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Volume 2, Number 1 • November 2000

December 7, 2000Product Liability Seminar

Atlanta, Georgia

January 11-13, 2001Midyear Meeting

State Bar of GeorgiaAtlanta – Swissôtel

February 21-23, 2001Defense Research Institute

Product Liability ConferenceLas Vegas, Nevada(312) 795-1101

March 15-18, 2001ABA

Product Liability AnnualCommittee Meeting

New Orleans, Louisiana(312) 988-6256

June 2001ABA

Tort & Insurance PracticeProduct LiabilityMegaconference

The seminarregistration form

is availableon page 13.

December 7 Seminar onNuts and Boltsof Product Liability Law

Plan to join us for an interesting CLE program on the Nuts and Bolts ofProduct Liability Law on December 7, 2000 at the Ritz-Carlton DowntownHotel in Atlanta. Special Moderator for the program will be Bernard Taylor ofAlston & Bird. Mr. Taylor is on a national trial team for product litigation forBaxter Healthcare Corporation and Allegiance Healthcare Corporation, andhe recently achieved a defense judgment in a product liability trial in Califor-nia. We are also delighted that Judge Gino Brogden will be participating in thepanel on Discovery Issues, drawing from his current experience on the benchas well as his useful insight from his past experiences representing both plain-tiffs and defendants. Defense counsel, Jay Bryan, and plaintiff's counsel, ChrisFarmer, will be panelists along with Judge Brogden on Discovery Issues. Inaddition, during the morning session, Ileana Martinez and Bryan Vroon willparticipate in a panel discussion onPretrial Considerations.

The luncheon speaker is MarkHerrmann of Jones, Day, Reavis &Pogue. Mr. Herrmann is a partner whohandles product liability cases and who

Judge Gino BrogdonBernard Taylor Ileana Martinez

continued on page 11

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speaker at national Product Liabilityseminars and has brought wonderfulenergy and ideas to our seminar. Wehave a terrific line-up of speakersfrom the plaintiff ’s bar, the defensebar, and the Bench. I hope you canjoin us.

Over the past year, we havereceived many requests for a “Nuts &Bolts” seminar, especially focusedon discovery and trial issues. As youwill see elsewhere in this newsletter,those topics will be fully covered at theseminar.

Thank you

A very special thank you to LesleySmith for her assistance with Sectionactivities. She has recently provided uswith several new ideas for Section ac-tivities that have been used with suc-cess by other Sections. Also, manythanks to Larry Jones and his helpful

Section Achievement AwardI am very pleased to announce that ourSection received an AchievementAward at the Annual Meeting ofthe State Bar. The award was madepossible by the hard work of manylawyers who spoke at our ProductLiability seminars and who contrib-uted articles to this newsletter over thepast year. Thank you!

I am also pleased to report that ourSection ended the 1999-2000 Bar yearwith its highest-ever number ofmembers – 466.

December 7 SeminarLaura Owens of Alston & Bird is co-chairing our next seminar, which is setfor December 7. Laura has practicedProduct Liability law for 15 years andspecializes in product liability litiga-tion involving medical devices andpharmaceuticals. She has been a

Stephanie E. ParkerJones, Day, Reavis & Pogue

staff for theircontinued as-sistance withour ProductL i a b i l i t ys e m i n a r s ,i n c l u d i n gthe one inDecember.

Best wishes for the upcomingHolidays. Please contact me if the Sec-tion can ever be of assistance to you.

Stephanie E. ParkerJones, Day, Reavis & Pogue3500 SunTrust Plaza303 Peachtree Street, NWAtlanta, Georgia 30308(404) 581-8552(404) 581-8330 - FAXSEParker@JonesDay.com

Significant Changes To Federal Rules Of Civil ProcedureTo Take Effect On December 1, 2000

By Gregory HanthornJones, Day, Reavis & Pogue

If you have not already done so, take alook at the amendments to the FederalRules of Civil Procedure that go intoeffect on December 1, 2000. Some ofthe differences are significant and ma-jor, including:

– The scope of discovery establishedby Rule 26(b) has been changed.The amendments set up a two tiersystem for discovery -- “party-con-trolled” and “court-ordered.” A

party, without order of court orstipulation, can obtain discoveryonly of “matter, not privileged, thatis relevant to the claim or defenseof any party, . . . .” Broader discov-ery “[f ] or good cause” can be or-dered, of “any matter [presumablyalso not privileged] relevant to thesubject matter involved in the ac-tion.” The Advisory Notes state --“The rule change signals to the court

that it has the authority to confinediscovery to the claims and defensesasserted in the pleadings, and sig-nals to the parties that they have noentitlement to discovery to developclaims or defenses that are not al-ready identified in the pleadings.”Adv. Ctee Note to Amended R.26(b). As a practical matter, for dis-covery that is not plainly directedto the claims or defenses in the

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Product Liability InstituteHeld In June

by Shannon SingletonStoll, Keenon & Park

On June 9, 2000, the Product Liability LawSection of the State Bar of Georgia held itsNinth Annual Product Liability InstituteSeminar in Atlanta. The day-long series oflectures and panel discussions was enjoyedby over 75 attorneys.

The morning session began with apanel discussion of litigators on both sidesof the bar, as well as in-house counsel. SaraTurnipseed of Nelson, Mullins, Riley &Scarborough in Atlanta acted as modera-tor. Panelists included Christine Buchananof GTE Service Corporation, MichaelMcGlamry of Pope, McGlamry, Kilpatrick& Morrison in Atlanta, and John Barrowof Winburn, Lewis & Barrow in Athens.The panel discussion focused on emergingtrends in Georgia product liability law andincluded an in-depth discussion of theOgletree decisions by Ms. Buchanan andMr. Barrow. These panelists treated the au-dience to a “behind-the-scenes” look at the case.Mr. Barrow and his firmrepresent the plaintiff inthis case and Ms.Buchanan was JudgeWendy Shoob’s law clerkon the case.

Much of the focus ofthis year’s Product Liabil-ity Institute Seminar wason the growing impor-tance of class action law-suits. During the morningsession, Richard “Doc”Schneider of King &Spalding discussed thePlaintiff ’s bar’s increasinguse of class action proce-dural devices to expandthe scope — and costs —of litigation. Mr.Schneider relied heavilyon his experience in theEngle case, the massive

smoking and health tobacco litigation classaction that recently concluded in Miami,Florida. During the afternoon session, Rob-ert Klonoff of Jones, Day, Reavis & Pogue’sWashington, D.C. office addressed some“cutting-edge” issues in product liabilityclass actions, including the 1998 Amend-ment to Rule 23 — Rule of Civil Proce-dure 23 (f ) — whereby Courts of Appealsmay permit an immediate appeal of a dis-trict court’s class action certification deci-sion. Mr. Klonoff, who is the author ofWest’s Nutshell on Class Actions, also ad-dressed the growing propensity of Plaintiff ’scounsel to file class action lawsuits in statecourt and Congress’s initiatives to curb thispattern. Specifically, Mr. Klonoff identified

Seminar speakers clockwise from top left: Doc Schneider, King & Spalding; Lee Wallace,Butler, Wooten; Dart Meadows, Meadows, Ichter & Trigg; Christine Buchanan, GTE;Robert Klonoff, Jones, Day, Reavis & Pogue; Sara Turnipseed, Nelson, Mullins.

pending bills in both the House of Repre-sentatives and Senate that would amend thediversity jurisdiction requirements for classaction cases so that removal to federal courtwould be easier.

During the lunch hour, William Can-non, Jr. of Cannon & Meyer von Bremenin Albany and a former President of theState Bar of Georgia discussed State Bar ini-tiatives to change the public’s perception ofattorneys. Mr. Cannon’s presentation in-cluded a videotape and radio announce-ments produced by the State Bar in con-junction with its efforts to create a betterimage for lawyers in our communities.

Other programs included a presenta-tion by Lee Wallace of Butler, Wooten,Overby, Fryhofer, Daughtery & Sullivan inAtlanta on the topic of plaintiff product li-ability automobile accident cases. Ms.Wallace’s presentation included an excellentPowerPoint presentation showing what to

look for — and what toavoid — when con-fronted with a productliability automobile case.Dart Meadows, who hasbeen actively involvedwith DRI, gave a talk onrecent case updates andprovided the attendeeswith a very useful sum-mary of recent cases. Fi-nally, William Plybon ofAlston & Bird in Atlanta,and Jonathan Engram ofWomble, Carlyle,Sandridge & Rice ofWinston-Salem, NorthCarolina discussed medi-cal experts and othermedical issues. The con-versation included a dis-cussion of requests forautopsy or testing andmotions in limine.

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Product liability lawsuits, particularlythose that involve wrongful death orpersonal injury, often require the ser-vices of a financial expert. In such situ-ations the financial expert can play anintegral part in the discovery processwith respect to document requests anddeposition questions and calculatingdamages for expert testimony or foruse in the settlement process. This ar-ticle will highlight the typical areas offinancial damages in product liabilitymatters and common mistakes thatexperts often make in the calculationof damages.

Damages related to wrongfuldeath and personal injury matters arethose that can be calculated with “rea-sonable certainty”. The types of dam-ages in these cases include lost earn-ings, lost fringe benefits, householdservices, medical expenses and the lossin value of a business due to the in-jury or death of a key person. Reliablestatistical data, which can be used as abasis for these calculations, can befound in sources such as the Bureauof Labor Statistics work life expectancytables, Vital Statistics Division of theNational Center for Health Statisticslife expectancy tables, Department ofLabor and U.S. Chamber of Com-merce statistics about fringe benefits,and industry, as well as state and localgovernment, data about salaries. Medi-cal and vocational experts can providea reliable basis to compute futuremedical and rehabilitation costs. Thereare many references and guides to per-sonal injury and wrongful death dam-ages that provide outlines and check-lists for items included in damages.

In addition to these more tradi-

tional categories of damages, someexperts will proffer more controversialdamages such as hedonic losses, orthose resulting from the lost enjoy-ment of life. Not only is quantifica-tion of these types of losses difficultand often speculative, due to the lackof statistical evidence, they are not ac-cepted in many jurisdictions. “Lostactive leisure”, which is accepted insome jurisdictions, applies to the timean injured party was active in leisureactivities such as jogging, tennis, or anyother activity that the injured party canno longer enjoy. Losses are typicallybased on the opportunity cost for do-ing the activity.

A financial expert can often beasked to assess reasonable punitivedamages or what is the maximumamount that is not considered exces-sive. For example, the California Su-preme Court ruled that a defendant’sfinancial condition must be presentedto the jury before punitive damagescan be imposed, because without thisinformation, a court is unable to de-termine whether or not the award isexcessive. Cases in both New York andNew Mexico have also considered thewealth of the defendant admissible forassessing punitive damages, and manycourts are now following suit.

Financial experts make a numberof common mistakes in determiningdamages for personal injury andwrongful death suits. The following isa list of mistakes to look for in a report:1. Earnings base: Past earnings are

not necessarily indicative of thefuture, such as with impending re-tirement or a line of work that re-quires upgrades in skills to retain

a level ofearningsor to in-c r e a s eearnings.Also, thein ju redp a r t ymay beworkingin a de-clining industry. Experts oftenmistake the time period for lostearnings to be the life expectancyof the injured or deceased, ratherthan the work life expectancy. Asin employment suits, often expertsdon’t consider the highest level ofwork that the injured party maybe able to reach or may have at-tained if the injured had lived.

2. Employee benefits: Common er-rors here include leaving benefitsout of the calculation or failing toconsider anticipated changes in thelevel of benefits.

3. Personal consumption: Plaintiff ’sheirs are not entitled to recover thedeceased’s personal consumptionspending; however, personal con-sumption expenses are ignored inpersonal injury claims.

4. Growth and discount rates: Theserates should be properly used intandem or growth rates may beignored if the “real rate” for dis-counting to the present value isused rather than the “nominalrate”. Improper selection and useof these rates is perhaps the mostcommon mistake made by experts.Growth rates for true growth of

Financial Damages in Product Liabilityby Denise HippsPhillips Hitchner Group, Inc.

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$2.6 Million VerdictReversed on Discovery

Ground

International Harvester Co. v.Cunningham,

245 Ga. App. 736 (2000)

The plaintiff was severely injured whena crank handle broke off a disc harrowand hit him in the face. The Court ofAppeals reversed the jury verdict inplaintiff 's favor because the trial courtabused its discretion when it refusedto compel the plaintiff to produce thecrank handle for an expert inspection.The plaintiff's expert had unlimitedaccess to the crank handle, yet Inter-national had only been given one op-portunity to test the handle. The courtwrote:“By preventing the parties from hav-ing equal access to the pivotal piece ofevidence, the trial court's denial ofInternational's request thwarted thevery purpose of discovery.”

Product Liability ClaimAgainst Pharmacy and

Pharmacist

Robinson v. Williamson,245 Ga. App. 17 (2000)

This action, with claims for bothmedical malpractice and product li-ability, was filed against Revco Dis-count Drug Centers and one of itspharmacists. The product liabilityclaim was based on the theory that thedefendants sold a defectively packagedand mislabeled product. The GeorgiaCourt of Appeals held that, underO.C.G.A. § 51-1-11.1 (b), the strictproduct liability statute applies onlyto a manufacturer, not a product seller.The appellate court then held that apharmacist and pharmacy are productsellers, not manufacturers. The courtheld that the remaining claims werebarred by the medical malpractice stat-ute of repose.

Insufficient Evidence ofProduct Liability Defect in

Thanksgiving Ham

Mann v. D.L. Lee & Sons, Inc.245 Ga. App. 224 (2000)

The plaintiffs here claimed thatdefendant's Thanksgiving ham wasdefective, thus causing food poisoning.The trial court granted summary judg-ment, and the Court of Appeals con-firmed. Finding that the plaintiffs hadintroduced no direct evidence that theham was tainted, the court held thatthe plaintiffs had not carried their bur-den of excluding every other reason-able hypothesis as to the cause of theirillness. The court further found thatthe mere fact that the plaintiffs becamesick after eating the ham was insuffi-cient, given that the plaintiffs ate otherfoods at the same time they ate theham, that the ham had not been tested,and that the ham did not look, smellor taste bad.

pleading, the burden of demonstrat-ing “good cause” will rest upon therequesting party.

– Rule 26(a)(1) has been revised sothat the initial disclosures cannotbe obviated by local rules. BUT, if“a party objects during the [Rule26(f )] conference that initial disclo-sures are not appropriate in the cir-cumstances of the action and statesthe objection in the Rule 26(f ) dis-covery plan,” then the disclosureswill not have to be made until the

court resolves the objection.Amended R. 26(a)(1).

– Rule 26( a)(1) disclosures have beennarrowed to only require disclosureof material which the disclosingparty intends to “use to support itsclaims or defenses.” This replaces the“relevant to disputed facts allegedwith particularity in the pleadings”standard of current Rule 26(a)(1).CAVEAT — the “use to support” isto be given a broad meaning. TheAdvisory Committee Notes statethat “use” includes use in motion

practice, court conferences, andeven “use of a document to ques-tion a witness during a deposition.”Adv. Ctee Note to Amended R.26(a).

– Absent court order, Amended Rule30 now limits depositions to one dayof 7 hours, excluding breaks.

As expressed by Committee mem-bers at an October 26 ALI-ABA CLE,the rule changes are designed to en-courage/prod District Judges to take amore active role in policing overlybroad, abusive discovery.

Significant Changes to Federal Rulescontinued from page 2

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Industrywide Aggregated ClaimsPotential Claims by the United Statesby Peter BiersteckerJones, Day, Reavis & Pogue

In the last few years, insurers, Stategovernments, and the United Stateshave made headlines by suing tobaccocompanies on the theory that smok-ing caused or exacerbated illnesses forwhich the insurers and governmentshad to pay the costs of treatment; thesuits seek to recoup those costs. Whileit may be tempting to ignore these suitsas simply another aggressive newweapon in the tobacco wars, thatwould be imprudent. To the contrary,this general theory applies equally tomanufacturers of every product inAmerica that could be argued to causeor exacerbate illness or injury.

Manufacturers of medical drugsand devices have particular reason tobe concerned. In its suit against thetobacco industry, the United States hasinvoked the very same statutory pro-visions — the Federal Medical CareRecovery Act (“MCRA”), 42 U.S.C.§§2651-2653; and the Medicare Sec-ondary Payer provisions of the SocialSecurity Act (“MSP”), 42 U.S.C.§1395y(b)(2) — upon which it reliedto intervene in class action settlementsinvolving pacemaker leads, bonescrews, breast implants, and diet drugs.See, e.g., Wilson v. Siemens Pacesetter,Inc., et al., Case No. C-1-93-0188(S.D. Ohio); Report of the AdvisoryCommittee on Civil Rules and the Work-ing Group on Mass Tort to the ChiefJustice of the United States and to theJudicial Conference of the United States,February 15, 1999, App. at 79 (bonescrews); U.S. v. Baxter Int’l, Inc., et al.,Case No. CV-00-BU-0837-S (N.D.Alabama) (breast implants); and In Re:Diet Drugs (Phentenmine, Fenflura-

mine, Dexafenfluramine) Products Li-ability Litigation, MDL Doc. No.1203 (E.D. Pennsylvania).

In ways that threaten every indus-try, including drug and medical devicemanufacturers, the United States, inits pursuit of the tobacco industry,unjustifiably seeks to expand the reachof these statutes and to pursue aggre-gate claims, dispensing with individu-alized proof of tort liability tradition-ally required by the Constitution.

Stretching the Reach of MCRAThe MCRA belatedly was adopted

in response to the Supreme Court’sdecision in United States v. StandardOil, 332 U.S. 301 (1947). See, e.g.,United States v. Trammel, 899 F.2d1483, 1486 (6th Cir. 1990). StandardOil held that, absent explicit congres-sional authorization, the United Stateshad no right of action against atortfeasor to recover medical expendi-tures incurred by the United States asa result of tortious injury to a soldier.332 U.S. at 304.

As originally enacted in 1962,MCRA authorized the Government torecover the “reasonable value” of medi-cal care that it “furnished” to “a per-son who is injured or suffers a disease. . . under circumstances creating a tortliability upon some third person . . .to pay damages therefor.” Pub. L. No.87-693, §1, 76 Stat. 593 (1962). De-spite the express statutory languagelimiting the right of recovery to healthcare “furnished” by the Government,Federal agencies and most courts in-terpreted this provision as reachinghealth care either directly furnished by

the UnitedStates orpaid for outof generalG o v e r n -ment rev-enues. See,e.g., 32C.F.R. §199 .12(e )(1986) (De-partment of Defense); 32 C.F.R. §842.118 (1990) (Air Force); Commer-cial Union Ins. Co. v. United States, 999F.2d 581, 586 (D.C. Cir. 1993) (read-ing “furnished” to encompass medicalexpenses “paid for by the Govern-ment”); but see Guyote v. MississippiValley Gas Co., 715 F. Supp. 778, 780(S.D. Miss. 1989) and United States v.Fort Benning Rifle & Pistol Club, 387F.2d 884, 887 (5th Cir. 1967) (bothquestioning whether MCRA reachedmedical care paid for out of generalFederal funds but not directly fur-nished by the Government). A con-forming and clarifying amendmentaccordingly was made to MCRA in1996, authorizing recovery for health-care costs that the Government either“furnished” or “paid for.” Pub. L. No.104-201, §1075(c)(4), 110 Stat. 2663(1996) (codified at 42 U.S.C.§2651(a)).

Since its enactment in 1962 andcontinuing after its amendment in1996, MCRA consistently has beenapplied only to recoup the costs ofmedical care either directly furnishedby the Government or paid for outof general Federal revenues, such asthe costs of health care provided to

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military personnel and veterans.MCRA has never been applied to re-cover the costs of medical care undersocial or private insurance programs,particularly health care providedthrough Medicare, 42 U.S.C. §§1395i, 1395t, or the Federal EmployeeHealth Benefits Act, 5 U.S.C. § 8901,et seq. (“FEHBA”). At no time havethe agencies directly responsible for ad-ministering social and private insur-ance programs, such as Medicare andFEHBA programs, adopted regula-tions to implement MCRA. To thecontrary, they have expressly deter-mined that MCRA is inapplicable pre-cisely because the health-care programsthey administered are a form of insur-ance. See, e.g., Health Care FinancingAdministration (“HCFA”) Ruling 79-4 (1979), reprinted in 52 Fed Reg. at26,088, 26,089 (1987) (explaininginapplicability of MCRA to Medicarebecause “the nature of Title XVIII [i.e.,Medicare] reimbursement as socialinsurance” stands “in contrast to those‘government payments’ specified bythe Federal Medical Care RecoveryAct.”). Government recovery ofhealth-care costs under insurance pro-grams, instead, is governed by and hasbeen pursued under separate statutoryprovisions, such as the MSP, 42 U.S.C.§1395y(b)(2), or contractual subroga-tion provisions.

In its lawsuit against the tobaccoindustry, the United States nonethe-less argues, for the first time, thatMCRA is much more expansive. Itcontends that, since 1962, the “plainlanguage” of MCRA has authorizedrecovery for medical care provided byall Government programs, includinginsurance programs, such as Medicareand FEHBA programs.

Whatever one thinks of the mer-its, it is clear that, if adopted, the

Government’s new-found positionwould increase substantially the poten-tial liability of everybody, not just ciga-rette manufacturers, under MCRA.For example, Medicare and FEHBAhealth-care expenditures, according toa Government report, total about$225 billion annually; they are nearlyseven times as large as those of theVeterans and Defense Departmentprograms combined. See, General Ac-counting Office, Federal Health Pro-grams, at Table 1.1 (August 7, 1998).

Extending MSP BeyondPrimary Insurance Plans

The Medicare Secondary Payerprovisions of the Social Security Act,the decisional law, the legislative his-tory, and HCFA’s own construction ofthe MSP make clear that the MSPpermits recovery against insuranceplans, but it does not authorize law-suits against alleged tortfeasors.

By its terms, the MSP specificallyauthorizes Medicare to seek recoveryof health care expenditures “againstany entity which is required or respon-sible . . . to pay . . . under a primaryplan.” 42 U.S.C. §1395y(b)(2)(B)(ii).A “primary plan” means “a grouphealth plan or large group health plan. . . a workmen’s compensation law orplan, an automobile or liability insur-ance policy or plan (including a self-insured plan) or no fault insurance. . .” Id. §1395y(b)(2)(A).

The decisional law comports withthe language of the MSP, expresslynoting that recovery is limited to in-surers, not tortfeasors. See, e.g., UnitedStates v. Rhode Island Insurers’ InsolvencyFund, 80 F.3d 616, 619-621 (1st Cir.1996) (distinguishing statutes thatapply to insurers and tortfeasors fromMSP which “specifically adverts toinsurance”); Health Insurance Ass’n v.Shalala, 23 F.3d 412, 427 (D.C. Cir.

1994) (“[T]he MSP statute plainlyintends to allow recovery only from aninsurer”); Evanston Hosp. v. Hauck, 1F.3d 540, 544 (7th Cir. 1993) (MSPapplies to contractual obligations topay insurance, not to tortfeasors); Inre Dow Corning, No. 95-20512(Bankr. E.D. Mich.) June 22, 2000slip. op. at 57-59 (granting, in part,summary judgment against theGovernment).

The legislative history, moreover,makes no mention of tortfeasors, fo-cusing exclusively on insurers. See, e.g.,H.R. Rep. No. 96-1479 at 133 re-printed in 1980 U.S.C.C.A.N.5903,5924; H.R. Rep. No. 96-1167at 389, reprinted in 1980U.S.C.C.A.N. 5526, 5752. As to theagency responsible for administeringMedicare, HCFA, nothing in its MSPregulations provides that MSP suitsmay be maintained against tortfeasors.See, e.g., 42 C.F.R. §§ 411.200-411.206; HCFA’s FY 2000 AnnualPerformance Plan. Nor is there a singlereported case in which Medicarebrought an MSP lawsuit against analleged tortfeasor both to establish tortliability and to recover Medicare ex-penditures.

The United States now asserts, inits lawsuit against the tobacco indus-try, that MSP permits recovery notonly against cigarette manufacturersbut all other alleged tortfeasors becausethey either have liability insurance orhave a “self-insured plan.” TheGovernment’s position plainly wouldincrease the exposure of all allegedtortfeasors, including drug and medi-cal device manufacturers, permittingthe Government to bring MSP law-suits to establish liability where it pre-viously participated only after damageswere awarded or a settlement fund wasestablished.

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No Basis for Aggregate Actionby United States

The United States, as would anycomplaining party, must prove an un-derlying tort, including proximate cau-sation. The MCRA, for example, per-mits recovery by the United States onlywhere “a person . . . is injured . . . un-der circumstances creating a tort liabil-ity upon some third person . . . to paydamages therefor.” 42 U.S.C.§2651(a). The MSP, likewise, autho-rizes the United States to recover onlyagainst entities who are “required orresponsible . . . to make payment . . ..” 42 U.S.C. §1395y(b)(2)(B)(ii); seealso In re Dow Corning, slip. op. at 63(“[A] liability insurer will be requiredor responsible to reimburse the Gov-ernment for a Medicare payment onlyafter it is established that such medi-cal care was necessitated by the com-mission of a tort against the Medicarebeneficiary by the insured.”).

The federal courts repeatedly haveheld that individual smokers cannotaggregate their tort claims as a classaction, through joinder, or other pro-cedural devices. See, e.g., Barnes v.American Tobacco Co. Inc., 161 F.3d127, 143 n. 9 (3rd Cir. 1998); Castanov. American Tobacco Co. Inc., 84 F.3d734 (5th Cir. 1996); Arkansas BlueCross Blue Shield, et al. v. Philip Mor-ris, Inc. et al., No. 98-CV-2612, slipop. (N.D. Ill. Jan. 20, 2000); Thomp-son v. American Tobacco Co. Inc., 189F.D.R. 544, 1999 WL 1054681 (D.Minn. Nov. 22, 1999); Clay v. Ameri-can Tobacco Co. Inc., 188 F.R.D. 483(S.D. Ill. 1999); Emig v. American To-bacco Co. Inc., 184 F.R.D. 379 (D.Kan. 1998); Insolia v. Philip Morris,186 F.R.D. 535 (W.D. Wis. 1998);Barreras Ruiz v. American Tobacco Co.Inc., 180 F.R.D. 194 (D.P.R. 1998);Walker v. Liggett Group, 175 F.R.D.

226 (S.D. W. Va. 1997); Smith v.Brown & Williamson Tobacco Corp.,174 F.R.D. 90 (W.D. Mo. 1997); Archv. American Tobacco Co. Inc., 175F.R.D. 469 (E.D. Pa. 1997).

More generally, nationwide, masspersonal-injury products liability ac-tions usually are unfit for such aggre-gated treatment. See, e.g., AmchemProducts, Inc. v. Windsor, 521 U.S. 591(1997) (rejecting class treatment ofasbestos claims); Georgine v. AmchemProducts, 83 F.3d 610 (3rd Cir. 1996)(same); In re American Med. Sys. Inc.,75 F.3d 1069 (6th Cir. 1996) (reject-ing class treatment of products liabil-ity claims); In re Rhone-Poulenc Rorer,51 F.3d 1293 (7th Cir. 1995) (same);In re Repetitive Stress Injury Litig., 11F.3d 368 (2nd Cir. 1993) (rejectingattempt to aggregate 44 products li-ability cases); Cimino v. Raymark In-dustries, Inc., 151 F.3d 297 (5th Cir.1998) (rejecting attempt to aggregateover 2,000 asbestos claims extrapolat-ing the results of sample trials); and Inre Fibreboard, 893 F.2d 706 (5th Cir.1990) (rejecting attempted consolida-tion of asbestos cases); see also Abdullahv. ACands, 30 F.3d 264 (1st Cir. 1994)(joinder of 1,000 asbestos plaintiffsinappropriate).

The rationale for these decisionsis two-fold. First, variegated State strictliability, negligence, and consumerprotection laws do not permit a singlejury in a single proceeding to adjudi-cate a nationwide aggregation of per-sonal-injury claims. See, e.g., Castano,84 F.3d at 734; Georgine, 83 F.3d at627; American Med. Sys., 75 F.3d at1088; Rhone-Poulenc, 51 F.3d at 1300-02; Repetitive Stress, 11 F.3d at 373.

Second, even where the law of onlya single jurisdiction applies, mass-tortpersonal injury victims cannot present

aggregate proof of quintessentially in-dividual factual issues, such as proxi-mate causation, reliance, assumptionof the risk, and comparative or con-tributory negligence. See, e.g., Barnes,161 F.3d at 149; Cimino, 151 F.3d at313-316; Abdullah, 30 F.3d at 264;Fibreboard, 893 F.2d at 711-12; Th-ompson, 189 F.R.D. 544, 1999 WL1054681, at *7-*8; and Arch, 175F.R.D. at 486-89.

There does not appear to be any-thing about the MCRA or the MSPthat circumvents the traditional ob-stacles to aggregate determinations ofmass-tort liability for personal injury.To the contrary, the MCRA and theMSP, coupled with the available pre-cedent, suggest the Government’s suitposes the same problems.

First, MCRA claims are governedby applicable state law. 32 C.F.R. §537.22(a)(1) (applying the “law of theplace where the injury occurred”);Thomas v. Shelton, 740 F.2d 478, 481(7th Cir. 1984). So, too, are its MSPclaims. In re Dow Corning, slip. op. at66 (“[T]he Government’s [MSP] claim. . . will be governed by the tort law ofthe applicable state.”). Thus, the in-tractability of applying the law of 51different jurisdictions in a single pro-ceeding remains a formidable obstacleto the Government’s action.

Second, under both MCRA andMSP, the Government still must provethe essential and individualized ele-ments of tort liability, such as relianceand proximate causation. MCRA, forexample, expressly provides that “theUnited States shall have a right to re-cover [independent of the rights of theinjured or diseased person] from saidthird person [i.e., the tortfeasor],” and“shall, as to this right be subrogated toany right or claim that the injured or

9

diseased person . . . has against suchthird person.” 42 U.S.C. § 2651(a).The Government’s MCRA claims areindependent in two ways: (1) they arenot subject to certain procedural de-fenses applicable to the injured or dis-eased person, such as the statute oflimitations; and (2) the Government’sclaims are unaffected by any settlementor judgment of an injured or diseasedperson’s claims. See, e.g., CommercialUnion, 999 F.2d at 587; Trammel, 899F.2d at 1487-88; In re Dow Corning,slip. op. at 38-48. However, the Gov-ernment remains a “subrogee” and,thus, “steps into [the injured person’s]shoes” and “does not secure rights su-perior to” the injured person. Commer-cial Union, 999 F.2d at 587.

The same is true of MSP claims.Waters v. Farmers Texas County Mut.Ins. Co., 9 F.3d 397, 400-01 (5th Cir.1997) (The MSP “does not put thegovernment in a position superior to[the injured person’s] own claim[against the insurance company];” “thegovernment stands exactly in [the in-jured person’s] shoes.”); Health Ins.Ass’n v. Shalala, 23 F.3d at 419 (MSPclaims are “somewhat parallel” to thoseunder MCRA); In re Dow Corning,slip. op. at 66-75.

Nothing in either MCRA or MSPgives the Government “a special rightin derogation of established procedurallaw” that applies “simply because theGovernment is a party plaintiff.”United States v. Farm Bureau Ins. Co.,527 F.2d 564, 567 (8th Cir. 1976);see also Commercial Union, 999 F.2dat 587 (The Government, underMCRA, “does not secure rights supe-rior to those of its employee.”). Thereaccordingly appears to be little or nobasis for the Government’s assertionthat it should be permitted to pros-ecute an aggregate claim to establish

tort liability to millions of recipientsof Government-funded health care,even though the recipients could notdo so themselves.

Statistical Evidence CannotProve Individual Tort Liability

The United States, in its tobaccolawsuit, has done more than assert anaggregate mass-tort claim for millionsof recipients. It further contends thatit can meet its burden of proof with-out any testimony from any indi-vidual, not even a named class repre-sentative, that the alleged misconductof the cigarette manufacturers proxi-mately caused them to begin or to con-tinue smoking which, in turn, causedthe individual to contract a smoking-related disease for which the UnitedStates provided reasonably necessarymedical treatment. The United States,instead, intends to present only aggre-gate, statistical evidence to estimate theproportion of beneficiaries who havevalid underlying tort claims, using sta-tistical data to prove the essential tortelements (such as reliance, proximatecausation, and injury), as well as theabsence of affirmative defenses (suchas assumption of the risk, or contribu-tory or comparative fault).

The United States’ proposedwholesale substitution of statisticalevidence for individual testimony andcross-examination raises significantconstitutional issues, even if the Gov-ernment ultimately develops statisti-cally reliable and valid aggregate evi-dence of individual factual issues, suchas proximate causation and reliance,sufficient to pass muster underDaubert v. Merrill Dow Pharmaceuti-cals, Inc. 509 U.S. 579 (1993).

There are significant Due Processand Seventh Amendment concernsthat arise when tort liability itself isestimated based solely on statistical

proof. As the Fifth Circuit observedin In re Fibreboard Corp., 893 F.2d706, 709-10 (5th Cir. 1990), the trialjudge’s comparatively limited use ofstatistical proof to aggregate for deci-sion some 3,000 asbestos claims causedit “profound disquiet” as a matter ofdue process. See also Arch, 175 F.R.D.at 489 n. 21 (shorthand methods to“establish the elements of causationand injury — without cross-examina-tion or rebuttal evidence — would vio-late defendants’ due process rights”);In re Masonite Corp., 170 F.R.D. at 425(defendants “cannot receive a fair trialwithout a process that permits a thor-ough and discrete presentation of[their] defenses”). Subsequently, inCimino, the Fifth Circuit squarely heldthat the trial court’s determination ofliability and damages for some 3,000asbestos claims by extrapolating statis-tically from 160 individually-litigated“sample” cases violated defendants’Due Process and Seventh Amendmentrights to have a jury make a “litigateddetermination” of the “distinct andseparable issues” of causation and dam-ages with respect to “each individualplaintiff.” 151 F.3d at 311, 314, 319-21.

Although not couched in consti-tutional terms, similar concerns aboutthe fairness of aggregate proof in mass-tort cases were expressed in a recentbreast implant case in which the Gov-ernment asserted about $100 millionin MCRA and MSP claims on behalfof approximately 15,000 recipients ofGovernment-funded health careagainst a bankrupt manufacturer ofbreast implants:

In the Government’s view: it is un-der no obligation to identify thebeneficiaries to whom such medi-cal care was provided; it is under noobligation to specify the medical

10

care that was furnished to each ofthese beneficiaries; it is under noobligation to provide a detailedbreakdown of the costs of such care;and it does not have a duty to dem-onstrate that each incidence ofmedical care for which the Govern-ment seeks reimbursement was ne-cessitated by an injury caused by theDebtor. …If the United States[were] suing a defendant over asingle federal beneficiary’s treat-ment, [could] it prevail withoutidentifying the patient, the benefitsprovided or the costs of the benefits?The answer to this question is obvi-ously no. And if it cannot do sounder those circumstances, whyshould it be able to do so when it issuing for benefits supplied to 100patients?

The manifest unfairness of theGovernment’s position is obvious.Fortunately, there is no legal author-ity that supports the Government’sextreme argument.

In re Dow Corning, slip. op at 101; seealso Repetitive Stress 11 F.3d at 373-74(granting mandamus vacating consoli-dation of 44 separate actions and cau-tioning that “aggregate litigations mustnot be allowed to trump our dedica-tion to individual justice, and we musttake care that each individualplaintiff ’s — and defendant’s — causenot be lost in the shadow of a tower-ing mass litigation. . . . It is possible togo too far in the interests of expedi-ency and to sacrifice basic fairness inthe process.”); Malcolm v. NationalGypsum, 995 F.2d 346, 350 (2nd Cir.1993) (consolidation for trial of 48asbestos plaintiffs constituted abuse ofdiscretion: “the benefits of efficiencycan never be purchased at the cost offairness”).

The Potential For AbuseApart from the significant legal

impediments to the Government’sposition that it may bring aggregatecases supported only by statistical evi-dence, placing such a weapon in thehands of the Executive Branch of Gov-ernment is fraught with the potentialfor abuse. The Government’s recentcase against the tobacco industry pro-vides a chilling example.

The health risks posed by smok-ing have long been known to the Gov-ernment, which, after all, issued its firstSurgeon General’s Report on tobaccoin 1964, before Medicare even existed.Congress nonetheless chose to proceedin this area — not by creating somehuge potential Medicare liability to theGovernment or by banning the sale ofcigarettes — but by requiring explicitwarnings on every pack of cigarettesand by collecting billions of dollars intobacco excise taxes annually.

The Clinton Administration,however, was not content with thisstate of affairs. It supported legislationto exact hundreds of billions of addi-tional dollars from the tobacco indus-try as compensation to the Govern-ment for excess health-care costs it in-curred in various programs, includingMedicare, because of the existence ofsmoking. In June 1998, Congress re-jected that legislative initiative. Unde-terred, the President of the UnitedStates, in his next State of the Unionaddress, instructed the Department ofJustice to prepare a lawsuit against thetobacco industry. Previously, the At-torney General and a Department ofJustice spokesperson had concludedpublicly that the Government had nocause of action against the cigarettemanufacturers:

DOJ Spokesperson Joe Krovisky:“Medicare and Medicaid statutes do

not provide explicit authority for thefederal government to pursue suit[against the tobacco industry].” Fed-eral Filings Business News, Apr. 29,1997. “Right now, it would seemwe don’t have authority to sue [thetobacco industry].” The (BergenCounty, N.J.) Record, Apr. 30, 1997at A4.

Attorney General Reno: Respond-ing to a question regarding “whetherthe administration will sue the to-bacco companies to reimburse thegovernment for Medicare and Med-icaid costs,” Attorney General Renoresponded “what we have deter-mined was that it was the state’scause of action and that we neededto work with the states, that the fed-eral government does not have anindependent cause of action.” U.S.Senate Committee on JudiciaryHearings on Justice DepartmentOperations, 105th Cong., 1997 WL210888 (Apr. 30, 1997).

One week later, responding at apress conference to a question aboutwhether “the federal government[would] get involved in the tobaccocases to get Medicare and otherhealth care costs,” Attorney GeneralReno said, “Again, as I testified atthe oversight hearing, an early deci-sion was made that the federal gov-ernment did not have an indepen-dent cause of action.” Federal NewsService, May 8, 1997.

Despite the Department of Justice’sprior considered opinions, it com-menced its lawsuit against the tobaccoindustry to recover Medicare and otherhealth-care expenditures underMCRA and MSP before the next Stateof the Union address.

The Government’s recent aggre-gate MCRA and MSP claims — e.g.,

11

Submission of MaterialsThe Product Liability Newsletter welcomes submission ofarticles and case summaries involving issues of interest to

product liability lawyers. If you are aware of a significant orinteresting case, please bring it to our attention.

We are also interested in short articles.

Thank you to Christine Panchurof Jones, Day, Reavis & Poguefor contributing the design and

layout of this newsletter.

Copyright © 2000 Product LiabilitySection of the State Bar of Georgia.All rights reserved. For reprint rights,contact Stephanie E. Parker, Chair.

is an adjunct professor of law at Case

Western Reserve University School of

Law. He is a graduate of Princeton and

Michigan and clerked for Judge

Nelson of the U.S. Court of Appeals

for the Ninth Circuit. The afternoon

will be devoted to Trial Issues, with Ted

Eichelberger and Michael McGlamry

discussing Plaintiff's Trial Issues, and

Richard Hines V, Robert Monyak, and

Paul Painter discussing Defense Trial

Issues. The diversity and years of

experience offered by these panelists

should make this a useful program for

everyone from the newest to the most

experienced lawyers working on prod-

uct liability litigation. The registration

form is reprinted in this newsletter.

The program carries 6 CLE hours, in-

cluding 1 Professionalism Hour and 3

Trial Hours. The registration fee in-

cludes lunch.

Nuts and Bolts of Product Liability Lawcontinued from page 1

$20 billion annually from the tobaccoindustry or $100 million from thebankrupt Dow Corning — are sub-stantial. The amounts claimed areenough to threaten any targeted de-fendant with potential bankruptcy.Under these circumstances, there is areal risk that the Government willcoerce defendants into settlingunmeritorious claims to avoid therisk of financial ruin and will seek toextract supplemental non-monetaryconcessions that could not otherwisebe obtained lawfully, such as, in thecase of tobacco, Food and Drug Ad-ministration jurisdiction over tobacco Visit

The State Bar’s

Website

www.gabar.orgFor Section

Web Pages

Go to

“Attorney information”

&

Select “Sections”

products. See, e.g., FDA v. Brown &Williamson Tobacco Corp., 120 S.Ct.1291, 2000 WL 289576 (U.S. Mar.21, 2000). The danger to everybodyis palpable.

This article originally appeared inthe September 2000, Defense ResearchInstitute’s For The Defense. It is re-printed here with permission.

Since the original publication of thisarticle, the United States District Courtfor the District of Columbia granted thedefendant tobacco companies’ motion todismiss the federal government’s Medi-

cal Care Recovery Act and MedicareSupplemental Payer Act claims ongrounds that closely parallel those devel-oped in the first two sections of this ar-ticle. United States v. Philip Morris,Inc., et al., 116 F.Supp.2d 131 (Sep-tember 28, 2000). The federal govern-ment is seeking to have those claims par-tially reinstated; the tobacco companiesare resisting based, in part, on the ag-gregation issues developed in later sec-tions of this article.

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9:10 DISCOVERY ISSUESDISCOVERY ISSUESDISCOVERY ISSUESDISCOVERY ISSUESDISCOVERY ISSUESModerator: Bernard Taylor, Alston & Bird, LLP,

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1:30 PLAINTIFF’S TRIAL ISSUESPLAINTIFF’S TRIAL ISSUESPLAINTIFF’S TRIAL ISSUESPLAINTIFF’S TRIAL ISSUESPLAINTIFF’S TRIAL ISSUESModerator: TBAPanelists: Theodore B. Eichelberger,

The Eichelberger Law Firm,AtlantaMichael L. McGlamry, Pope,McGlamry, Kilpatrick &Morrison, Atlanta

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14

F Y IUS District Court

Northern District of Georgia website:www.gand.uscourts.gov/default.htm

the injured party’s career may beappropriate even when inflationrates should not be used due to theselection of the discount rate. Of-ten the appropriate discount rateis the real portion of a risk free rate,such as Treasury Bills.

5. Prejudgment interest: Often ig-nored yet, many jurisdictions es-tablish a statutory rate and methodfor given types of damages.

6. Mitigation: Often experts ignoremitigation even though most cases

require its consideration. For in-stance, in a personal injury mat-ter, the individual may still be ableto work after the injury, but in adifferent job. The mitigating fac-tors in the case that may reducethe loss include the salary for analternative job, including annualincreases, along with any appli-cable benefits. Unless it is deter-mined the person cannot fill thatposition, damages would be re-duced by that amount, even if theperson decides not to work. The

expert should look into the injuredparty’s history to determine previ-ous lines of work or qualificationsthat may provide feasible jobs af-ter the injury.

Denise Hipps is a shareholder inPhillips Hitchner Group, Inc., a litiga-tion and valuation ser vices firmlocated in Atlanta, Georgia. DIRECT404-898-2787; email: dhipps@phillips-hitchner.com; www.phillips-hitchner.com.

Financial Damages in Product Liabilitycontinued from page 4

15

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