High court to tackle varied liability cases

WASHINGTON—Cases with implications for risk managers constitute nearly half of the business docket facing the U.S. Supreme Court when it begins its new term Oct. 4.

Issues such as federal pre-emption of state tort laws in product liability cases, the use of arbitration in consumer contracts, the amount of information a company must disclose regarding potential liability exposures and the extent of protections afforded employees under the Civil Rights Act of 1964 all will be before the court in the new term.

Led by Chief Justice John Roberts, the Supreme Court has maintained a “healthy appetite” for such cases, Robin Conrad, executive vp of the Washington-based National Chamber Litigation Center Inc., which handles litigation for the U.S. Chamber of Commerce, said during a briefing last week.

She said 17 of the 38 cases accepted by the high court so far are business-related.

One recurring theme is federal pre-emption of state tort law.

“Pre-emption in the area of tort claims is a particularly important issue for business,” Maureen Mahoney, of counsel in the Washington office of Latham & Watkins L.L.P., told the briefing. The court will consider that issue in two product liability cases.

The first, to be heard Oct. 12, is Russell Bruesewitz and Robalee Bruesewitz vs. Wyeth Inc. et al. Hannah Bruesewitz, described in court papers as a healthy 6-month-old child, suffered permanent developmental damage after receiving Wyeth's Tri-Immunol, a combined vaccine for diphtheria, pertussis and tetanus, in 1992.

The National Child Vaccine and Injury Act of 1986 holds that no vaccine manufacturer shall be liable in a civil action for damages arising from a vaccine-related injury or death associated with the administration of a vaccine after Oct. 1, 1988, if the injury or death resulted from side effects that were unavoidable even though the vaccine was properly prepared and was accompanied by proper directions and warnings.

The Brueswitzes argue that the law does not preclude all vaccine design-defect claims if the side effects were avoidable, which they argue was the case with their daughter and that Wyeth could have made a safer vaccine. They first sought compensation from a special vaccine court, which rejected their claim. Then they sued in Pennsylvania state court, from which Wyeth had the case removed to U.S. district court. The district court and a three-judge panel of the 3rd U.S. Circuit Court of Appeals later upheld Wyeth's claim of pre-emption.

Another pre-emption case, Delbert Williamson vs. Mazda Motor of America Inc., also involves product liability. The case, brought by the family of a woman who died in a car crash while wearing only a lap seat belt, involves whether a federal safety standard, which allowed Mazda to install two lap-only seat belt configurations in the rear seat of the car, is shielded from a lawsuit brought in state court. A California Court of Appeal upheld pre-emption, setting the stage for Nov. 12 arguments before the Supreme Court.

A clash between state law and the Federal Arbitration Act led to AT&T Mobility L.L.C. vs. Vincent and Liza Concepcion. The California couple alleged that AT&T Mobility's offer of a free telephone to people who signed up for its wireless service was fraudulent, because the customers still had to pay sales tax on the phone. The Concepcions brought a class action suit against AT&T, which said the claims should be subject to individual arbitration as stated in the arbitration clause of the service contract. The clause also banned class actions.

A U.S. district court judge called the provisions “perhaps the most fair and consumer-friendly provisions this court has ever seen” in a consumer arbitration agreement, according to court papers. Despite the consumer-friendly nature of the agreement, the judge and a three-judge panel of the 9th U.S. Circuit Court of Appeals held that the arbitration provision violated California law.

In its petition for Supreme Court review, AT&T Mobility argued that if the 2009 appeals court decision stands, “it will be the death knell for consumer arbitration in California, and possibly in many other states in the circuit.”

Arguments will be heard Nov. 9.

Another 9th Circuit decision, this one involving securities law, also will be reviewed by the high court. The case—Matrixx Initiatives Inc. et al. vs. James Siracusano et al.—alleges that Scottsdale, Ariz.-based Matrixx and senior executives misled investors at the pharmaceutical maker about allegations that its cold remedy Zicam had caused a loss of smell in some patients. Matrixx said it did not have to disclose the adverse-event reports because they were not statistically significant. The plaintiffs argued that Matrixx's failure to disclose the complaints led to investment losses.

Between 1999 and 2003, Matrixx received some complaints about Zicam, two doctors compiled data on 10 such patients, and several customers sued, according to court documents. But Matrixx officials expressed optimism about future growth and did not publicly mention the allegations and lawsuits.

The U.S. District Court of Arizona granted Matrixx's motion to dismiss the lawsuit in March 2006. In October 2009, however, the 9th Circuit reversed that decision. Among other things, the appeals court rejected the statistically insignificant argument.

No date has been set for oral arguments.

In an employment-related case, the high court will hear arguments Dec. 7 in Eric L. Thompson vs. North American Stainless L.P. At issue is whether someone who is only associated with an employee who engaged in legally protected activity also should be protected from workplace retaliation under Title VII of the Civil Rights Act of 1964.

According to court papers, Mr. Thompson, a metallurgical engineer, and Miriam Regalado, then his fiancée and now his wife, both worked for Ghent, Ky.-based North American Stainless. Ms. Regalado filed a sex discrimination claim against the company with the Equal Employment Opportunity Commission, which notified the company of the charge in February 2003.

Mr. Thompson, who had worked at the firm since 1997, was terminated three weeks later. He sued and alleged the termination was in retaliation for Ms. Regalado's complaint and violated Title VII protections. North American Stainless argued the termination was performance-related.

Last year, the en banc 6th U.S. Circuit Court of Appeals in Cincinnati held that only those who engaged in protected activity under the law are protected against retaliation (BI, June 8, 2009).