IN THE COURTS
SCOTUS RULES IN FAVOR OF EMPLOYERS AND ENFORCES CLASS ACTION WAIVERS IN ARBITRATION AGREEMENTS
This year the Supreme Court issued a major decision affecting the ability of employees to pursue class action claims. Justice Neil Gorsuch, writing for the majority, held that employers can require employees to arbitrate their disputes individually and waive their right to class or collective actions against their employer.
In the 5-4 decision, the Court rejected the National Labor Relations Board’s position in D.R. Horton that class action waivers violate employee’s rights. The opinion resolved three different cases that were argued together all involving an employee who had signed
an arbitration agreement that contained a class action waiver. The plaintiffs attempted to bring litigation under the Fair Labor Standards Act and other state claims through a class action or collective action in federal courts.
The court stated that the answer to the case “was clear,” “In the Federal Arbitration Act, Congress has instructed federal courts to enforce arbitration agreements according to their terms- including terms providing for individualized proceedings.”
FIFTH CIRCUIT OVERTURNS $502 MILLION J&J VERDICT AFTER FINDING ‘UNEQUIVOCALLY DECEPTIVE’ CONDUCT BY PLAINTIFFS’ LAWYER
In April of this year, the U.S. Court of Appeals for the Fifth Circuit threw out a half-billion dollar verdict against Johnson & Johnson and DePuy Orthopedics and ordered a new trial in a bellwether products liability case that involved DePuy’s Pinnacle hip implant devices.
Writing for the three-judge panel, U.S. Circuit Court Judge Jerry Smith said that U.S. District Judge Ed Kinkeade in Dallas, TX, erred by allowing plaintiffs’ lawyers to present “inflammatory character evidence” about defendants. Judge Kinkeade allowed evidence regarding past wrongdoing by the defendants, evidence that was both “unduly prejudicial and irrelevant to the jury.” The “most problematic evidence” were allegations about bribes that Johnson & Johnson paid to “henchmen” of Saddam Hussein in Iraq, stemming from the company’s agreement in 2011 to pay a settlement to resolve a U.S. foreign bribery probe.
Judge Kinkeade’s proclivity towards rubber-stamping plaintiffs’ lawyers’ irrelevant and prejudicial evidentiary requests has been well-documented in Judicial Hellholes.
Judge Smith also chastised infamous plaintiffs’ lawyer Mark Lanier in the court’s opinion. The court found that Lanier should have disclosed the thousands of dollars in monetary “gifts” he gave to two doctors who testified as plaintiffs’ expert witnesses in the trial. Lanier has been leading the charge in the hip implant litigation, which includes almost 9,300 lawsuits consolidated before Judge Kinkeade.
The court stated, “This is the rare case in which counsel’s deceptions were sufficiently obvious, egregious, and impactful to penetrate the layers of deference that would ordinarily shield against reversal.” “Lawyers cannot engage with a favorable expert, pay him ‘for his time,’ then invite him to testify as a purportedly ‘non-retained’ neutral party,” Judge Smith wrote. “That is deception, plain and simple. And to follow that up with [a] post-trial ‘thank you’ check merely compounds the professional indiscretion.”
NEW JERSEY SUPREME COURT ADDRESS LAX STANDARDS AND LAWSUIT ABUSE
The New Jersey Supreme Court delivered some good news in 2018 when it adopted a more rigorous standard for evaluating the reliability of expert testimony, applied the state’s product liability law to claims brought by plaintiffs from other states, and ended no-injury class actions targeting technical issues in consumer contracts.
Governor Murphy also returned to the longstanding tradition of reappointing Supreme Court justices based on merit, resisting the urge to pack the court with political allies. In May 2018, he reappointed Justice Anne Patterson, author of the consumer contracts decisions, and preserved nonpartisan judicial independence.
Court Strengthens Expert Evidence Standards
At long last, New Jersey will no longer be considered an evidentiary outlier that permits plaintiffs to bring meritless cases based on junk science. In August 2018, the New Jersey Supreme Court joined federal courts and the vast majority of states in adopting the Daubert standard for assessing the reliability of expert testimony.
The highly-anticipated decision was eleven years in the making. Up until now, New Jersey’s status as hometown to many pharmaceutical companies coupled with its lenient standard for expert testimony made it a haven for plaintiffs’ lawyers to bring product liability claims that would not be brought elsewhere.
In re Accutane Litigation was the consolidation of over 2,000 cases in which plaintiffs claimed Hoffman La Roche’s prescription acne medication, Accutane, caused Crohn’s Disease, a gastrointestinal illness. They made the argument despite that out of all the published epidemiological studies, not one found a causal relationship between Accutane and Crohn’s disease.
To overcome this hurdle, plaintiffs’ lawyers found two “experts” who were willing to testify that they believed the epidemiological studies to be unreliable, and that a causal relationship could be shown using other forms of evidence, such as animal studies.
The trial court excluded the plaintiffs’ experts’ testimony because it was a “conclusion-driven” attempt to cherry-pick supportive evidence while dismissing more reliable evidence. The appellate court panel reversed, however, and would have allowed them to testify.
In its August 2018 decision, the New Jersey Supreme Court found that “[t]he trial court did the type of rigorous gatekeeping that is necessary when faced with a novel theory of causation, particularly one, as here, that flies in the face of consistent findings of no causal association as determined by higher levels of scientific proof.”
In reversing the appellate division, the state’s high court explicitly adopted the factors used by most other courts in evaluating the reliability of expert testimony and charged courts with acting as gatekeepers. These factors include considering whether the theory has been tested, subjected to peer review and publication, its potential rate of error, and whether the expert’s theory is generally accepted in the scientific community. Applying this standard, the court found the “clear result” was that the trial court correctly excluded the testimony. As a result, it found that an Atlantic County judge had properly dismissed 2,100 Accutane lawsuits that relied on the flawed expert testimony.
In adopting Daubert, the court found that “its factors for assessing the reliability of expert testimony will aid our trial courts in their role as the gatekeeper of scientific expert testimony in civil cases.”
Court Dismisses Remaining Accutane Lawsuits
Two months after adopting Daubert, the New Jersey Supreme Court dismissed the remaining Accutane litigation, which included actions by 532 plaintiffs of which only 18 were New Jersey residents. The other 514 plaintiffs came to New Jersey from 44 other states.
The plaintiffs may have filed their lawsuits in New Jersey to benefit from what was at the time a lower standard for expert testimony. In contending that Accutane’s language warning of the risk of inflammatory bowel disease should have been stronger, they also had to contend with a state law that reasonably provides a preemption that a medication’s warnings are sufficient when the U.S. Food and Drug Administration has approved them. This preemption can be overcome, but only if a plaintiff can show that the manufacturer deliberately hid information from the FDA or there is clear and convincing evidence that the manufacturer knew or should have known of the inadequacy of the warnings. The plaintiffs sought to avoid this requirement of the New Jersey Product Liability Act by claiming that the laws of their home states should apply.
Plaintiffs argued that the court should apply the laws of each jurisdiction. While the trial court had applied the New Jersey law and, as a result, dismissed the cases, the Appellate Division reversed. It engaged in a state-by-state analysis and found that most of the claims could not be summarily dismissed based on the presumption that an FDA-approved warning is sufficient, even though they were brought in New Jersey.
The New Jersey Supreme Court ruled that “New Jersey has an interest in consistent, fair, and reliable outcomes” and applied the New Jersey law to all cases. The
high court also found that making a trial court judge become an expert in products liability law of 44 other jurisdictions would not promote principles of judicial efficiency. Finding no evidence that Roche deliberately concealed or withheld any material information from the FDA or improperly manipulated the regulatory process, the court dismissed all 532 cases.
The combination of more rigorous scrutiny of expert testimony and application of the state’s presumption that FDA-approved warnings are adequate will certainly give plaintiffs’ lawyers around the country pause before engaging in litigation tourism to the Garden State.
Court Ends No-Injury Consumer Contract Lawsuits
New Jersey’s Truth-in-Consumer Contract, Warranty and Notice Act (TCCWNA) was intended to prevent deceptive practices in consumer contracts but has instead led to increased litigation and massive class actions that are grossly out of line with any actual harm to the customer or culpability of the businesses that are sued. Spurred by TCCWNA’s minimum $500 per violation penalty, opportunistic plaintiffs’ lawyers filed numerous class actions in recent years alleging technical violations in the fine-print of consumer contracts, even where consumers did not read it and experienced no injury. In 2018, the New Jersey Supreme Court issued two decisions that will substantially reduce the potential for the type of no-injury claims that have flooded New Jersey courts by clarifying who is an “aggrieved” consumer entitled to bring a claim under the statute.
First in Dugan v. Dine Equity, the court held that a plaintiff is not an “aggrieved consumer” unless he or she—at a minimum—received and “interacted” with the document at issue. Thus, to sustain a class action under TCCWNA, the plaintiff must now show not only that each class member actually read the document, but also that he or she was harmed as a result of reading it. Merely making a purchase and being exposed to a contract that did not comply with the technical requirements of the law is not enough to bring a lawsuit. That case claimed TGI Fridays violated the Act because its menus did not indicate the price of beverages. At minimum, the court held, a plaintiff must show he or she received a menu to sue, therefore, a class action could not include those who did not.
In the second TCCWNA opinion, Spade v Select Comfort, a unanimous court ruled that plaintiffs must prove they have suffered some actual harm as a result of the alleged violation in order to be eligible to collect the statutory penalty provided by the law.
In that case, two consumers brought a class action claiming that Select Comfort’s sales contract indicated that all sales were “final” in violation of the Act, yet they had not attempted to return their furniture. Two other consumers alleged that the sales contract they received from Bob’s Discount Furniture failed to include language mandated by the Act indicating they are entitled to a full refund in the event of a late delivery—but their furniture was delivered on time. They also alleged that the language did not appear in the 10-point bold face type required by the regulations.
In both cases, the court concluded that a person who receives a contract with a provision that does not conform to statutory or regulation requirements can only bring a claim if he or she suffered adverse consequences because of that issue. The court rejected an expansive definition of “aggrieved consumer” offered by New Jersey’s plaintiffs’ bar, the New Jersey Association for Justice, which would have allowed anyone who is offered or enters into a contract that includes a technical violation to sue. To accept this definition, the court found, would be to read the word “aggrieved” out of the statute. That word “distinguishes consumers who have suffered a harm because of a violation of [the TCCWNA] from those who merely have been exposed to unlawful language in a contract or writing, to no effect.”
As observed by practitioners on the ground, “No longer can plaintiffs bring these no-injury class actions and expect to hold hostage companies who do business in New Jersey. While plaintiffs can still bring TCCWNA cases, those will be reserved for the truly injured and deserving, and not the plaintiffs’ class action bar.” While litigators in New Jersey agree that the decision “hopefully … puts the last nail in the coffin of these ridiculous no-injury claims under TCCWNA,” others note that “it remains to be seen whether plaintiffs lawyers will brainstorm new and innovative ways to argue actual harm suffered.”
WISCONSIN SUPREME COURT UPHOLDS LIMIT ON NONECONOMIC DAMAGES IN MEDICAL LIABILITY CASES
In a landmark medical liability decision, the Supreme Court of Wisconsin held that the state’s statutory $750,000 limit on noneconomic medical liability damages does not violate a patient’s constitutional right to equal protection or due process. The Wisconsin Injured Patients and Families Compensation Fund was enacted by the legislature in response to a “medical malpractice crisis,” and was designed to guarantee full payment of an injured party’s economic damages while at the same time controlling liability by limiting noneconomic damages to $750,000.
An intermediate appellate court, however, determined the limit was facially unconstitutional because it imposed an “unfair burden” on “catastrophically injured patients.”
The Wisconsin Supreme Court reversed, finding the limit on noneconomic damages constitutional. The legislature carefully weighed its options and set out its objective “to ensure affordable and accessible health care for all of the citizens of Wisconsin while providing adequate compensation to the victims of medical malpractice.” Chief Justice Patience Roggensack recognized the unfortunate nature of the plaintiff ‘s injury, but recognized that, “[w]ere we to construe the cap based on our emotional response to (Mayo’s) injury, we would be substituting our policy choice for that of the Legislature.”