the FDCA as evidenced by the fact that they received [pre-market approval] for the medical devices at issue in this case”).109 Id.110 531 U.S. 341, 348 (2001).111 Id.; Stengel, 2010 WL 4483970, at *2. 112 Stengel, 2010 WL 4483970, at *3. 113 Id.; see Buckman, 531 U.S. at 353.


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that the Stengels’ claim that Medtronic violated its duties under the FDCA by failing to warn the FDA of the potential dangers of their medical devices: (1) would not exist had the FDCA not been enacted, and (2) could not be brought by a private litigant under 21 U.S.C. § 337(a).114 For these reasons, the district court held that the Stengels’ amended complaint did not remedy the fact that the state law claims were impliedly preempted by the MDA.115

The Stengels appealed to the United States Court of Appeals for the Ninth Circuit, which affirmed the decision of the lower court.116 Specifically, the court of appeals held, in relevant part: (1) the Stengels’ failure to warn claims were impliedly preempted by federal law; and (2) the district court did not abuse its discretion by denying the Stengels leave to amend the complaint.117 The Ninth Circuit began by addressing the express preemption provision of the FDCA, concluding that the Stengels’ claims “generally challenged the safety and ef-fectiveness of Medtronic’s pump without any hint of an allegation that Medtronic’s conduct violated FDA regulations.”118 In the absence of any unlawful conduct by Medtronic, which the court determined to have properly sought and received FDA approval of its pain pump and intrathecal catheter device, the court of appeals held that the Stengels’ initial complaint was properly dismissed by the district court pursuant to the express preemption provision of the MDA.119 Next, the Ninth Circuit addressed the proposed amended complaint. The court held that the claims alleged therein were “expressly preempted to the extent they rel[ied] on the theory that Medtronic should have sent a medical device correction notice to physicians, whether or not the FDA ordered it, because FDA regulations permitted Medtronic to send the notice without prior FDA approval.”120 For support, the court relied upon the Seventh Circuit deci-sion in McMullen v. Medtronic,121 which held that “[w]here a federal requirement permits a course of conduct and the state makes it obligatory, the state’s requirement is in addition to the federal requirement and thus is preempted.”122 In light of McMullen, the Ninth Circuit concluded that because the Stengels claimed only that Medtronic was permitted to warn the FDA but did not allege that Medtronic violated FDA regulations in the premarket approval process, their state law claims were expressly preempted.123

114 Stengel, 2010 WL 4483970, at *3. 115 Id. 116 Stengel v. Medtronic, Inc., 676 F.3d 1159 (9th Cir. 2012). 117 Id. at 1159.118 Id. at 1162. 119 Id.120 Id.; see 21 C.F.R. § 814.39(d) (2012).121 421 F.3d 482 (7th Cir. 2005). 122 Id. at 489.123 Stengel, 676 F.3d at 1163.


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The Ninth Circuit did, however, acknowledge that portions of the claims in the Sten-gels’ proposed amended complaint—specifically, those alleging that Medtronic breached a federal obligation to monitor the product after premarket approval and to report health risks to the FDA—could be interpreted to survive express preemption.124 Nonetheless, on the same grounds articulated by the district court, the Ninth Circuit concluded that even the failure-to-warn claim that survived express preemption was impliedly preempted under Buckman. Consequently, the court of appeals upheld the district court’s decision and found no abuse of discretion in a denial of the Stengels’ request for leave to amend.

A. The Dissent: Advocating for State-by-State Traditional Damages Remedies for Violations of Common Law Duties In his dissent, Judge Noonan emphasized that the issue before the Ninth Circuit was one of great magnitude with far-reaching implications.125 Arguing that the majority’s deci-sion improperly deprived injured consumers of a remedy against manufacturers of defective devices, Judge Noonan posited that neither precedent nor federal requirements supported the court’s decision to prevent the Stengels from amending their complaint.126 First, the dissent cited to Medtronic, Inc. v. Lohr,127 in which the Supreme Court declared that “[n]othing in § 360k denies Florida the right to provide a traditional damages remedy for violations of common law duties when those duties parallel federal requirements.”128 In Lohr, the Court held that common law duties not preempted by the express terms of the MDA may “parallel” federal law.129 These common law duties are, therefore, not irrelevant, as states may provide a remedy for their breach.130 Judge Noonan pointed out that this exception to preemption as stated by the Court in Lohr was restated in Riegel, to support the notion that states may provide a damages remedy despite the express preemption provision of the MDA. According to the dissent, Buckman is not to the contrary—rather, Judge Noonan contended, Buckman predated Riegel and did not involve “traditional, free-standing tort claims, analogous to those in Lohr.”131 On this basis, the dissent concluded that Lohr is still binding law, and, thus, the Stengels’ state law claims fall within an exception to the express preemption provision of the MDA.132

124 Id.125 Id. at 1168 (Noonan, J., dissenting).126 Id.127 518 U.S. 470 (1996).128 Stengel, 676 F.3d at 1168 (citing Lohr, 518 U.S. at 495).129 Id. 130 Id. at 1169.131 Id. 132 Id. at 1170.


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133 See Readenour v. Marion Power Shovel, 719 P.2d 1058, 1064 (Ariz. 1986) (allowing the plaintiff to argue that the manufacturer, upon discovering “an unreasonably dangerous condition at any time during the product’s history[,]” should have either retrofitted “each of the models already sold or warn[ed] each of the buyers of the existence of the latent danger”).134 Stengel, 676 F.3d at 1170.135 Id.136 H.R. 1346, 111th Cong. (2009).137 S. 540, 111th Cong. (2009).138 See MDSA of 2009, available at http://www.govtrack.us/congress/bills/111/hr1346. 139 H.R. 1346, 111th Cong. (2009); S. 540, 111th Cong. (2009).

Judge Noonan also opined that Medtronic violated federal regulations when it failed to adequately respond to FDA warning letters and adverse events indicating that its device posed a specific danger. The Arizona Supreme Court has recognized a cause of action based on a manufacturer’s failure to remedy or give notice of an unreasonably dangerous condition discovered post-market.133 If Arizona law imposes requirements that parallel the require-ments under federal law, it also provides a remedy in damages for the violation of the state requirements.134 Because the Stengels alleged a valid parallel state law cause of action that allows a remedy of damages for the injuries sustained by Richard Stengel as a consequence of Medtronic’s failure to warn of the danger posed by its pump, the dissent concluded that the Stengels should have been allowed to amend their complaint.135

v.the First legislative attack on Riegel:

medical device saFety act oF 2009

On March 5, 2009, Democratic Representatives Henry Waxman (California), Chair of the House Committee on Energy and Commerce, and Frank Pallone (New Jersey), Chair of the Health Subcommittee, introduced a bill136 to the House of Representatives that would amend the FDCA with respect to liability for medical devices under state and local requirements. Senators Edward Kennedy (D-MA) and Patrick Leahy (D-VT), introduced a companion bill137 in the Senate. The bills, collectively referred to as the Medical Device Safety Act of 2009 (“MDSA”), are intended “to prohibit specified provisions preempting state and local requirements for medical devices intended for human use from being con-strued to modify or otherwise affect any action for damages or the liability of any person under state law.”138 The effect of the MDSA would be far-reaching—it would reverse the Supreme Court’s decision in Riegel and permit consumers to bring state law liability suits against medical device companies with respect to devices approved by the FDA under the premarket approval process. The proposal has garnered the support of 109 co-sponsors in the House and twenty-three co-sponsors in the Senate.139

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140 This section of the FDCA is the MDA of 1976. See 21 U.S.C. § 360k (2006).141 H.R. 1346, 111th Cong. (2009); S. 540, 111th Cong. (2009).142 Id.143 See Black v. M & W Gear Co., 269 F.3d 1220 (10th Cir. 2001) (stating that there is a presumption against retroactive application of a statute which applies absent clear congressional intent favoring its retroactive application).144 Stengel v. Medtronic. 676 F.3d 1159 (9th Cir. 2012).

As proposed, the MDSA seeks to amend Section 521 of the FDCA140 in two (2) ways: first, it will add a provision entitled “No Effect On Liability Under State Law” which states: “Nothing in this section shall be construed to modify or otherwise affect any action for damages or the liability of any person under the law of any State.”141 Thus, under the Act, federal law will have no effect on state tort law remedies for consumers injured by FDA-approved medical devices. Second, the MDSA will be applied to cases retroactively, as if it were included in the original MDA of 1976.142 Generally, courts do not apply statutes retroactively to conduct that arose before the statute was enacted if the legislation will af-fect substantive rights or liabilities.143 The MDSA, however, expressly states that it would be applicable “to any civil action pending or filed on or after the date of enactment of this Act.” If passed by Congress, the Act would dramatically alter a medical device manufac-turer’s success in defending against state common law claims involving medical devices on grounds of preemption.

a. Exploring the Potential Impact of the MDSA on State Law The Supreme Court’s decision in Riegel acknowledged that state tort law claims against manufacturers of FDA-approved medical devices are preempted by the express preemption provision of the MDA. Applying Riegel to address preemption of “parallel” claims in the context of medical device litigation, the Ninth Circuit held in Stengel that state law claims—even those alleging parallel violations to federal law—may be preempted either expressly or impliedly by the MDA of 1976.144 Yet, proposed legislation might have a profound impact on the ability of device manufacturers to assert a preemption defense to “parallel” viola-tions of state and federal law. State-by-state trends in case law and congressional support for the MDSA of 2009 may provide some insight into each jurisdiction’s disposition toward preemption in the medical device context. The MDSA of 2009 has garnered support by democratic House congressmen and congresswomen, with some republican co-sponsorship as well. Currently, in the House of Representatives, as of July 2012, the bill is supported by Democrats from thirty-one states and the District of Columbia in the following proportions:

Alabama (one co-sponsor); Arizona (one co-sponsor); California (fifteen co-sponsors); Colorado (two co-sponsors); Connecticut (three co-sponsors); District of Columbia (one co-sponsor); Florida (five co-sponsors); Georgia (three co-sponsors); Hawaii (two co-sponsors); Illinois (seven co-sponsors); Iowa (three co-sponsors);


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145 See MDSA of 2009, available at http://www.govtrack.us/congress/bills/111/hr1346.146 Id.147 S. 540, 111th Cong. (2009).148 2009 WL 2045559 (E.D. Cal. July 9, 2009).149 Id. at *8.150 Id.

Maine (two co-sponsors); Maryland (one co-sponsor); Massachusetts (four co-sponsors); Michigan (four co-sponsors); Mississippi (one co-sponsor); Missouri (one co-sponsor); New Hampshire (one co-sponsor); New Jersey (three co-sponsors); New Mexico (three co-sponsors); New York (twelve co-sponsors); North Carolina (two co-sponsors); Ohio (three co-sponsors); Oregon (two co-sponsors); Pennsyl-vania (four co-sponsors); Rhode Island (two co-sponsors); Texas (six co-sponsors); Vermont (one co-sponsor); Virginia (three co-sponsors); Virgin Islands (one co-sponsor); and Wisconsin (one co-sponsor).145

Additionally, three Republican representatives—each from New England (one co-sponsor), North Carolina (one co-sponsor), and Pennsylvania (one co-sponsor)—support the bill.146

In the Senate, the bill has amassed the support of democratic and independent senators from the following states:

California (two co-sponsors); Iowa (one co-sponsor); Missouri (one co-sponsor); New Mexico (two co-sponsors); New York (two co-sponsors); North Carolina (one co-sponsor); Ohio (one co-sponsor); Illinois (one co-sponsor); Oregon (one co-sponsor); Pennsylvania (one co-sponsor); Rhode Island (two co-sponsors); South Dakota (one co-sponsor); Vermont (one co-sponsor); and West Virginia (one co-sponsor).147

Case law of several states seems to mirror the congressional support for the MDSA. With fifteen co-sponsors in the House and two in the Senate, California is one of the most ardent supporters of the bill and its state courts have already sought to limit the application of Riegel. For example, in Prudhel v. Endologix, Inc.,148 a California district court held that alleged express warranty of safety claims were preempted but parallel claims that require “more than mere noncompliance” are not preempted.149 The court identified manufactur-ing defect claims as parallel claims that survive preemption, but it held that strict liability, negligence, and implied warranty claims were preempted by the MDA.150 Another strong supporter of the bill in the House and Senate is New York, with a total of fourteen co-sponsors combined. Like California, New York state courts have also applied Riegel selectively. In

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151 788 F. Supp. 2d 145 (S.D.N.Y. 2011).152 Id. at 147.153 Id. at 159-60.154 592 F. Supp. 2d 1147 (D. Minn. 2010).155 Id. at 1166.156 Id.157 623 F.3d 1200 (8th Cir. 2010). Other Minnesota cases such as Riley v. Cordis Corp, 625 F. Supp. 2d 769 (D. Minn. 2009), have also taken an aggressive stance toward state law claims in medical device cases, finding that even a claim involving prohibited conduct may be impliedly preempted as an improper private FDCA action under Buckman Co. v. Plaintiff’s Legal Committee, 531 U.S. 341 (2001).158 Bloomberg News, Medtronic to Settle Lawsuits over Devices Tied to Deaths, n.y. times, October 15, 2010, at B5.159 Id.

Gelber v. Stryker Corp.,151 the United States District Court for the Southern District of New York denied the manufacturer’s motion to dismiss two claims involving a hip implant.152 The court held that a manufacturing-based parallel claim survived preemption because an FDA warning letter specified the nature of the alleged violation but the plaintiff’s negligence and failure-to-warn claims were preempted by the MDA.153 Nineteen states have yet to weigh in on the MDSA in Congress. Of those that have not proffered a vote, Minnesota has arguably taken the most aggressive pro-Riegel stance in MDA preemption cases. One of the most prominent examples may be found in the Min-nesota case, In re: Medtronic, Inc., Sprint Fidelis Leads Products Liability Litigation.154 There, Judge Kyle of the United States District Court in the District of Minnesota dismissed more than 1,000 cases filed against Medtronic alleging that its Sprint Fidelis implantable cardioverter-defibrillator lead failed and injured consumers.155 The decision was the first published opinion by a federal court to offer an in-depth analysis of the Supreme Court’s decision in Riegel. Acknowledging that “at least some plaintiffs have suffered injuries from using Sprint Fidelis leads, and [that] the court is not unsympathetic to their plight,” the court adhering to the Court’s decision in Riegel held that the plaintiffs’ state law tort suits were preempted by the MDA.156 The Eighth Circuit affirmed the lower court’s decision, holding that the failure to warn, design defect claims, breach of express warranty claim, and manu-facturing defect claims were all preempted by the MDA.157

The lack of support for the MDSA by states such as Minnesota is not surprising, given the profound impact that the retroactive Act would have on decisions such as Sprint Fidelis Leads Products Liability Litigation. If passed, the MDSA could have revived over 1,200 individual tort suits against Medtronic, but this time with Medtronic’s preemption defense out of reach. That risk was neutralized in October 2010, when Medtronic agreed to pay $268 million to settle lawsuits over the cardioverter-defibrillator claims, resolving cases in both federal and state courts.158 The settlement of the case covers about 8,100 cases, which amounts to roughly all claims in the United States against the company on this issue.159


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vi.conclusion

Stengel is particularly persuasive for state courts, given that it was decided by the United States Court of Appeals for the Ninth Circuit, the largest of the thirteen courts of appeals with twenty-nine active judgeships and appellate jurisdiction over the district courts in California, Alaska, Arizona, Hawaii, Idaho, Montana, Nevada, Oregon, and Washington.160 Although there seems to be inconsistency in California’s support for the MDSA and the Ninth Circuit’s adherence to Riegel, the numerical significance of co-sponsorship in Congress warrants closer review. For instance, even though Arizona is identified as a co-sponsor of the MDSA in the House of Representatives, it is important to note that such support repre-sents only one-ninth of the state’s allotted representation in the House. Similarly, Alabama’s sole co-sponsor is only one of seven representatives for the state. An even more prominent example is California, boasting fifteen co-sponsors of the MDSA, which is a mere twenty-eight percent of the state’s total representation in the House. Through this lens, the MDSA falls short of widespread national support—in fact, only Hawaii, the District of Columbia, Maine, New Mexico, Rhode Island, Vermont and the Virgin Islands have entirely supported the bill.161

After Riegel, state and federal courts have varied in their application of preemption doctrine in the context of medical devices. Although Riegel held that a state may provide a damages remedy for claims that “parallel” federal requirements under the MDA, the Supreme Court offered no guidance for determining the state law claims that “parallel” federal law. Consequently, plaintiffs alleged tort law claims in negligence and strict liability against manufacturers of devices that had gained FDA premarket approval, arguing that these claims did not add to or conflict with FDA requirements but “paralleled” the relevant federal regulations. Today, a majority of courts have held, as in Sprint Fidelis and Riley, that most state law claims are preempted. Stengel introduces another aspect of the preemption debate for medical devices—namely, that Buckman’s implied preemption doctrine should also apply to state tort law claims that escaped express preemption under the MDA. The outcome of this proposed legislation is uncertain. If enacted, the Act would effect significant change in the litigation of state law tort claims against manufacturers of Class III devices.162 Device manufacturers would not be able to successfully argue that a plaintiff’s product liability claims arising from defective Class III medical devices are preempted by the governing MDA and FDA regulations. Rather, devices that had been subjected to the rigorous premarket approval process and were granted FDA approval would be at the mercy

160 See United States Courts for the Ninth Circuit, About the Court, http://www.ca9.uscourts.gov/informa-tion/.161 See supra note 145.162 See Gregory J. Wartman, Life After Riegel: A Fresh Look at Medical Device Preemption One Year After Riegel v. Medtronic, Inc., 64 Food & drug l.J. 291, 311 (2009).

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of jurors to determine whether the safety warnings accompanying these devices were ad-equate.163 Nonetheless, despite congressional efforts to limit the preemptive power of Riegel, the MDSA of 2009 has not amassed overwhelming support from the states. Rather, it seems likely that Riegel will continue to provide a foundation upon which state and federal courts, like the Ninth Circuit in Stengel, will interpret the scope of their preemptive jurisprudence for medical devices under the MDA.

163 Id.

The Federation of Insurance Counsel was organized in 1936 for the purpose of bringing together insurance attorneys and company representatives in order to assist in establishing a standard efficiency and competency in rendering legal service to insurance companies, and to disseminate information on insurance legal topics to its membership. In 1985, the name was changed to Fed-eration of Insurance and Corporate Counsel, thereby reflecting the changing character of the law practice of its members and the increased role of corporate counsel in the defense of claims. In 2001, the name was again changed to Federation of Defense & Corporate Coun-sel to further reflect changes in the character of the law practice of its members.

The FEDERATION OF DEFENSE & CORPORATE COUNSEL QUARTERLY, published quarterly through the office of publication by the Federation of Defense & Corporate Counsel, Inc., 11812 North 56th Street, Tampa, FL 33617.

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ON COLOR BACKGROUND QUARTERLY€¦ · Laura A. Turbe-Capaz is a Senior Associate at Butler Pappas....

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