Freeman v. Hoffman-La Roche, Inc.

618 N.W.2d 827

260 Neb. 552

Aimee FREEMAN, appellant, v. HOFFMAN-La ROCHE, INC., a corporation, appellee.

No. S-98-1095.

Supreme Court of Nebraska.

October 27, 2000.

Jeffrey A. Silver, Omaha, for appellant.

Jill Vinjamuri and Michael G. Connery, of Kutak Rock, Omaha, for appellee.

HENDRY, C.J., WRIGHT, CONNOLLY, GERRARD, STEPHAN, McCORMACK, and MILLER-LERMAN, JJ.

CONNOLLY, J.

In this appeal, we reconsider our approach to products liability for defects in prescription drugs in light of changes in the law and the release of Restatement (Third) of Torts: Products Liability §§ 1 to 21 (1997) (Third Restatement). The appellant, Aimee Freeman, filed a petition alleging seven theories of recovery against the appellee pharmaceutical company, Hoffman-La Roche, Inc. (Hoffman). She seeks damages for injuries she sustained following her use of the prescription drug Accutane. Hoffman demurred on the basis that the petition failed to state a cause of action. Based on our decision in McDaniel v. McNeil Laboratories, Inc., 196 Neb. 190, 241 N.W.2d 822 (1976), the district court dismissed with leave to amend in order to allow Freeman to plead facts that at the time Accutane was approved by the U.S. Food and Drug Administration (FDA), Hoffman committed fraud as part of the approval process. Freeman stood on her petition, and the action was dismissed with prejudice.

I. BACKGROUND

Freeman's operative petition alleged the following facts: On or about September 23, 1995, Freeman presented herself to her physician for treatment of chronic acne. After examination, her physician prescribed 20 milligrams daily of Accutane. Hoffman is the designer, manufacturer, wholesaler, retailer, fabricator, and supplier of Accutane.

Freeman took the Accutane daily from September 27 through October 2, 1995, and from October 4 through November 20, 1995. Hoffman alleged that as a result of taking the Accutane, she developed multiple health problems. These problems included ulcerative colitis, inflammatory polyarthritis, nodular episcleritis OS, and optic nerve head drusen. As a result, Freeman alleged that she sustained various damages. Freeman alleged that the Accutane she took was defective, misbranded, and mislabeled. She alleged that Hoffman knew that Accutane was dangerous and/or posed significant health risks and that despite this knowledge, Hoffman misled the medical community and their patients with incomplete information regarding its safety by failing to disclose the side effects that Freeman suffered. She also alleged that Hoffman made misrepresentations regarding the safety and effectiveness of Accutane in order to induce medical providers to select Accutane instead of other available drug options. According to Freeman, she and her physician relied upon these misrepresentations.

Freeman alleged seven theories of recovery, the details of which are set out further in the analysis sections of this opinion: (1) strict liability on the bases that Hoffman distributed Accutane when it was not fit for its intended purpose and when the inherent risks outweighed the benefits of its use, and because it was unreasonably dangerous; (2) negligence on the bases that Hoffman performed negligent and careless research, testing, design, manufacture, and inspection of the product and failed to give adequate warnings of the risks of its use; (3) misrepresentation on the basis that Hoffman falsely represented to Freeman that Accutane was safe to use, thus inducing her to use the product; (4) failure to warn; (5) breach of implied warranty; (6) breach of express warranty; and (7) fear of future product failure on the basis that the actions of Hoffman caused Freeman to suffer mental distress and anxiety.

II. ASSIGNMENTS OF ERROR

Freeman assigns that the district court erred in sustaining Hoffman's demurrer and in dismissing the petition with prejudice.

III. STANDARD OF REVIEW

In reviewing an order sustaining a demurrer, an appellate court accepts the truth of the facts which are well pled, together with the proper and reasonable inferences of law and fact which may be drawn therefrom, but does not accept conclusions of the pleader. Prokop v. Hoch, 258 Neb. 1009, 607 N.W.2d 535 (2000).

In determining whether a cause of action has been stated, the petition is to be construed liberally. If as so construed the petition states a cause of action, a demurrer based on the failure to state a cause of action is to be overruled. Danler v. Rosen Auto Leasing, 259 Neb. 130, 609 N.W.2d 27 (2000); Cobb v. Sure Crop Chem. Co., 255 Neb. 625, 587 N.W.2d 355 (1998).

If from the facts stated in the petition it appears that the plaintiff is entitled to any relief, a general demurrer will not lie. Fox v. Metromail of Delaware, 249 Neb. 610, 544 N.W.2d 833 (1996).

IV. ANALYSIS

Freeman contends that she has stated a cause of action for products liability under a variety of theories of recovery. Before proceeding, we believe it helpful to set forth a brief history of the general principles of products liability law and its development since the adoption of Restatement (Second) of Torts § 402 A (1965) (Second Restatement).

In products liability litigation, the notion of a defective product embraces two separate concepts. The first, commonly labeled as a manufacturing defect, is one in which the product differs from the specifications and plan of the manufacturer. The second concept of a defective product is one in which the product meets the specifications of the manufacturer but the product nonetheless poses an unreasonable risk of danger. This condition is generally characterized as a design defect. See Rahmig v. Mosley Machinery Co., 226 Neb. 423, 412 N.W.2d 56 (1987). A manufacturer may also be liable for a failure to warn. Id.

In products liability cases, there is a significant distinction between a manufacturer's liability as the result of negligent manufacture and its liability for the manufactured product on account of strict liability in tort. In a cause of action based on negligence, the question involves the manufacturer's conduct, that is, whether the manufacturer's conduct was reasonable in view of the foreseeable risk of injury; whereas in a cause of action based on strict liability in tort, the question involves the quality of the product, that is, whether the product was unreasonably dangerous. Id. See, also, Ortho Pharmaceutical Corp. v. Heath, 722 P.2d 410 (Colo.1986), overruled on other grounds, Armentrout v. FMC Corp., 842 P.2d 175 (Colo.1992) (describing types of defective product claims).

For organizational purposes, we address Freeman's allegations of product defects in terms of the defects which she attempts to allege: design, manufacturing, and warning.

1. DESIGN DEFECT

In her operative petition, Freeman alleges that Hoffman is strictly liable for her injuries on the bases that Accutane was not fit for its intended purpose, that the risks inherent in the design outweighed the benefits of its use, and that Accutane was more dangerous to Freeman than was anticipated due to undisclosed side effects. As facts supporting her allegations, Freeman alleges that Accutane is sold as an acne medication and that the side effects of Accutane present life-threatening conditions. Thus, Freeman's petition asserts that Hoffman is liable on the basis of a design defect. Hoffman, however, alleges that because Accutane was approved by the FDA, it is exempted from liability for a design defect pursuant to our decision in McDaniel v. McNeil Laboratories, Inc., 196 Neb. 190, 241 N.W.2d 822 (1976).

(a) Second Restatement § 402 A

In dealing with products other than prescription drugs, this court has recognized a manufacturer's liability in tort for design defects. Liability arises when an article a manufacturer has placed in the market, knowing that it is to be used without inspection for defects, proves to have a defect which causes an injury to a human being rightfully using the product. Rahmig, supra. We have also adopted and applied the test set out in the Second Restatement § 402 A. See Rahmig, supra.

Section 402 A at 347-48 provides:

(1) One who sells any product in a defective condition unreasonably dangerous to the user or consumer or to his property is subject to liability for physical harm thereby caused to the ultimate user or consumer, or to his property, if

(a) the seller is engaged in the business of selling such a product, and

(b) it is expected to and does reach the user or consumer without substantial change in the condition in which it is sold.

(2) The rule stated in Subsection (1) applies although

(a) the seller has exercised all possible care in the preparation and sale of his product, and

(b) the user or consumer has not bought the product from or entered into any contractual relation with the seller.

Comment i. at 352 provides that the rule stated in § 402 A

applies only where the defective condition of the product makes it unreasonably dangerous to the user or consumer.... The article sold must be dangerous to an extent beyond that which would be contemplated by the ordinary consumer who purchases it, with the ordinary knowledge common to the community as to its characteristics.

This is commonly referred to as the "consumer expectations test." See Annot., 73 A.L.R.5th 75 (1999).

In Rahmig v. Mosley Machinery Co., 226 Neb. 423, 412 N.W.2d 56 (1987), we discussed criticisms of the consumer expectations test as embodied in § 402 A and the application in other jurisdictions of a risk-utility test in determining whether a product is unreasonably dangerous. We noted, however, that the issue of whether to adopt a risk-utility test was not before us. We then specifically overruled cases indicating that a plaintiff must present evidence of a reasonable alternative design in cases involving design defects.

Since Rahmig, we have applied the consumer expectations test for strict liability. See, e.g., Haag v. Bongers, 256 Neb. 170, 589 N.W.2d...