A couple of years ago, we chastised a Third Circuit panel in our “Wrong Court” post, pointing out that its decision to declare an Internet marketing platform a “seller” under Pennsylvania law improperly usurped state judicial power under Erie Railroad Co. v. Tompkins, 304 U.S. 64 (1938). That decision, Oberdorf v. Amazon.com, Inc., 930 F.3d 136 (3d Cir. 2019), was subsequently vacated, rehearing granted on precisely these grounds, and ultimately certified to the Pennsylvania Supreme Court for resolution. See Oberdorf v. Amazon.com, Inc., 818 F. Appx. 138 (3d Cir. 2020). That was the proper disposition under Erie because state courts, not federal courts exercising diversity jurisdiction, should decide whether to recognize novel theories of tort liability. As the United States Supreme Court has repeatedly stated:
[A] federal court is not free to apply a different rule however desirable it may believe it to be, and even though it may think that the state Supreme Court may establish a different rule in some future litigation.
Hicks v. Feiock, 485 U.S. 624, 630 n.3 (1988); accord, e.g., Boyle v. United Technologies Corp., 487 U.S. 500, 517 (1988); Day & Zimmerman, Inc. v. Challoner, 423 U.S. 3, 4 (1975). For a complete discussion of related United States Supreme Court precedent, see this post.
Perhaps no circuit has been as firm in enforcing the federalist principle that federal courts applying state law should show such restraint than the Third Circuit. In “Wrong Court” we listed over a dozen examples: Sheridan v. NGK Metals Corp., 609 F.3d 239 (3d Cir. 2010); Travelers Indemnity Co. v. Dammann & Co., 594 F.3d 238 (3d Cir. 2010); Lexington National Insurance Corp. v. Ranger Insurance Co., 326 F.3d 416, 420 (3d Cir. 2003); Werwinski v. Ford Motor Co., 286 F.3d 661 (3d Cir. 2002); City of Philadelphia v. Beretta U.S.A. Corp., 277 F.3d 415 (3d Cir. 2002); Camden County Board of Chosen Freeholders v. Beretta, U.S.A. Corp., 273 F.3d 536, 541-42 (3d Cir. 2001); Northview Motors, Inc. v. Chrysler Motors Corp., 227 F.3d 78, 92 n.7 (3d Cir. 2000); Leo v. Kerr-McGee Chemical Corp., 37 F.3d 96, 101 (3d Cir. 1994) Adams v. Madison Realty & Development, 853 F.2d 163 (3d Cir. 1988); Falcone v. Columbia Pictures Industries, 805 F.2d 115 (3d Cir. 1986); Bruffett v. Warner Communications, 692 F.2d 910 (3d Cir. 1982); McKenna v. Ortho Pharmaceutical Corp., 622 F.2d 657 (3d Cir. 1980). For a more complete discussion of this Third Circuit precedent (as of 2009), see this post.
Unfortunately, Erie has been transgressed, indeed ignored, again – this time in the MDL context, which makes the error particularly dangerous (a novel state law theory exerts settlement pressure in thousands of cases), and particularly hard to correct (judicial errors disadvantaging defendants in MDLs are notoriously hard to appeal). The decision is In re Valsartan, Losartan, & Irbesartan Products Liability Litigation, 2021 WL 222776 (D.N.J. Jan. 22, 2021), and the issue is express warranty.
The Valsartan MDL, as readers may remember from our prior posts, involves claims that certain drugs were contaminated with nitrosamines – the same class of allegedly carcinogenic compounds that anyone who eats bacon or other processed foods is already exposed to in larger doses than could exist in tiny pills. Since it’s an MDL – which more properly stands for “Maximized and Distorted Litigation” – plaintiffs sued everyone conceivable under every conceivable theory of liability, and some that haven’t been conceived yet.
One of the latter types of theories was involved in today’s decision. Plaintiffs were suing over generic drugs, which means they have every incentive to be creative to surmount the formidable barrier of generic preemption. See generally our Generic Preemption Scorecard. So they came up with an “express warranty” theory of liability that no court anywhere (federal or state) had adopted.
The drug in question is “a drug of choice in lowering high blood pressure.” 2021 WL 222776, at *5. Further, the alleged impurities did not interfere with the drug’s anti-hypertensive activity, so every plaintiff received an effective medication. Id. at *3-4. It’s hard to come up with a valid express warranty claim under those circumstances. In brief, the express warranty theory the Valsartan plaintiffs invented was:
Common Law Breach of express warranties by all defendants because inclusion of defendants’ VCDs [Valsartan containing drugs] in the U.S. Orange Book serves as a warranty that the VCDs at issue constituted a generic drug that is bio-equivalent in every way to the patented drug.
Id. at *5 (emphasis original). Note the use of “common law” – there can be no dispute that the relevant issues involve predictions of state law to which the Erie doctrine applies.
After punting on state law notice issues (as Bexis’ book demonstrates – Beck & Vale, Drug & Medical Device Product Liability Deskbook §2.08, at nn. 16.1 to 16.2 (updated 2020) – the states vary widely on this issue), Valsartan describes plaintiffs’ warranty theory in stark detail:
Plaintiffs argue [manufacturer] defendants’ express warranties arise not from statements in the product labeling, but from the very act of naming the product by the generic active ingredient...
