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Florida’s 4th DCA Underlines Importance of Rules Governing Depositions of Designated Corporate Representatives

02 May 2013 00:00:00 -0800

In a recent decision, a Florida appellate court discussed why we have rules allowing for corporate entities to designate corporate representatives to speak for them, and the implications of failing to utilize the designated procedures properly. In Carriage Hills Condominium, Inc. v. JBH Roofing & Constructors, Inc., --- So. 3d ---, 2013 WL 1136399, 38 Fla. Law Weekly D643 (Fla. 4^th DCA, March 20, 2013), the court addressed the appeal of a summary judgment granted by a trial court following the deposition of an employee of a corporation.

Carriage Hills, a condominium association, through its board of directors, hired JBH Roofing to perform building repairs necessitated by Hurricane Wilma pursuant to a contract which obligated JBH to perform only work approved by Carriage Hills’ public adjuster, and to accept payments approved by and received from Carriage Hills’ insurer. Less than a year later, Carriage Hills had terminated JBH’s contract and JBH sued alleging breach of contract and other related claims. The breaches alleged by JBH included (a) failure to pay for repairs approved by the carrier; (b) failure to diligently present claims for loss to the carrier; and (c) retention of other roofing contractors to perform work that should have gone to JBH pursuant to the contract.

Carriage Hills answered and asserted affirmative defenses alleging, among other things, that (1) the contract was “executed without Board approval”; (2) that it had already paid JBH in full for all work performed; (3) that JBH failed to mitigate damages; and (4) that JBH failed to perform its repairs satisfactorily or with due diligence.

JBH noticed for deposition the “Corporate Representative of Carriage Hills Condo with the most knowledge of the allegations contained in the complaint.” The notice made no reference to any particular issue(s) to be addressed, or to Carriage Hills' affirmative defenses and counterclaims.

Carriage Hills tendered Ms. Diane Foley, who in her then-capacity as President of the association, executed the JBH contract and was apparently the person with “the most knowledge” of the allegations in JBH’s complaint.

After testifying that she was authorized to execute the contract, Ms. Foley was repeatedly asked whether, in her “opinion,” contentions within the parties' pleadings were accurate. When asked whether she “believed” JBH had breached the contract, she responded, “In my layman opinion, no.” She testified that she was “not aware” of any unauthorized work performed, and that she “believed” that JBH completed all the tasks it was authorized to do up to the time of termination. She also did not believe JBH's work was defective.

Armed with this testimony, JBH filed its Motion for Summary Judgment, in response to which Carriage Hills filed affidavits of another former president of the association and of its treasurer, in which it was asserted that JBH performed “substandard work with respect to the roof systems”, “submitted duplicate charges”, and “conducted unauthorized work, including work that was not paid for [by the carrier].” The affiants further asserted that due to JBH's shoddy repair work, Carriage Hills was forced to retain other roofing contractors to fix “water leaks and problems encountered with the roof system,” and that JBH was paid all of the funds approved by -- and received from -- the insurer.

The trial court held that Ms. Foley, as its corporate representative, was “Carriage Hills,” and that her testimony was therefore binding on Carriage Hills. Accordingly, it struck the two affidavits, reasoning that “[i]n situations where the non-movant in a motion for summary judgment submits an affidavit which directly contradicts an earlier deposition . . . , courts may disregard the later affidavit.” Based upon Ms. Foley’s deposition testimony, the trial court granted summary judgment to JBH, and Carriage Hills appealed.

On appeal, Florida’s 4^th District Court of Appeals addressed the proper procedure for noticing and taking the deposition of a designated corporate representative in Florida. Florida Rule of Civil Procedure 1.310(b)(6), which governs depositions of designated corporate representatives, requires the party seeking the deposition to describe, with reasonable particularity, the matters for examination. This allows the corporate entity to select an individual or individuals able to testify on its behalf regarding the designated subjects. The Rule does not require that the person with “the most knowledge” regarding anything be produced. In fact, the court pointed out that the “knowledge” as to which the designated representative(s) are produced to testify is that of the corporation, and not the personal knowledge of the selected individual(s). The deponent needn’t have any relevant personal knowledge at all.

Against this backdrop, the appellate court noted that Ms. Foley had not been properly noticed as a corporate representative, since the notice failed to designate specific areas of inquiry, instead asking for the person “with the most knowledge’ regarding the allegations in the complaint. And JBH got exactly what it asked for as a result – a deponent with personal knowledge of relevant facts but not a person who would testify to the knowledge and litigation positions of Carriage Hills. To add insult to injury, the deposition was also not properly conducted, in that Ms. Foley was repeatedly asked about her personal opinions rather than the positions of the corporation. The result was that Ms. Foley’s testimony did not directly contradict the affidavits subsequently submitted by Carriage Hills, and the appellate court held that the trial court had acted improperly when it struck them and entered summary judgment based on Ms. Foley’s testimony. The summary judgment was therefore reversed and the case remanded to the trial court for further proceedings.

It has, unfortunately, become a common practice in Florida for notices for corporate representative depositions to request the “person or persons with the most knowledge” regarding designated subject areas or, most broadly, “the issues set forth in the pleadings.” The Carriage Hills decision serves as an important reminder of how failure to properly notice and conduct a corporate representative deposition can severely diminish the usefulness of the resulting deposition and the streamlining purpose of Rule 1.310(b)(6). Conversely, practitioners receiving such notices should consider filing objections and/or objecting on the record to such improper language.

Update Regarding Florida’s Proposed Product Liability Instructions

08 Apr 2013 00:00:00 -0800

On May 17, 2012, The Supreme Court of Florida issued its opinion concerning proposed new Standard Jury Instructions for product liability cases. The Court preliminarily approved several of the proposed instructions, but rejected a number of instructions and directed the Committee to revise the proposed instructions. Among the rejected proposed instructions were an instruction covering strict which eliminated the differences between design and manufacturing defects and eliminated the risk utility test; an instruction on inferences of defect; and an instruction on crashworthiness.

On February 1, 2013, the Committee submitted revised proposed instructions for comment. The comment period ended on March 1, 2013. The changes contained in the revised instructions are far less drastic than the initial proposed revisions. The strict liability instruction essentially mirrors current instruction PL 5 and maintains a distinction between design defects and manufacturing defects. The revised proposed instruction also continues to list both the consumer expectations and risk/benefit tests. However, the Committee notes explain that pending further development in the law, the Committee has not taken a position on whether the risk/benefit test and consumer expectation test should be given together or in the alternative. The Committee also did not take a position on whether the risk/benefit test is a standard for proving a defect or an affirmative defense. Accordingly, the proposed instructions include the risk/benefit test in the instruction for design defect as well as in a separate defense instruction. The proposed instructions make clear that the jury should not be instructed on the risk/benefit test both as a defect standard and a defense.

Another change included in the revised proposed instructions is a specific set of negligence based product liability instructions. Under the existing product liability instructions, the parties were forced to shoehorn products liability concepts into the standard instructions for general negligence.

Further, due to the Legislature’s statutory overruling of D’Amario v. Ford Motor Co., 806 So.2d 424 (Fla. 2001), the Committee scrapped the very wordy and unbalanced crashworthiness instruction. The revised proposed instructions now only include a short statement of crashworthiness in the summary of claims and explain that the no special product liability instructions should be given. Rather, the Committee Notes for the instruction explain that the standard instructions applicable in other cases should be given in crashworthiness cases.

The Committee will be submitting the revised proposed rule to the Florida Supreme Court. The Court will then open a period for additional comment on the proposed rules before issuing its opinion on the proposal.

Check back with us for updates.

Proposed Florida Law H.B. 587 Seeks Fairness in Plaintiff Recoveries on Claims for Medical Expenses

26 Feb 2013 00:00:00 -0800

On February 1, 2013, Florida Representative, Dave Hood (R-Daytona Beach), filed H.B. 587,[1] a bill proposing to add Section 768.755 to the Florida Statutes. If passed, this statute would at last bring fairness and accuracy to the calculation of medical special damages that a plaintiff may publish to the jury at trial. This would alter current Florida case law which holds that evidence of the gross amount of medical expenses is admissible even if the health care provider accepted a reduced payment pursuant to a contractual discount with the plaintiff’s health insurer.

For example in Nationwide Mutual Fire Insurance Co. v. Harrell,[2] the plaintiff introduced evidence at trial of the gross amount of her medical bills even though the medical provider had accepted a discounted figure from her health insurer as payment-in-full. The defendant appealed, arguing that the admission of the amount charged rather than the amount paid misled the jury as to the true amount of the medical special damages. In its appeal, the defendant cited several precedent cases in which plaintiffs were prohibited from asking the jury to award the gross amount of medical bills when the treater had accepted a lower payment from Medicare on behalf of such plaintiffs. The First District Court of Appeal disagreed, distinguishing the scenario in which the reduced medical bills resulted from Medicare or other government benefit programs as opposed to contractual discounts negotiated by private insurers.

The Nationwide Court found that in situations where the plaintiff “earned (or paid for)” the benefit of reduced health care costs through the payment of private insurance premiums, she was entitled to present evidence of the gross amount of medical expenses charged.[3] The court cited the “well-settled rule of damages” that “where the tortfeasor did not contribute to the payment of the premiums of such insurance, [he] should not benefit from the expenditures made by the injured party in procuring the insurance coverage.” This rationale was taken even further in Durse v. Henn,[4] where the Fourth District Court of Appeal allowed the plaintiff to present evidence of his gross medical bills - even though he had no health insurance - because he “earned in some way” the benefit of reduced charges by negotiating a compromise of the amount billed by the medical care provider.

These two cases fail to account for the inherent fiction of modern healthcare billing. Today, gross hospital bills are not a truthful indicator of the real costs of the medical services provided. The recent debate over the Patient Protection and Affordable Care Act exposed how medical care providers fabricate vastly inflated bills for their services, disconnected from any real market forces.[5] In an unrelated case, the Florida Fourth DCA discussed this inherent perfidy of modern medical billing:

“[A] hospital’s cost to provide a service no longer bears much relationship to what it charges, but reimbursement rates from third party payors give hospitals an incentive to set their usual charges at an artificially high amount, from which discounts are negotiated; cost-shifting results in discriminatorily high charges to uninsured patients, in that every patient is billed at full charges, but only the uninsured are expected to pay those amounts. As a result, actual charges are not instructive on what is reasonable. [….]”

See Colombia Hospital v. Hasson.[6] The Nationwide and Durse opinions actually encourage this dysfunctional system by allowing false evidence of phantom medical expenses for which the medical provider never required payment. In fact, considering the observation in Columbia Hospital above, the Durse holding could actually discourage an injured person from presenting his health insurance to the hospital in order to maximize the bill in hopes of a higher personal injury award.

The primary duty of the courts is the search for the truth in order to give justice to the litigants. See Ward v. Ochoa.[7] A rule of law permitting admissibility of fictional damages subverts the very purpose of the civil jury system. For example, assume a hypothetical in which a pain management doctor provided the plaintiff a series of post-accident trigger point injections at an invoiced cost of $900 per injection. Assume also that the pain doctor had waived subrogation rights and agreed to accept just $150 per injection as payment-in-full based on the cost he negotiated in a preexisting contract with plaintiff’s private health insurer. As decided in Nationwide, the plaintiff in this hypothetical could nonetheless present false evidence to the jury that her costs were $900 per injection. Nationwide would also permit this plaintiff to present the fictional $900 per injection in calculating future medical care costs despite full knowledge the amount would never be expected by her doctor.

If the jury awards her that gross amount however, Florida law requires the trial court to deduct the $750 per-injection “discount” from the amount awarded by the jury.[8] This post-verdict setoff is of little consolation to the defendant. Plaintiffs’ lawyers obviously seek to publicize the maximum possible economic damages to the jury based on the very reasonable presumption that they will correlate larger economic losses with a higher severity of injury.[9] The current “setoff” approach is designed only to prevent a windfall on past medical expenses never paid by the plaintiff. The approach fails however, to appreciate that juries calculate awards for pain and suffering and other noneconomic damages based upon the amount of the medical bills submitted by the plaintiff for reimbursement. Thus, any equity worked by the post-verdict setoff will have already been erased by an exaggerated pain and suffering award stemming from the inflated bills.

If passed, H.B. 587 will change this scenario. The Bill proposes that if the medical provider’s charges have been satisfied, “the actual amounts remitted to the provider are the maximum amounts recoverable.” In such circumstances, the Bill requires that any difference between the amounts originally billed by the provider and the actual amounts accepted by the provider as payment-in-full “are not recoverable or admissible into evidence.” Therefore, in the above hypothetical, the plaintiff would be permitted only to present evidence that the trigger point injections cost $150 per shot. The Bill further proposes that if there remains an outstanding balance or if the claimant alleges the need for future medical services, the maximum amounts recoverable are the amounts customarily accepted - as opposed to billed - in payment for such services by providers in the same geographic area.

The current state of Florida law reflects an antiquated notion that the gross amount of medical bills are derived from a rational, market-driven calculation of the true costs of the services provided. This is simply no longer the case. Hopefully, H.B. 587 will bring a fair and accurate statutory approach for jury calculations of medical special damages. In the meantime, RKC lawyers continue to use other strategies including aggressive non-party discovery of the billing policies of medical providers in order to ensure the evidence reflects the true costs of

[1] A copy of H.B. 587 can be found at http://flhouse.gov/Sections/Bills/billsdetail.aspx?BillId=49754.

[2] 53 So. 3d 1084 (Fla. 1st DCA 2010).

[3] The Nationwide Court’s basis for distinguishing the precedent cases on such grounds was tenuous at best. Even those qualifying for so-called “free” Medicare Part A coverage would have earned it via payroll taxes while either they or their spouse was working. See the Federal Insurance Contributions Act, 26 U.S.C. Ch. 21.

[4] 68 So. 3d 271 (Fla. 4th DCA 2011).

[5] See Brill, Steven. “Bitter Pill: Why Medical Bills Are Killing Us.” Time Magazine. 20 Feb. 2013. Brill’s study of modern hospital billing found that “no hospital’s prices are consistent with those of any other [….] nor based on anything objective like cost.” Brill cited findings in economic studies of the medical marketplace showing:

[I]n healthcare there is little of the price sensitivity found in conventional marketplaces [….]. If you were in pain or in danger of dying, would you turn down treatment at a price 5% or 20% higher than the price you might have expected?

When he polled hospital officials to explain exorbitant prices on specific patient bills, Brill received responses such as: “Those are not our real rates,” or that the figures were “only used internally in certain cases, but most people never pay those prices.”

[6] 33 So. 3d 148, 150 n.3 (Fla. 4th DCA 2010)

[7] 284 So.2d 385, 387 (Fla. 1973). See also, Morgan Intern. Realty, Inc. v. Dade Underwriters' Ins. Agency, Inc., 571 So.2d 52, 53 (Fla. 3^rd DCA 1990) (Noting that in its “search for the truth,” the jury “has a perfect right to [….] ask questions [….] in developing the truth of the controversy”); see also Fla. Std. Jury Instr. (Civ.) 101.2; Oath Of Juror After Voir Dire (requiring the juror to “solemnly swear or affirm” to “well and truly try [the] case” and render a “true verdict”).

[8] See Goble v. Frohman, 901 So. 2d 830 (Fla. 2005) in which the Florida Supreme Court determined that contractual discounts negotiated by the plaintiff’s HMO and “written off” by the plaintiff’s medical providers were deemed collateral sources to be setoff against the awarded damages. The Florida Supreme Court did not address the issue of whether this setoff was to occur before the medical bills were presented to the jury or, post-verdict by the trial court. In the underlying appellate case however, the Second Florida District Court of Appeal held that the setoff was to occur post-verdict, Goble v. Frohman, 848 So. 2d 406 (Fla. 2d DCA 2003), a procedure followed in both Nationwide and Durst.

[9] See Ronen Avraham, Putting a Price on Pain-and-Suffering Damages: A Critique of the Current Approaches and a Preliminary Proposal for Change, 100 Nw. U. L. Rev. 87, 112 (2006). Indeed, recent research has shown that jurors’ subjective assessments of the severity of injury are perhaps the best predictor of pain and suffering awards. See Roselle L. Wissler et al., Decisionmaking About General Damages: A Comparison of Jurors, Judges and Lawyers, 98 Mich. L. Rev. 751, 760-761 (1999).

Using Cell Phone Records In Accident Cases

03 Jan 2013 00:00:00 -0800

It is now standard procedure to obtain the cell phone records of the opposing party in cases involving motor vehicle accidents. The number of motor vehicle accidents that have been linked to cell phone usage, both telephone conversations and texting, is staggering. According to a 2010 National Safety Council study, 28% of traffic accidents occur when a driver is using a cell phone. As a result, it is critical to obtain a driver’s cell phone records when defending a product liability case involving a motor vehicle or any car accident case. Cell phone records are typically obtained through a subpoena to the driver’s cell phone provider.

The goal when reviewing the driver’s cell phone records is to determine whether the driver of the motor vehicle may have been talking on the cell phone or texting at the time of the accident. If you can establish that the driver was using the phone at the time of the accident, then you have powerful evidence that the driver was distracted. This evidence supports that the driver’s cell phone distraction was the cause of the accident, rather than some malfunction or defect in the motor vehicle.

Unfortunately, using cell phone records to establish a driver was on the phone at the time of the accident can be a very challenging task. Every second will often be important when trying to establish that the driver was using the cell phone at the time of the accident and had not ended the call before the accident. The unique challenges presented by cell phone records are demonstrated by the number of expert witnesses whose practices are solely dedicated to analyzing cell phone records and determining the actual starting and ending times for calls.

It is important to understand the main issues that arise when analyzing cell phone records. While the records produced by the different cell phone providers vary, they usually provide at least the start time and duration for all calls made and received. You must determine what the times on the cell phone records represent. For example, does the start time represent the time that the call was placed or when the call was answered? How is the call duration calculated? Does the call end when the first person hangs up or only when the person who made the call hangs up? Is the number of minutes of call duration rounded up to next minute? Another important issue is the source of the starting and ending times for a call. These times are typically recorded using the time from the cell site (or cell tower) that processes the call. The problem is the times on the various cell sites are not synchronized; thus, there may be timing discrepancies between the different cell sites. Being aware of the issues that exist with cell phone records is essential when analyzing whether the cell phone was in use at the time of the accident.

When you receive cell phone records you should first consult the cell phone provider’s website, which typically contains some information on how to read the records. In addition, you should request from the provider a legend or key which defines the terms and characters used in the records. If you still have questions regarding what the times represent or the other contents of records, you can depose the provider’s records custodian.

Florida Supreme Court To Decide Appropriate Procedure For Litigating Wrongful Death Claims That Arise During Pendency of Personal Injury Action

27 Nov 2012 00:00:00 -0800

Two recent opinions from the Third District Court of Appeals cast doubt as to the appropriateness of amending a lawsuit upon the plaintiff’s death. In both cases, the Third District held that Florida’s Wrongful Death Act extinguishes a personal injury action and survivors must file a new lawsuit asserting the wrongful death allegations.

In Capone v. Philip Morris U.S.A., Inc., 56 So. 3d 34 (Fla. 3d DCA 2010), the Third District considered whether it was proper for the trial court to deny Capone’s motion to amend her complaint to assert a claim under Florida’s Wrongful Death Act. Frank and Karen Capone filed suit against Philip Morris in 2005, alleging Mr. Capone sustained personal injuries as a result of smoking the defendant’s cigarettes. Mr. Capone’s injuries ultimately led to his death in July 2006. In 2008, Capone moved to amend her complaint to assert a new cause of action for injured smokers made available to litigants as a result of the decision in Engle v. Liggett Group, Inc., 945 So. 2d 1246 (Fla. 2006). Capone also moved to substitute herself as the personal representative of her husband’s estate as the proper party plaintiff. Philip Morris moved to dismiss, arguing that the personal injury action abated upon Mr. Capone’s death and that Capone’s wrongful death suit had to be filed separately.

Philip Morris relied upon a provision within Florida’s Wrongful Death Act, Section 768.20, Florida Statutes. This statute provides in pertinent part that “[w]hen a personal injury to the decedent results in death, no action for personal injury shall survive and any such action pending at the time of death shall abate.” The trial court agreed with Philip Morris and dismissed the personal injury case. The court’s ruling served to permanently extinguish Ms. Capone’s claims against Philip Morris, since at the time of the ruling the statute of limitations for the wrongful death claim had expired. Upholding the trial court’s decision, the Third District explained, “[t]he trial court correctly dismissed the amended complaint because Frank Capone’s personal injury claim had abated upon his death and Karen Capone was required to file a separate wrongful death claim, which she did not do prior to the expiration of the two-year statute of limitation for that cause of action.”

The Third District affirmed a similar trial court decision in Ruble v. Rinker Material Corporation, 59 So. 3d 137 (Fla. 3d DCA 2011). On August 11, 2008, Lance and Joan Ruble filed a personal injury complaint for asbestos-related injuries. Five days later, Lance Ruble died as a result of asbestos-related mesothelioma. Joan Ruble then filed a motion to amend the complaint to allege a cause of action for wrongful death. The Rinker defendants opposed the motion, arguing that it is improper for Ms. Ruble to attempt to convert the personal injury action into a claim for wrongful death. The trial court agreed, finding that since Mr. Ruble’s claim was one for personal injuries and those injuries ultimately caused his death, the Wrongful Death Act requires Mrs. Ruble to file a new complaint to allege wrongful death.

The Supreme Court of Florida accepted jurisdiction of both cases and Oral Argument was held on June 5, 2012. The questions posed by Justices Quince, Pariente and Lewis focused on whether the legislature intended to require a personal representative to file a new action once the personal injury action was abated. Counsel for each side agreed that the term “abate” means “extinguish” and that the personal injury claims are extinguished upon the death of a plaintiff. However, the parties disagreed as to the proper procedure for asserting the wrongful death allegations. Advocates for the plaintiffs in both cases argued that the legislative intent was not to extinguish the entire lawsuit, but rather to extinguish the personal injury claims. They cited to a series of cases where the parties stipulated to substituting the proper party and to an amendment of the pleadings to reflect the wrongful death allegations. Counsel for Philip Morris and Rinker argued that the statute clearly dictates the procedural vehicle for asserting a wrongful death claim and there is generally no prejudice to the plaintiff if they timely file the new lawsuit.

Justice Pariente was the most vocal of the Justices, repeatedly questioning the policy reasons for requiring a personal representative to file a new lawsuit and expressing doubt that such a procedure serves the ever-present goal of judicial efficiency. Justice Lewis also explored the statute of limitations issue, questioning both the plaintiff’s failure to take advantage of the available option of filing a new suit and the fairness of the harsh result reached in the Capone case. The Justices also considered lengthy arguments from both sides in the Ruble case regarding the Court’s jurisdiction. The parties disagree about whether Ruble timely served a Motion for Reconsideration, which then gave rise to her appeal to the Third District. Counsel for Rinker argued that the motion was not timely served and that Court does not have jurisdiction over the matter. This issue was not addressed in the Third District’s order affirming the trial court’s decision to dismiss the case.

The Florida Supreme Court has not yet issued an opinion in either case. The Court’s decision will provide a bright line rule regarding the procedure for asserting wrongful death allegations when a plaintiff dies. If the Court affirms the Third District decisions, a personal representative for an estate will have to pursue the wrongful death claim in a separately filed action. Should the Court reverse the Third District, personal representatives will be permitted to substitute themselves as the plaintiff and amend the complaint to include wrongful death

Recent Meningitis Outbreak May Mean Increased Scrutiny for Compounding Pharmacies

22 Oct 2012 00:00:00 -0800

The recent fungal meningitis outbreak attributed to a compounding pharmacy will mean increased FDA scrutiny even for those practicing compounding in a lawful and compliant manner as well as for wrongdoers. Until recent events, the biggest obstacle FDA faced in effectively regulating pharmacy compounding was its own budget. However, Congress may eliminate the “funding” barrier by prioritizing enforcement of FDA Compliance Policy Guide 460.200 - Pharmacy Compounding in light of the recent publicity surrounding the fungal meningitis outbreak allegedly traced to a Compounding Pharmacy. This will mean increased FDA scrutiny even for those practicing compounding in the “proper” manner as well as for those wrongdoers. For years the FDA has struggled to adapt an enforceable policy to regulate compounded pharmaceuticals, while not running afoul of Congress or the Judiciary. But selective enforcement by practicing discretion in deciding whether or not to take enforcement action has not adequately controlled the situation in the view of the public.

After all according to FDA, when Congress enacted the FD&C Act in 1938, it discreetly “outlawed” all pharmacy compounding practices. But simultaneously the FDA recognized the medical need for compounding and has consequently, exercised “enforcement discretion” for years.

Now that compounding is headline news, renewed calls for regulation of compounding by the FDA resonate from Capitol Hill. The FDA has received several letters from the elected questioning the law governing compounding and asking if the law needs to be strengthened. In a recent interview retired Chief Counsel of the FDA, Peter Barton Hutt, expressed his contention that the Agency can enforce on those who compound to “build inventory”, compound prior to having a prescription and compound pharmaceuticals already in FDA approved commercial manufacture.

Several recent cases, most notably Franck’s Lab compounded veterinary drug case, where twenty some odd polo ponies were found dead show the inconsistency of the FDA’s “discretionary” regulatory and enforcement policy.

What are the duties and rights of compounding pharmacies? What obligations do they hold and to whom do they answer? Who may inspect compound pharmacies and when? It becomes quite complicated as attempts at action by the FDA, State Boards of Pharmacy, legislatures and courts have left a patchwork of incomplete, overlapping laws, contradictory court rulings and uncertainty as to how much power any regulatory authority may exercise. For compounding pharmacies, their legal rights and obligations may not be that easy to define and should seek legal counsel to avoid FDA and state penalties that could lead to costly private lawsuits as well.

10th Circuit Holds Opinions of Expert, Craig Good, are Bad and Reverses Multimillion Verdict

07 Sep 2012 00:00:00 -0800

In Hoffman v. Ford Motor Company,[1] the Tenth Circuit Court of Appeals held that the opinions of expert, Craig Good, were inadmissible because they were not grounded in fact or science. The court reversed and remanded the verdict for entry of a judgment in favor of Ford.

In that case, plaintiff, Erica Hoffman, was rendered quadriplegic after she was ejected from the front passenger seat of a 1999 Ford Mercury Cougar Coupe in a rollover accident. Plaintiffs alleged this catastrophic injury was the result of an alleged defect in the seatbelt – the seatbelt allegedly unlatched during the accident. The claims against Ford alleged negligence and strict liability. Good, a mechanical engineer, was retained by the plaintiffs to offer opinions on whether: (1) Erica Hoffman was wearing her seatbelt at the start of the rollover accident; (2) the seatbelt functioned properly and as expected during the rollover; and (3) safer alternative seatbelt buckle designs were available at the time the vehicle was manufactured, which would have prevented or reduced her injuries. Good has appeared in a variety of product liability cases, including personal watercraft and other recreational vehicles.

As for the first question, based on a physical evaluation of the seatbelt in question, Good concluded plaintiff was wearing her seatbelt at the onset of the rollover. Having reached that conclusion, Good then opined the seatbelt must have malfunctioned for the plaintiff to be ejected from the vehicle and claimed the seatbelt was released due to inertial unlatch. He based this opinion by calculating the amount of vertical gravitational force necessary for this phenomenon to occur. To render this calculation, he subjected eighteen seatbelt buckles, similar in design to the plaintiff’s seatbelt, to a series of acceleration tests conducted in a laboratory. He did not, however, include the plaintiff’s seatbelt in his acceleration tests. He also limited his testing to the seatbelt hardware and did not include any other component (the webbing or steel stalk) in the testing. According to Good, his tests established that inertial unlatch thresholds decreased as the angle increased.

In his expert report, Good recognized the importance of comparing rollover crash test data to ascertain whether the results could be duplicated “in the real world.”[2] Notably, he claimed there was insufficient real world rollover crash test data to make this comparison. So, he compared his results to horizontal plane crash tests instead. Based on this analysis, Good concluded the plaintiff’s seatbelt buckle “most probably” inertially unlatched during the rollover.[3] Notably, at trial, he abandoned his reliance on the horizontal plane crash tests and, instead, relied on the opinions of the plaintiff’s accident reconstruction expert that the necessary accelerations could occur on the vehicle structure; but, he did not explain why the accelerations would have been present on the seatbelt buckle.

Ford repeatedly challenged Good’s opinions throughout the proceedings on the grounds that they were irrelevant and inadmissible. In that regard, it argued that Good failed to determine whether the amount of force, which he opined was necessary to bring about this phenomenon in the laboratory setting, occurred or could have occurred in the rollover accident. Although Good identified several points in the accident sequence where he believed sufficient forces would have been generated to cause inertial unlatch, neither he nor plaintiff’s accident reconstruction expert performed any calculations or tests to determine the levels of acceleration being applied on the buckle at the identified points. Ford further argued that Good’s opinions were flawed because he ignored existing rollover crash test data in which accelerations on seatbelt buckles were measured. Those tests did not produce inertial latch at the lowest threshold, which Good determined was necessary. The trial court allowed Good to offer his opinions despite the apparent flaws in his analysis. The jury found Ford 25% liable. The judgment against Ford was $4.5 million.

On appeal, Ford argued the trial court failed to perform its gatekeeper role before allowing the jury to hear Good’s inertial latch opinions and abused its discretion by admitting the opinions because his methodology was neither relevant nor reliable. The Tenth Circuit agreed and held the inertial unlatch opinions should not have been admitted because there was “no scientific link between Good’s tests [sic] results and those accelerations present or likely to have been present on [the plaintiff’s] buckle in the subject accident.”[4] The court concluded that Good’s opinions were “based on mere speculation or assumptions that the levels of acceleration he found necessary to inertially unlatch similar buckles in the laboratory occurred or could have occurred on [the plaintiff’s] buckle.”[5]

As for the trial court’s gatekeeper role, the court articulated the analysis under the Daubert standard,[6] which must be applied when the admissibility of an expert’s opinion is challenged. In that regard, a trial judge must “assess the reasoning and methodology underlying the expert’s opinions and determine whether it is both scientifically valid and applicable to a particular set of facts.”[7] This did not occur and the trial court was criticized for not being “a sufficiently exacting gatekeeper.”[8] For example, no hearing was held on the Daubert issue and the trial court failed to analyze whether the purported insufficient testing actually undermined the validity and relevance of Good’s opinions. The trial court also improperly shifted the burden to Ford to demonstrate why Good’s opinions were unreliable and irrelevant; rather than requiring the plaintiffs to show that the opinions were admissible. The trial court also incorrectly considered Ford’s demands for a comparison of rollover crash test data as unfair – even though Good acknowledged that such a comparison was necessary.

While the outcome in Hoffman is not unique, the opinion provides an excellent discussion regarding how a trial court should execute its role as the gatekeeper of evidence. It further underscores the importance of holding expert opinions to exacting standards to ensure that a jury’s role, as fact finder, is not undermined by scientifically and factually invalid expert testimony.

To review the Hoffman opinion, click on the link below:

Click here to download related files

[1] No. 10-1137, 2012 WL 3518897 *1 (10th Cir. Aug. 16, 2012).

[2] Hoffman, 2012 WL 2899053 at *4.

[3] Id.

[4] Id. at *11.

[5] Id.

[6] Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579, 589-91 (1993).

[7] Hoffman, 2012 WL 3518897 at *8.

[8] Id. at *1.

Electronic Document Production: A Cautionary Tale

22 Aug 2012 00:00:00 -0800

On August 3, 2012, a U.S. District judge in the Southern District of Florida levied sanctions against TD Bank and its outside counsel in Coquina Investments v. Rothstein, 2012 WL 3202273 (S.D. Fla. Aug. 3, 2012, Case No. 10-60786). Coquina was a high profile case regarding TD Bank’s alleged assistance with a Ponzi scheme that resulted in a $67 million verdict against the bank. Judge Marcia Cooke issued a post-trial order against the bank for concealing evidence that would have been relevant at trial and against its counsel for negligently failing to turn over documents.

Judge Cooke cited numerous discovery violations in the order, including the failure to conduct an adequate search for documents. Perhaps most importantly, however, was the finding regarding the failure to produce a document in a manner that preserved the document’s qualities. The order stated the document “should have been produced in either a native format or in color tiff.” The order also criticized counsel for failing to realize that some information was lost due to formatting and for failing to realize “that further printing or copying of the document would result in degradation of the document’s clarity or quality.” Additionally, the order criticized outside counsel’s reliance on the bank’s corporate in-house counsel to locate relevant documents. Using particularly strong language throughout the order, the judge referenced the bank’s outside counsel’s use of more than 200 attorneys on the case as “too many cooks spoiling the broth” and went on to describe the litigation as being “conducted in an Inspector Clouseau-like fashion.”

As part of the sanctions against the bank, the judge made the following finding of fact: “I will therefore direct that the facts that TD Bank’s monitoring and alert systems were unreasonable and that TD Bank had actual knowledge of Rothstein’s fraud be taken as established for purposes of this action.” As a result of these findings of fact, it may be impossible for the bank to successfully appeal the $67 million verdict against it. The judge also ordered that the bank and its counsel must pay attorney’s fees and costs for Coquina Investments’ added expenses resulting from the violations.

This ruling is one of many recent discovery opinions throughout the country that emphasize the significant need for attorneys to closely advise and work with their clients on discovery issues. Further, in regard to electronic discovery, counsel and clients should take steps to preserve documents in their native forms. Producing hard copies of documents, or even electronic copies in an altered format may no longer be enough to satisfy a discovery request. Attorneys should also diligently endeavor to recognize deficiencies in the documents produced by their clients and use due diligence in ensuring that discovery requests are properly fulfilled.

Florida’s Economic Loss Rule: No Tort Claim for Damage to Product Only

15 Aug 2012 00:00:00 -0800

Florida’s economic loss rule bars tort claims for economic losses arising when a product malfunctions and damages only itself. In Florida Power & Light Co. v. Westinghouse Elec. Corp., 510 So. 2d 899 (Fla. 1987) and Casa Clara Condominium Ass’n., Inc. v. Charley Toppino and Sons, Inc., 620 So. 2d 1244 (Fla. 1993), the Florida Supreme Court adopted the economic loss rule in Florida.

In 2004, the Florida Supreme Court reiterated the economic loss rule as it applies to products liability claims in Indemnity Insurance Company of North America v. American Aviation, Inc., 891 So. 2d 532 (Fla. 2004). The Court held that a manufacturer has no duty beyond that arising from contract to prevent a product from malfunctioning or damaging itself. As a result, a plaintiff cannot bring strict liability, negligence, or other tort claims against a manufacturer based upon an alleged product defect where there is no bodily injury or damage to other property. Although the court noted that strict liability is applicable in cases where plaintiff has suffered personal injury or property damage, the court refused to extend strict liability to cover economic losses absent bodily injury or damage to other property. In a concurring opinion, Justice Cantero explained that the result of allowing tort claims solely where a product damages itself would result in “contract law drowning in a sea of tort.” (quoting East River Seamship Corp. v. Transamerica Delaval, Inc., 476 U.S. 858, 866 (1986)).

Thus, under Florida law, when parties are not in sales or transactional privity with each other, tort law provides a remedy for product defects only when personal injury or damage to other property is at issue. By contrast, when two parties are in privity with each other, the remedy for economic damages resulting from a product defect which damages only the product itself, rests in contract./warranty law. The overlap of these two causes of action is prohibited by the economic loss rule.

US Supreme Court Holds that Cost of Translating Foreign Documents Does Not Fall Within the Scope of 28 U. S. C. § 1920(6)

10 Jul 2012 00:00:00 -0800

On May 21, 2012, the Supreme Court of the United States issued its opinion in Taniguchi v. Kan Pacific Saipan, Ltd., which concerned whether the cost of translating foreign documents is a taxable cost under 28 U. S. C. § 1920(6). In that case, the plaintiff, a professional Japanese baseball player, alleged he sustained personal injuries when his leg broke through a wooden deck on the defendant’s resort property. He sought damages for lost income from contracts he could not honor as a result of the injuries. The trial court granted the defendant’s motion for summary judgment on the grounds that the plaintiff offered no evidence that the defendant had notice of a defect in the wooden deck or otherwise failed to exercise reasonable care. The trial court also awarded the defendant costs, which included the cost of translating Japanese documents into English. The Ninth Circuit Court of Appeals affirmed the summary judgment and the costs awarded to the defendant.

The question before the Court was whether the phrase “compensation of interpreters” extends to translation of documents. Under § 1920(6), the “cost of interpreters,” among other items, may be recovered as a taxable cost by a prevailing party. The Court held that the term “interpreter” as used in the statute does not include the cost of translating foreign documents. In so holding, it reasoned that the “the ordinary and technical meanings of [the term] ‘interpreter,’ as well as the statutory context in which the word is found, lead to the conclusion that § 1920(6), does not apply to translators of written materials.”

To see the full Opinion, click here.