 What happens if the equipment you buy turns out to be a hazard?Patricia M. Ayd and Merle M. Troeger
D eveloping and marketing new chemical products and identifying new applications for existing products are exciting scientific and business ventures. At the same time, these activities may turn out to be the foundation of future lawsuits by persons who who claim they were injured by those products or applications. What happens when your company is sued for injuries from negligence or products liability? What issues arise, and how will your company defend itself?
The scenario Thirteen years ago, Mr. Hotshot, a Premier R&D employee, suggested that Premier begin developing a new product, Super-PTFE, which would incorporate PTFE resins. Premier declined to pursue the project. Mr. Hotshot then resigned and began his own business with the intention of developing and marketing Super-PTFE independently. Run-Rite, a manufacturer of orthopedic prostheses, purchased the right to manufacture Super-PTFE from Hotshot. It then obtained approval from the U.S. Food and Drug Administration to market its new knee-replacement prosthesis made with Super-PTFE. Run-Rite purchased PTFE from Premier and combined it with other ingredients to create Super-PTFE. Run-Rite then began producing and selling knee-replacement prostheses, with great financial success. Premier was aware of Run-Rite's application of PTFE and actively began to market PTFE to Run-Rite and other companies for use in prosthetic devices. Now, 10 years after the first Run-Rite prosthesis was implanted, Premier, Run-Rite, Hotshot, and 15 surgeons are defendants in a lawsuit seeking millions of dollars in damages brought by patients whose Super-PTFE knee replacements failed.
Claims for recovery
The plaintiffs sought many millions of dollars in damages.
The defense of Premier
Ms. Smith soon receives a call from Help Is Us's attorney, Mr. Gogetum. He informs her that his firm will represent Premier and will obtain an extension to answer the complaint. Premier assigns Ms. Smith the task of cooperating with the attorneys.
Mr. Gogetum schedules a meeting to review the allegations of the complaint. Ms. Smith explains that she knows nothing of the history and marketing of PTFE because it was developed originally by Primo. Nonetheless, before the meeting Mr. Gogetum wants Ms. Smith to compile all of Premier's and Primo's documents concerning PTFE and to provide a list of all independent contractors ever involved in the research, development, and/or marketing of PTFE. The attorney sends her a copy of Federal Rule of Civil Procedure 26(a) (1).
Mr. Gogetum arrives at Ms. Smith's office with briefcases, legal pads, and associates in tow to ask questions about long-past events. Ms. Smith explains that Premier has no central record-keeping department and that records are in boxes, in various desk drawers, at scientists' homes, and on computer disks. She is not sure whether Premier acquired any of Primo's documents relating to the development of PTFE. Ms. Smith asserts that Premier cannot provide the requested information. Mr. Gogetum responds that "no" is not an acceptable answer. Not only must the documentation be provided, but, as Ms. Smith is investigating, she must be looking for information to answer an enormous list of questions, as shown in the box on page 16. Her plea that the investigation is too burdensome falls on deaf ears.
Legal theories underlying the products liability case
Negligence. A claim of negligence focuses on whether the defendant's conduct fell below a standard of care established by law for protecting others against unreasonable risk of harm (2). In the context of a developer and/or manufacturer of a product, negligence is the failure to act as a reasonably prudent product developer-manufacturer would under the same or similar circumstances to protect consumers from unreasonable risks.
In this case, Premier will be judged on the basis of what was known, or reasonably should have been known, about PTFE and its safety when the product was sold to the codefendants for use in prostheses and/or at the time of the sale of the prostheses to the individual plaintiffs. Because PTFE is a product that Premier has continued to market over a period of time, Premier may have a duty of care to the ultimate user of PTFE. This duty may include the requirement to keep informed of the state of the art with respect to PTFE and to issue appropriate warnings if new information about dangers of the product's use come to light.
Because the focus is on the reasonableness of Premier's conduct, the attorneys are interested in how Premier conducted its business with respect to PTFE. Because Premier is judged by a reasonable manufacturing standard, the conduct of other manufacturers and knowledge of other manufacturers are relevant. As a result, the attorneys are asking questions geared to determining whether Premier's and Primo's conduct was reasonable in light of what was known in the industry within the relevant time frame.
Claim of warranty. The claim of warranty focuses on whether Premier made any express or implied representations about PTFE that turned out to be false or misleading. An express warranty is an affirmation of the fact or promise about the goods by a description of the goods or by use of a sample or model (3). The most common implied warranties are a warranty that the product "is fit for the ordinary purposes for which such goods are used" (4) or that it is "fit for a particular purpose" (5). So the focus of this claim is to determine whether the product does what it is supposed to do based on what was said about its characteristics or performance. The attorneys will be searching for any documentation of communications relating to the virtues or uses of PTFE or limitations on its use.
Strict products liability. Strict products liability (6) focuses not on fault or the promises made by the seller, but on whether the product is defective and unreasonably dangerous to the ultimate user. Premier may have a direct responsibility to the surgical patients who received Super-PTFE knee replacements even though Premier's sale of PTFE was only the first step in an extended chain of scientific and commercial events. The focus of the attorneys' questions is on what was known about PTFE, what its uses were, and whether there were any improper applications and safety concerns. Other important facts on strict products liability are given in the box on the next page.
Whatever the underlying legal theory, the defense will focus on Premier's ability to prove that its employees acted in a reasonable manner, that the product was truthfully marketed, and that PTFE was not defective for its intended purposes. These defenses require that Premier be able to show what its employees did, what they knew, and/or what they should have known or done at the times relevant to the sale and use of PTFE and Super-PTFE.
In the clear?
Ms. Smith decides that the solution to this documentation problem is to provide information that will show that Premier has always met all of the industry and governmental standards and regulations with respect to PTFE. Because she is sure that Premier has precisely and meticulously followed the safeguards in place to ensure such compliance, she is confident that she can prove this fact and there will be no need for this extended investigation. "Wrong," says her attorney.
Industry standards and the state of the art
Furthermore, even if Premier has fully complied with industry standards, a court may find that those standards are inadequate and that higher standards are needed. (Some courts say that federal safety regulations provide the absolute standard of care for negligence cases, rather than merely nonconclusive evidence of the appropriate standard [8]). Courts have recognized that industry standards do not always represent the state of the art.
Mr. Gogetum provides a timely example: When constructed, the Titanic contained a sufficient number of lifeboats to meet then-current standards for the number of lifeboats per ship. However, because the regulations were old and the Titanic was the newest ship in the port, those regulations were not reasonable safety requirements based on the state of the art. The regulations had not kept pace with the shipbuilders' ability to increase the number of passengers per ship. Mr. Gogetum is sure that the plaintiffs' attorneys will be combing the literature and talking with experts to establish that the PTFE and/or Super-PTFE industry standards and regulations were outdated in light of medical studies indicating that breakdown of the PTFE prosthesis could result in the release of chemicals with a profound effect on the recipients' immune systems.
Instead of discovering a sure defense to the claims (i.e., compliance with standards and regulations), Ms. Smith has now just prompted the attorney to ask more questions to which she has no ready answers: What actions did Premier take to ensure that industry standards reflected the state of the art and that the application of those standards was reasonable under the circumstances? Why did the regulations or standards apply to the product in question? Were the standards promulgated by industry alone or with input from consumers, scientists, or end users of the product? What testing and research was the standard based upon? Were the proper testing methodologies used in that research? Was a sound and reliable scientific methodology used to create the standard?
There are still more questions: Were there other standards from other organizations that are inconsistent with the standards applied by Primo and/or Premier? If so, what was Premier's rationale for following the standards selected? Was governmental regulation based on the attempt to create a minimum level of performance, and would a higher level have been more reasonable under the circumstances? Did the standards take into account the various uses of the product or the environment in which it would be used? When and how were the standards updated?
Finally, was there any disagreement within or outside of the industry concerning the use of PTFE or Super-PTFE because the standards were too broad, too narrow, too weak, or too stringent? Were tests run in support of Run-Rite's application to the FDA? If not, what information was provided to the FDA to support the safety and efficacy claims? Had PTFE been approved by the FDA?
The investigation
She then begins talking with the chemists still employed by Premier who have worked on the development and marketing of PTFE since its inception at Primo. She learns that there are boxes of documents in Dr. Packrat's garage. Packrat has no idea of the boxes' contents, only that he had packed them up when Premier bought Primo and changed the location of the laboratory. He believes that a couple of other retired employees also have records, including those relating to the initial testing of PTFE. One of those people has moved to Arizona, so those documents may be gone now.
Dr. Packrat also remembers an incident in which complaints about the use of PTFE were raised when Dr. Madd attended a conference sponsored by the National Academy of Clinical Ecologists. He thinks that one of the topics was the effect of exposure to certain chemicals on the autoimmune system. Dr. Packrat thinks Premier looked into this, but quite frankly, he doesn't put much stock in clinical ecology, so he ignored the issue. He also remembers some discussion that Premier did not want to develop Super-PTFE. Maybe it was because of potential liability.
The smoking guns
Ms. Smith investigates further and determines that Dr. Madd left Premier under unfortunate circumstances, expressing anger that the chemical industry was not taking the concerns of the clinical ecologists seriously. Finding no documents that indicate any follow-up to Dr. Madd's memo, her first impulse is to wish this memo away (or worse, shred it). She resists this temptation and gives Dr. Madd's memo to the defense lawyers. Chances are that Dr. Madd has been contacted by the other side and, angry at Premier for firing him, has turned over his yellowed copy to the plaintiffs' lawyers.
Ms. Smith looks into Mr. Hotshot's parting with Premier. She finally uncovers the minutes of an R&D meeting in which it was stated that development of Super-PTFE was not pursued because of financial considerations. Premier's limited resources, according to the minutes, would be more wisely spent on development of a totally unrelated project. No concerns about the safety of Super-PTFE were raised. She continues to investigate. A retired founder of Primo who stayed with Premier for a few years remembers the Dr. Madd incident and an ensuing discussion that took place at a special board meeting. The minutes are tracked down, and it is determined that the studies presented at the conference did not require further investigation. The prostheses' failures were related to surgical techniques and improper sizing of the prostheses, not the use of PTFE or Super-PTFE. The reports of chemical sensitivity were based on unscientific research methodologies. Review of respected peer-reviewed medical journals did not support the conclusions.
Don't become Premier
Maintain proper insurance in the proper amounts to protect against liability. Understand the insurance policies. Conduct insurance audits with your attorney and insurance representatives to ensure proper coverage and to understand areas where protection might not be available. Maintain a history of your insurance policies, including declaration sheets, policies, and endorsements. This is important because your insurance company probably will not keep these records. Establish procedures to respond to the receipt of a complaint or other legal notices. Missed deadlines may spell disaster.
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