On April 18, 2012, Winston & Strawn and the Environmental Law Institute co-hosted an informative seminar on, “Hydraulic Fracturing Risks and Opportunities: Regulator, NGO, Industry and Investor Perspectives,” in New York City. The meeting was expertly chaired by May Wall, a partner in the law firm’s Environmental Law Department in Washington, D.C. The panelists included Kate Sinding, an NRDC Senior Attorney and Deputy Director of NRDC’s New York Urban Program; John Imse, a principal at Environ in Denver, who advises clients in the oil and gas industry; Lawrence A. Wilkinson, an analyst with Standard & Poor’s Oil & Gas Team; and Carol P. Collier, the Executive Director of the Delaware River Basin Commission. All four speakers were knowledgeable, informative and articulate. Unfortunately, there is insufficient space here to summarize all of the speakers' discussion points.

With recent amendments to Federal Rule of Civil Procedure 26 and a proliferation of Motions to Strike/Exclude Expert Testimony under the Court’s responsibility as a gatekeeper of information that is to be considered by a jury, keeping apprised of recent rulings on these issues is key to effectively using experts in defending mass tort claims. This presentation will discuss the changes to Rule 26, including how courts have handled discovery disputes involving experts, and will address recent Daubert and Frye decisions that may assist in having an opponent’s experts testimony stricken before presentation to a jury as well as other considerations as you work on expert preparation for mass tort cases. 

Three law firms based in Austin, Texas recently filed suit on behalf of 13 people claiming that almost 20 apps, including Facebook, Foursquare, Yelp and Twitter, violate policies put in place by distributers such as Apple’s App Store, Amazon’s App Store and Google Play.  The American Statesmen reports that the violations are a result of mobile apps “stealing” address book data, such as names, phone numbers, email addresses and even birthdays.  The lawsuit seeks to stop app developers from harvesting data without permission.  The complaint cites an industry publication that claims the information collected could be worth 60 cents to several dollars per contact. 

A New York Times article investigating contact mining recently noted that “the address book in smartphones — where some of the user’s most personal data is carried — is free for app developers to take at will, often without the phone owner’s knowledge.”  The app developers use the data in an effort to expand the number of people using their program.  Developers use email addresses to target potential new customers and to target advertisements.  Several companies, including Path, a social networking site, have issued apologies regarding “how [their] application used your phone contacts.” 

Attorney Richard Newman, an Internet law attorney and managing partner of the Hinch Newman firm, with offices in both California and New York, thinks that the lawsuits are starting to have an impact.  Mr. Newman stated “the mobile communications industry is finding that failing to properly inform consumers of what is happening to their information is increasingly grabbing the attention of regulatory authorities, including the Federal Trade Commission.”  Until a regulatory framework is hammered out to govern emerging data privacy issues, litigation may be one of the only things keeping pace with technology development.  

Actually, it’s what’s happening in Vegas.   It’s spring, and we’re beginning to see a light at the end of the winter tunnel.  Grass is starting to grow, trees are beginning to bud, flowers are blooming, etc.  What better way to celebrate the annual coming of Spring than at DRI’s Product Liability Seminar in Las Vegas?  OK, I confess that Spring and Las Vegas are not “causally connected”, as we DRI-ers like to say.  You can actually go out to Vegas any time of year, and they will welcome you with open arms no matter what the season.  But, what you can’t do just any time of year is go out there and get both the camaraderie of your DRI friends AND the CLE education from leading product liability lawyers and experts from around the country.  So, if you’ll join us April 11-13 at the Venetian for the DRI Product Liability Seminar, you’ll get networking, friends, education, Vegas AND Spring, all at the same time.  You don’t want to be the one who has to hear about it after the fact,  so make plans to join us.  And if you want some really good Automotive CLE, come to the Automotive SLG Breakout session Wednesday afternoon where you’ll hear Neal Walters (the guy who puts the “class” in “class action”) Tracy Ferak (the component part liability guru) and Chris Massenburg (who will tell you all about where the Big Auto companies find themselves economically these days) present some seriously useful stuff.  I’ll see you there – I’ll be the tall guy in the suit.  

Jeff Curran is Of Counsel with Gable Gotwals in Oklahoma City. Jeff focuses his practice primarily in the areas of product liability, insurance matters, entertainment law and commercial litigation.

In the majority of jurisdictions, to establish a claim for design defect in a product liability action, the plaintiff must present some proof of a “feasible alternative design” or “reasonable alternative design.” 

As required by the Consumer Product Safety Improvement Act of 2008 (“CPSIA”), the Consumer Product Safety Commission published ANSI/SVIA 1-2007 as a mandatory consumer product safety standard for ATVs.  The standard became effective on April 13, 2009.  ANSI/SVIA has since issued a 2010 version of the standard.  The Commission issued a notice of proposed rulemaking on July 25, 2011 and is soon expected to issue a final rule amending the mandatory standard to reference the 2010 version. 

The Commission found that though most of the changes in the 2010 version are relatively minor, merely enhancing the standard’s clarity and consistency, the Commission thought it best to incorporate all of the provisions of ANSI/SVIA 1-2010 in order to avoid any confusion with two slightly different versions of the standard, the current mandatory standard and the revised voluntary standard. 

The most substantive of the changes noted by the Commission in the 2010 version are as follows: (1) elimination from the scope section of a provision calling for expiration of the definition and requirements for the Y-12+ youth ATV age category on July 28, 2011; (2) a change in how to calculate the speed for the braking test of youth ATVs; (3) a change in the force applied to passenger handholds during testing; (4) the addition of a requirement that youth ATVs shall not have a power take-off mechanism; (5) the addition of a requirement that youth ATVs shall not have a foldable, removable, or retractable structure in the ATV foot environment; (6) additional specificity concerning the location and method of operation of the brake control; (7) tightening the park brake performance requirement, by requiring the transmission to be in “neutral” during testing, rather than in “neutral” or “park”; and (8) the requirement that tire pressure information be on the label, when the previous requirement could be interpreted to allow tire pressure to be either on the label, the owner’s manual, or the tires. 

If the Commission issues a final rule, the 2010 standard will become effective 60 days after publication of the final rule in the Federal Register.  The rule will apply to all ATVs manufactured or imported on or after that date.

Two recent rulings denying motions to remand in chemical exposure cases by demonstrate that a complaint must contain sufficient facts to show legitimate claims against all parties.  A failure to properly plead causes of action allows a federal court to conclude a claim does not exist and therefore maintain jurisdiction over the case under the doctrine of fraudulent joinder.  

Bayer CropScience LP was sued by two individuals who live near the Institute, West Virginia, plant and who claim illness as a result of exposures during a ten day period in 2009. Sue Ferguson Davis v. Bayer AG, et al., Civil Action No. 2:11-cv-00879 and Donna Willis v. Bayer AG, et al., Civil Action No. 2:22-cv-00880.  Both filed virtually identical complaints in state court naming Bayer CropScience and others, including West Virginia Paving, Inc., a West Virginia corporation, as defendants.  The plaintiffs claimed exposure to toxic fumes “negligently released into the atmosphere..." caused a variety of personal injuries.  Bayer CropScience removed the cases to federal court arguing that both Complaints did not contain particular factual allegations justifying claims against the non-diverse party, West Virginia Paving.  Inclusion of that company as a defendant destroyed diversity, precluding removal to federal court.  Both plaintiffs filed motions to remand.

On the issue of diversity jurisdiction the Court found all of the defendants except West Virginia Paving were from different states or countries than the two West Virginia plaintiffs.  Only if West Virginia Paving was fraudulently joined to prevent federal jurisdiction, could the case remain in federal court.

Recognizing well-settled law, Judge Joseph R. Goodwin explained that the doctrine of fraudulent joinder allows federal courts to disregard the citizenship of non-diverse defendants for jurisdictional purposes.  A heavy burden is placed on parties who seek federal jurisdiction, as they must demonstrate there is “no possibility” that plaintiff can establish a case against the in-state defendant or there is outright fraud in the facts pled in the complaint.  

The judge concluded the complaints lacked even a “glimmer of hope” of establishing claims against West Virginia Paving and denied remand in both cases.  He found the complaints simply did not link West Virginia Paving to the specific chemical leak described in both complaints, and concluded (as admitted by plaintiffs) that “West Virginia Paving’s conduct could not have caused the plaintiff’s injuries, ….because [it] was not operating a chemical facility at any point around that date.” Without West Virginia Paving as a defendant, there was complete diversity between the parties, and the court therefore denied plaintiffs’ motion to remand.

When Consumer Product Safety Commissioner Thomas Moore retired in October 2011 after serving three terms, the Consumer Product Safety Commission (CPSC) was split evenly along party lines.   There were two republicans, Nancy Nord and Anne Northup, and two democrats, Robert Adler and Chairman Inez Tenenbaum.  Now it seems President Obama's nomination of democrat Marietta Robinson will again give democrats the edge. 

Marietta Robinson has been a trial lawyer in Michigan for thirty three years, representing both plaintiffs and defendants.   Additionally, for eight years Robinson served as the federally appointed trustee of the Dalkon Shield Trust, a trust that paid billions to women who used the Dalkon Shield contraceptive.  Robinson threw her hat in the ring for a seat on the Michigan Supreme Court in 2000 and 2002. 

The CPSC works to "protect the public against unreasonable risks of injury associated with consumer products."  CPSC Commissioners are nominated by the President and confirmed by the Senate.  Robinson told the Washington Post that she was honored to be nominated and hoped to get through Senate confirmation quickly.    

Two decisions within the past few days emphasize the limits on class action arbitration waivers, despite recent United States Supreme Court opinions that breathed new life into such provisions.  With these recent decisions, we see courts relying on both federal and state law concepts to invalidate arbitration provisions when the courts conclude that an individual plaintiff could not feasibly pursue arbitration. 

Vindication of Federal Rights.

The Second Circuit visited the issue for the third time in In re American Express Merchants’ Litigation, No. 06-1871-cv (2d Cir. Feb. 1, 2012).  Merchants there are pursuing Sherman Act antitrust claims against American Express, alleging that American Express improperly ties its non-premium credit cards to its premium charge card services.  Because charge card customers are much more desirable from the merchants’ perspective, American Express is able to charge higher processing fees for those transactions.  These plaintiffs allege that American Express forces merchants to also accept its credit cards and to pay higher processing fees for them even though the credit card customers tend to make smaller purchases.

In two earlier opinions, 554 F.3d 300 (2d Cir. 2009) and 634 F.3d 187 (2d Cir. 2011), the Second Circuit held that the arbitration provision in the merchants’ agreements with American Express was unenforceable.  Following the Supreme Court’s opinion in AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011), the Second Circuit asked for supplemental briefing on the topic.  Although Concepcion held that the Federal Arbitration Act preempts state law that imposes particular restrictions on arbitration provisions, the Second Circuit held for a third time that American Express’ arbitration clause is unenforceable because it prevents an aggrieved party from vindicating a federal statutory right.

In this third opinion, the Second Circuit concluded that Supreme Court authority “leaves open the question presented on this appeal: whether a mandatory class action waiver clause is enforceable even if the plaintiffs are able to demonstrate that the practical effect of enforcement would be to preclude their ability to bring federal antitrust claims.”  [Slip Op. at 15]  These plaintiffs satisfied the Second Circuit that they would be precluded from doing so in individual arbitrations because individual damages (a mean of $5,300 and a maximum of $39,000) could not compare to the several hundred thousands of dollars needed for an expert economic analysis of liability and damages.  [Id. at 22]  Thus, “the only economically feasible means for plaintiffs enforcing their statutory rights is via a class action.”  [Id.]  It is not enough that the Clayton Act, 15 U.S.C. § 15, allows for treble damages, attorneys’ fees, and expenses.  A plaintiff must advance the expert costs and then must assume the risk of losing—a significant deterrent to pursuing civil antitrust claims in the court’s mind.  [Id. at 23]

Those plaintiffs relied on an economist’s declaration to establish the likely cost of the necessary analysis.  The court concluded that American Express did not seriously challenge that evidence, which amounted to a concession that an individual plaintiff could not reasonably pursue the claims, whether in court or arbitration.  [Id.]  Just as notable, the court’s “decision in no way relies upon the status of plaintiffs as ‘small’ merchants.  We rely instead on the need for plaintiffs to have the opportunity to vindicate their statutory rights.”  [Id. at 24]

Other courts, particular lower courts in the Second Circuit, have applied this vindication of federal right approach to other statutory claims, such as Title VII employment discrimination suits.  E.g., Chen-Oster v. Goldman, Sachs & Co., 2011 WL 2671813 (S.D.N.Y. July 7, 2011).  With the Second Circuit’s most recent opinion, expect such attacks on arbitration provisions to increase.  It will become more important to challenge the validity of an expert’s assertion of the costs of proceeding with individual arbitration—perhaps to the point of seeking Daubert hearings as part of this process.  While Concepcion and other Supreme Court opinions strengthen defendants’ positions regarding enforcing arbitration provisions, the law is by no means settled. 

Traditional Unconscionability.

On the other side of the country one day earlier, the Northern District of California relied on traditional unconscionability principles to invalidate an arbitration provision in Lau v. Mercedes-Benz USA, LLC, No. CV 11-1940-MEJ (N.D. Cal. Jan. 31, 2012).  That plaintiff bought a luxury car but had numerous mechanical problems with it.  Mercedes sought to compel arbitration when the plaintiff filed suit.  The court found the provision procedurally and substantively unconscionable. 

The contract contained paragraph in capital letters noting the plaintiff’s ability to take the contract to review it and that it contained an arbitration provision on the back.  The arbitration provision had a bold font heading and also was in capital letter.  [Slip Op. at 2]  The court found that procedural unconscionability existed because the dealership presented the contract on a take-it-or-leave-it basis.  It did not matter that the plaintiff signed next to a paragraph mentioning the arbitration provision on the back of the contract.  While the plaintiff negotiated the price (apparently exceeding $100,000), he “was never offered the opportunity to negotiate the inclusion or exclusion of specific pre-printed terms.”  [Id. at 12]

The court found substantive unconscionability because the plaintiff faced substantial expenses in arbitration that do not exist in litigation.  Those expenses include the arbitrator’s hourly fee and the administrative body’s fees.  [Id. at 13]  The provision also was unbalanced because it allowed for a de novo appeal to a three-member panel only if the award was $0 or in excess of $100,000.  The practical effect was to deny plaintiff an appeal right if he recovered less than his full reimbursement right of more than $100,000 but allowed Mercedes to appeal if plaintiff received that full recovery.  Of course, plaintiff also faced advancing more costs if he appealed any award.  [Id. at 14]

Courts frequently undertake this traditional unconscionability analysis to invalidate arbitration provisions.  Plaintiffs’ counsel are being more aggressive in attacking provisions on those grounds, including seeking discovery about a corporation’s experience in arbitration in hopes of showing that the deck is stacked against the consumer.  Thus, it is crucial to take care in drafting an arbitration provision, presenting it to the consumer/employee, and documenting those efforts well before the threat of suit arises.  Consider having the business advance the costs of the arbitration, forgoing seeking its fees (unless the claim against it is frivolous), and ensure that the clause treats the parties equally.    

The U.S. Supreme Court in Shute v. Carnival Cruise Lines, 499 U.S. 585 (1991) held the Shutes, who were injured on a Carnival Cruise ship in waters off Mexico, must file suit in Florida pursuant to the forum selection provision printed on the back of their ticket.   The Shutes filed suit in their home state of Washington.  The cruise ship departed from California.  Shute is still one of the most far reaching holdings enforcing adhesion-like forum selection provisions.  The Shutes also had a strong argument that they lacked notice of the forum selection/choice of law provisions.