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First Quarter 2011 l Volume 21, Number 1 l ISSN-1094-9542

MONOGRAPH Federal Preemption Defenses in Product Liability Suits: A Continuing Evaluation

FEATURE ARTICLES Don’t Let Your Employees Take Work Home with Them; It May Save You a Lawsuit Some Day The Aftermath of Illinois Emcasco v. Nationwide Ins. Co.: Continuing to Protect the Privileged Communications Between an Insurer and Its Coverage Counsel Judicial Selection: A Discussion of Elective and Appointed Systems in Light of Current Developments in the Law

Illinois Association of Defense Trial Counsel WWW.IADTC.ORG

PRESIDENT KENNETH F. WERTS Craig & Craig, Mt. Vernon PRESIDENT-ELECT ANNE M. OLDENBURG Alholm, Monahan, Klauke, Hay & Oldenburg, LLC, Chicago 1ST VICE PRESIDENT R. HOWARD JUMP Jump & Associates, P.C., Chicago 2ND VICE PRESIDENT ALEEN R. TIFFANY Aleen R. Tiffany, P.C., Crystal Lake SECRETARY/TREASURER DAVID H. LEVITT Hinshaw & Culbertson LLP, Chicago DIRECTORS DAVID M. BENNETT Pretzel & Stouffer, Chartered, Chicago JOSEPH A. BLEYER Bleyer and Bleyer, Marion TROY A. BOZARTH HeplerBroom LLC, Edwardsville C. WM. BUSSE, JR. Busse, Busse & Grassé, P.C., Chicago BRUCE DORN Bruce Farrel Dorn & Associates, Chicago MARGARET M. FOSTER McKenna Storer, LLC, Chicago BARBARA FRITSCHE Rammelkamp Bradney, Jacksonville JENNIFER B. GROSZEK Resolute Management, Inc., Chicago LINDA J. HAY Alholm, Monahan, Klauke, Hay & Oldenburg, LLC, Chicago KEVIN J. LUTHER Heyl, Royster, Voelker & Allen, Rockford JOHN P. LYNCH, JR. CremerSpina, LLC, Chicago PAUL R. LYNCH Craig & Craig, Mt. Vernon WILLIAM K. McVISK Johnson & Bell, Ltd., Chicago R. MARK MIFFLIN Giffin, Winning, Cohen & Bodewes, P.C., Springfield BRADLEY C. NAHRSTADT Williams, Montgomery & John, Ltd., Chicago AL J. PRANAITIS Hoagland, Fitzgerald, Smith & Pranaitis, Alton MICHAEL L. RESIS SmithAmundsen LLC, Chicago JOHN W. ROBERTSON Robertson, Wilcox, & Statham, P.C., Galesburg ROBERT T. VARNEY Robert T. Varney & Associates, Bloomington EXECUTIVE DIRECTOR Sandra J. Wulf, CAE, IOM PAST PRESIDENTS: Royce Glenn Rowe • James Baylor • Jack E. Horsley • John J. Schmidt • Thomas F. Bridgman • William J. Voelker, Jr. • Bert M. Thompson • John F. Skeffington • John G. Langhenry, Jr. • Lee W. Ensel • L. Bow Pritchett • John F. White • R. Lawrence Storms • John P. Ewart • Richard C. Valentine • Richard H. Hoffman • Ellis E. Fuqua • John E. Guy • Leo M. Tarpey • Willis R. Tribler • Alfred B. LaBarre • Patrick E. Maloney • Robert V. Dewey, Jr. • Lawrence R. Smith • R. Michael Henderson • Paul L. Price • Stephen L. Corn • Rudolf G. Schade, Jr. • Lyndon C. Molzahn • Daniel R. Formeller • Gordon R. Broom • Clifford P. Mallon • Anthony J. Tunney • Douglas J. Pomatto • Jack T. Riley, Jr. • Peter W. Brandt • Charles H. Cole • Gregory C. Ray • Jennifer Jerit Johnson • Stephen J. Heine • Glen E. Amundsen • Steven M. Puiszis • Jeffrey S. Hebrank • Gregory L. Cochran • Rick Hammond The IDC Quarterly is the official publication of the Illinois Association of Defense Trial Counsel. It is published quarterly as a service to its members. Subscriptions for non-members are $100 per year. Single copies are $25 plus $5 for postage and handling. Requests for subscriptions or back issues should be sent to the Illinois Association of Defense Trial Counsel headquarters in Springfield, Illinois. Subscription price for members is included in membership dues.

IDC QUARTERLY EDITORIAL BOARD Adnan Arain, Editor-In-Chief

Geoffrey M. Waguespack, Assistant Editor

Aon, Chicago

CremerSpina, LLC, Chicago

[email protected]

[email protected]

Sarah J. Condon, Executive Editor

Beth A. Bauer, Assistant Editor

CNA Insurance, Chicago

HeplerBroom LLC, Edwardsville

[email protected]

[email protected]

Donald J. O’Meara, Jr., Associate Editor

Brad A. Elward, Assistant Editor

Pretzel & Stouffer, Chartered, Chicago

Heyl, Royster, Voelker & Allen, Peoria

[email protected]

[email protected]

COLUMNISTS Adnan Arain Aon, Chicago Beth A. Bauer HeplerBroom LLC, Edwardsville James K. Borcia Tressler LLP, Chicago Roger R. Clayton Heyl, Royster, Voelker & Allen, Peoria Thomas G. DiCianni Ancel, Glink, Diamond, Bush, DiCianni & Krafthefer, P.C., Chicago Brad A. Elward Heyl, Royster, Voelker & Allen, Peoria Joseph G. Feehan Heyl, Royster, Voelker & Allen, Peoria Stacy Dolan Fulco CremerSpina, LLC, Chicago C. Kinnier Lastimosa Sedgwick, Detert, Moran & Arnold LLP, Chicago

Martin J. O’Hara Much Shelist Denenberg Ament & Rubenstein, P.C., Chicago James W. Ozog Wiedner & McAuliffe, Ltd., Chicago Eliina Viele Pritzker Jump & Associates, P.C., Chicago Michael L. Resis SmithAmundsen LLC, Chicago Tracy E. Stevenson Robbins, Salomon & Patt, Ltd., Chicago Dina L. Torrisi HeplerBroom LLC, Chicago Willis R. Tribler Tribler Orpett & Meyer, P.C., Chicago Geoffrey M. Waguespack CremerSpina, LLC, Chicago Kenneth F. Werts Craig & Craig, Mt. Vernon

CONTRIBUTORS Brian J. Benoit Wiedner & McAuliffe, Ltd., Chicago Jared K. Clapper SmithAmundsen, LLC, Chicago Madeline Orling Connolly HeplerBroom LLC, Edwardsville Mark D. Hansen Heyl, Royster, Voelker & Allen, Peoria Katherine K. Haussermann CremerSpina, LLC, Chicago George A. Kiser HeplerBroom, LLC, Edwardsville Edna McLain HeplerBroom LLC, Chicago

Robert P. Pisani McKenna Storer, LLC, Chicago Jesse A. Placher Heyl, Royster, Voelker & Allen, Peoria Eric C. Scheiner Sedgwick, Detert, Moran & Arnold LLP, Chicago Anne B. Schmidt HeplerBroom LLC, Edwardsville John F. Watson Craig & Craig, Mattoon Rachael G. Winthrop SmithAmundsen, LLC, Chicago

THE ILLINOIS ASSOCIATION OF DEFENSE TRIAL COUNSEL P.O. Box 3144 • Springfield, IL 62708-3144 800-232-0169 • 217-585-0991 • FAX 217-585-0886 • [email protected] SANDRA J. WULF, CAE, IOM, Executive Director

In This Issue Monograph

M-I

Features

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Don’t Let Your Employees Take Work Home with Them: It May Save You a Lawsuit Some Day, by George A. Kiser

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The Aftermath of Illinois Emcasco v. Nationwide Ins. Co.: Continuing to Protect the Privileged Communications Between an Insurer and Its Coverage Counsel, by Rachael G. Winthrop and Jared K. Clapper

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Judicial Selection: A Discussion of Elective and Appointed Systems in Light of Current Developments in the Law, by John F. Watson

52 20 56 25 51 3 28 9 13 68 55 58 59 17 44 33 2 48 15 30 41 61 35 54

Amicus Committee Report, by Michael L. Resis Appellate Practice Corner, by Brad A. Elward Association News Commercial Law, by James K. Borcia The Defense Philosophy, by Willis R. Tribler Editor’s Note, by Adnan Arain Employment Law, by Geoffrey M. Waguespack Evidence and Practice Tips, by Joseph G. Feehan Health Law, by Roger R. Clayton, Mark D. Hansen and Jesse A. Placher IDC Membership and Committee Applications IDC New Members IDC Notice of Elections IDC Quarterly Index – Volume 20 Insurance Law, by C. Kinnier Lastimosa and Eric C. Scheiner Medical Malpractice, by Dina L. Torrisi and Edna McLain Municipal Law, by Thomas G. DiCianni President’s Message, by Kenneth F. Werts Product Liability, by James W. Ozog and Brian J. Benoit Professional Liability, by Martin J. O’Hara Property Insurance, by Tracy E. Stevenson Recent Decisions, by Stacy Dolan Fulco and Katherine K. Haussermann 2011 Spring Symposium Registration Information Supreme Court Watch, by Beth A. Bauer Young Lawyers Report, by Eliina Viele Pritzker

Regular Columns

Federal Preemption Defenses in Product Liability Suits: A Continuing Evaluation, by Robert P. Pisani, Anne B. Schmidt and Madeline Orling Connolly

Manuscript Policy Members and other readers are encouraged to submit manuscripts for possible publication in the IDC Quarterly, particularly articles of practical use to defense trial attorneys. Manuscripts must be in article form. A copy of the IDC Quarterly Manuscript Guidelines is available upon request from The Illinois Association of Defense Trial Counsel office in Springfield, Illinois. No compensation is made for articles published, and no article will be considered that has been submitted simultaneously to another publication or published by any other publication. All articles submitted may be subjected to editing and become the property of the IDC Quarterly, unless special arrangements are made. Statements or expression of opinions in this publication are those of the authors and not necessarily those of the Association or Editors. A copy of the IDC Quarterly Editorial Policy is available upon request. Letters to the Editor are encouraged and welcome, and should be sent to the Illinois Association of Defense Trial Counsel headquarters in Springfield. Editors reserve the right to publish and edit all such letters received and to reply to them. IDC Quarterly, First Quarter, 2011, Volume 21, No. 1. Copyright © 2011 The Illinois Association of Defense Trial Counsel. All rights reserved. Reproduction in whole or in part without permission is prohibited. POSTMASTER: Send change of address notices to IDC Quarterly, The Illinois Association of Defense Trial Counsel, PO Box 3144, Springfield, IL 62708-3144. Second-Class postage paid at Springfield, IL and additional mailing offices. This publication was printed by Gooch & Associates, Springfield, Illinois.

IDC Quarterly

President’s Message

practice of law and our judicial system. I also want to thank the many individuals who presented at the symposium. A special thanks goes out to the University of Illinois Civic Leadership Program for the analysis they provided of judicial selection in Illinois and other states across the nation.

By: Kenneth F. Werts Craig & Craig Mt. Vernon

[T]he Illinois Association of Defense Trial Counsel approached other As members of the bar, we all should be concerned whenever our system of justice is criticized as being biased. Allegations of judicial bias have grown across the country, as well as in Illinois, following highly publicized campaigns for judicial office. As members of the bar, we should do all that we can to quell the concern of citizens that the judges they appear before will be anything but qualified and unbiased while at the same time working to ensure that those selected as judges are just that. A core value of the Illinois Association of Defense Trial Counsel is to promote and support a fair, unbiased and independent judiciary. It is critical to our system of justice that we have a fair, unbiased and independent judiciary and that citizens perceive our judicial system as embracing these values. To that end, the Illinois Association of Defense Trial Counsel approached other sister bar organizations from across the state to conduct a forum where judges, legislators, educators and bar leaders could address the issue of judicial selection and the public perception of our judicial system. A symposium was conducted in Chicago on October 5, 2010, which specifically addressed concerns with judicial selection. The Illinois Association of Defense Trial Counsel joined with the Illinois State Bar Association, the Chicago Bar Association, the Cook County Bar Association, and the Women’s Bar Association of Illinois to discuss our current system for selection of judges, how we arrived at that system, how it is working and whether it could be improved. I want to thank those sister bar groups for the incredible job they did in putting the symposium together. I am certain that there will be future combined efforts by these bar groups to help educate the public on issues that all have in common and which touch the 2

sister bar organizations from across the state to conduct a forum where judges, legislators, educators and bar leaders could address the issue of judicial selection and the public perception of our judicial system. A symposium was conducted in Chicago on October 5, 2010, which specifically addressed concerns with judicial selection.

The goal of this symposium simply was to discuss our current system of judicial selection, whether it is working to create a fair, unbiased, and independent judiciary, and if not, what suggestions there were to create one. There was no agenda for advancing what system was the best, or for that matter, that our current system was not. The symposium itself, I believe, was a great success in advancing the discussion as to these issues. You can read more about the symposium in the feature article in this issue authored by John Watson entitled, “Judicial Selection: A Discussion of Elective and Appointive Systems in Light of Current Developments in the Law.” In his article, John shares highlights from the symposium.

First Quarter 2011

Editor’s Note By: Adnan Arain Aon Chicago

When the IDC Quarterly is published for the first quarter, readers will ideally see a polished product that adds to their understanding of the law and provides something of a snapshot of the issues of the law being practiced on the defense side of the bar in Illinois. It may be worth noting, however, that the moment-in-time snapshot is actually the result of months of preparation—preparation that starts well before Thanksgiving, goes through the holiday season, through the end of the year and all of the connected professional, administrative and personal circumstances. The current issue of the IDC Quarterly proves that despite the end-of-the-year deadlines and holiday gatherings, the busy attorney contributors to this publication have sacrificed a great deal of personal and professional time to create this finished product. This issue of the Quarterly once again provides a full offering on the professional liability front for practicing lawyers, by examining attorney confidentiality. And it does so in a number of contexts. A feature article by Rachael G. Winthrop and Jared K. Clapper examines the attorney-client privilege and the work product doctrine as they apply to communications with coverage counsel. Joining Rachael and Jared in addressing some aspect of attorney confidentiality, James W. Ozog and Brian J. Benoit examine the duty to preserve evidence in their Products Liability column. Additionally, in the Municipal Law column, Thomas DiCianni examines the confidentiality of attorney investigations in a municipal settings. This issue also features a number of other interesting and complex issues related to litigation. The Insurance Law column by C. Kinnier Lastimosa takes on the complicated

issue of setoff provisions in uninsured motorist cases. In his Evidence and Practice Tips column, former Quarterly editorin-chief Joseph G. Feehan discusses appellate court rulings on the destruction of electronic evidence. In their medical malpractice column, Dina Torrisi and Edna McLain look at the doctrine of relation back, and specifically, ask what comprises a sufficiently close relationship of facts.

The current issue of the IDC Quarterly proves that despite the end-of-the-year deadlines and holiday gatherings, the busy attorney contributors to this publication have sacrificed a great deal of personal and professional time to create this finished product.

Among the more unusual topics discussed, George A. Kiser has submitted a feature article on the legal situation arising from workers whose clothes carry asbestos into their homes, a situation leading to questions of foreseeability and whether duties are owed to those who ultimately come into contact with the asbestos. Meanwhile, in the Commercial Law column, James K. Borcia addresses a lawsuit that alleged price gouging of gasoline.

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IDC Quarterly

Nelson v. Aurora Equipment

Feature Article By: George A. Kiser HeplerBroom, LLC Edwardsville

Don’t Let Your Employees Take Work Home with Them; It May Save You a Lawsuit Some Day Introduction Across the country, appellate courts are considering whether an employer owes a duty to protect non-employees against the harm of asbestos exposure alleged to have been carried home on their employees’ work clothes or in their cars. Known as secondary exposure claims or take-home exposure claims, courts across the country have been reaching different conclusions. Two recent appellate decisions in Illinois, demonstrate the split of opinion on this issue. The Illinois Appellate Court, Second District, held that an employer did not owe a duty to family members of its employees whose family members were allegedly exposed to asbestos through the employees’ work clothes. Nelson v. Aurora Equipment Company, 391 Ill. App. 3d 1036, 909 N.E.2d 931 (2nd Dist. 2009). The Second District reasoned that the parties did not share a relationship giving rise to a duty. Conversely, in the most recent case, the Illinois Appellate Court, Fifth District, held that an employer does have a duty to protect its employees’ family members from the dangers of asbestos brought home on the employees’ work clothes. Simpkins v. CXS Corp., et al., No. 5-07-0346, (5th Dist., June 10, 2010).1 The Fifth District determined that the injury and occurrence were foreseeable. Factually, Simpkins and Nelson are not different and they are not dissimilar to the many claims of take-home or secondary asbestos exposure claims being filed in Illinois and elsewhere. Both address claims by a spouse that he or she was exposed to asbestos brought home on his or her spouse’s clothing. Yet, Nelson and Simpkins came to opposite conclusions.

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In Nelson, Eva Nelson’s husband, Vernon, worked at the defendant Aurora Equipment Company from 1968 to 1987. Nelson, 909 N.E.2d at 933. Additionally, the plaintiff alleged that Eva’s son, John Nelson, worked at Aurora Equipment from 1977 to 1993. Id. Plaintiff alleged that both Vernon and John were exposed to asbestos at Aurora Equipment, which asbestos attached to their clothing. Plaintiff further alleged that Eva Nelson died on January 9, 2004, from mesothelioma, which was caused by her exposure to asbestos from the Aurora Equipment Company through her husband and son’s work clothing. Id. The Kane County Circuit Court granted the defendant’s motion for summary judgment, holding that Aurora Equipment did not owe the plaintiff a duty of care. The Second District affirmed this decision. The plaintiff in Nelson argued that Aurora Equipment owed Ms. Nelson a duty of care because it was foreseeable that her exposure would cause injury and death. Id. 909 N.E.2d at 933-34. Defendant argued that because it had no relationship with Eva Nelson, it did not owe her a duty of care. Id. at 934. The Second District began its analysis of the case by pointing out that the only theory of liability at issue was premises liability. Id. The court then acknowledged that a premises’ liability action was a negligence claim and it set forth the general elements of duty in a negligence claim in Illinois. Id. Those elements were not different than the criteria cited in Simpkins, the Fifth District opinion that was recently handed down. The Nelson court noted that whether a duty existed depended on whether the defendant and the plaintiff stood in such a relationship to one another that the law imposed upon 1

The Illinois Supreme Court allowed the defendant’s Petition for Leave to Appeal in this case. Simpkins v. CSX Corp. Sup. Ct. No. 110662.

About the Author George Kiser focuses his practice on trials involving toxic tort litigation, including Asbestos and Silica cases. He handles asbestos cases pending in Madison County, Illinois, St. Louis, Missouri, Cook County, Illinois, and outlying Illinois counties. He has coordinated and negotiated settlement of asbestos cases, prepared and argued trial motions and has oversight and management responsibility for hundreds of asbestos cases. He has represented clients throughout Illinois and Missouri and has tried 29 cases to a jury verdict in Missouri and Illinois. He is a 1989 graduate of the University of Missouri School of Law.

First Quarter 2011

the defendant an obligation of reasonable conduct for the benefit of the plaintiff. Id.; Simpkins at 6. “The reasonable foreseeability of injury is one important concern, but our Supreme Court has recognized that foreseeability alone ‘provides an inadequate foundation upon which to base the existence of a legal duty.’” Nelson, 909 N.E.2d at 933, 934 (citing Ward v. K-Mart Corp., 136 Ill. 2d 132, 554 N.E.2d 223 143 Ill. Dec. 288 (1990)). The Second District then recited that other factors were relevant in determining whether a duty existed including the likelihood of injury, the burden of guarding against the injury and the consequences of placing that burden upon the defendant. Nelson, at 934, see also Simpkins, at 7. For the Second District, however, the nature of the relationship between the parties was a threshold question in the analysis of whether a duty existed. Nelson, 909 N.E.2d at 934.

The Nelson court noted that whether a duty existed depended on whether the defendant and the plaintiff stood in such a relationship to one another that the law imposed upon the defendant an obligation of reasonable conduct for the benefit of the plaintiff.

The Second District then recounted the history of premises liability law, which traditionally had based liability and duty of care on whether the person present on land was an invitee, licensee or trespasser. Id., at 935. These precepts did not apply to Eva Nelson because she was never an entrant on Aurora Equipment’s premises. Id. The Second District’s reasoning that premises liability did not apply to Ms. Nelson relied upon the Illinois Supreme Court case of Marshall v. Burger King Corp., 222 Ill. 2d 422, 856 N.E. 2d 1048 (2006). In Marshall, a patron of a Burger King Restaurant was killed when a vehicle’s accelerator stuck, sending the car through the restaurant’s windows and into the plaintiff’s decedent, a patron of the restaurant. Marshall, 222 Ill. 2d at 425. In considering whether Burger King owed its patron a duty to protect him from the vehicle intrusion, the Illinois

Supreme Court in Marshall stated that the “touchstone of this court’s duty analysis is to ask whether a plaintiff and a defendant stood in such a relationship to one another that the law imposed upon the defendant an obligation of reasonable conduct for the benefit of the plaintiff.” Id. at 436-437. The Marshall court, indeed, found that the plaintiff and Burger King did have a special relationship that gave rise to a duty, that of a business inviter and invitee. Id., at 437. The Marshall court then held that the other factors – foreseeability, the likelihood of injury, the burden of guarding against the harm and the consequences of placing the burden on the defendant – did not support an exemption from that duty. Id. at 437. Thus, the Second District relied upon the Illinois Supreme Court’s pronouncements in Marshall to find that a defendant’s duty arose from its relationship with the plaintiff or decedent. Nelson, 909 N.E.2d at 937. Following the supreme court’s reasoning, the Second District noted that a relationship between the parties was the threshold issue and that it would consider the other four factors, including foreseeability, only in determining whether to create an exemption from that duty. Id. In other words, if there is no relationship giving rise to a duty, the other four factors are not to be considered as the defendant does not owe a duty in that situation. Marshall, 222 Ill. 2d at 436-437. This is not the approach that the Fifth District took in Simpkins, where that court held that the four factors determine whether a relationship existed. The Second District also followed the analysis of the Illinois Supreme Court in the case of Duncan v. Rzonca, 133 Ill. App. 3d 184, 478 N.E.2d 603, 88 Ill. Dec. 288 (1985) in order to conclude that the relationship of the parties determines whether a duty exists. In this unique factual scenario, a police officer was injured in a car accident while responding to a bank’s false emergency alarm. Duncan, 133 Ill. App. 3d at 191. The bank failed to control a three year old boy who pushed a button, falsely sounding the alarm. Id. The Illinois Supreme Court held that the bank did owe the officer a duty because they had a special relationship with the police, who had an obligation to respond to the alarm when activated. Id. at 194. In Nelson, the Second District determined that Ms. Nelson was neither like the patron of Burger King nor the police officer duty-bound to respond to the bank’s alarm. In fact, the Second District found that Ms. Nelson had no relationship with the defendant, a fact that the plaintiff conceded. Id. at 939. Because Ms. Nelson had no relationship with the defendant, it did not have a duty to protect Ms. Nelson, its employee’s spouse and mother, from the take-home asbestos exposure. Id. Consistent with the reasoning of Marshall and Duncan, the Second District did not reach an analysis of the (Continued on next page) 5

IDC Quarterly

Don’t Let Your Employees Take Work Home (Continued) other factors as they only apply to determine if there is an exemption from a duty. Simpkins v. CSX

The facts of Simpkins v. CSX Corporation, before the Fifth District were not materially different from the facts of the Nelson case. Simpkins’ approach and its conclusions, however, were opposite those of the Second District. Annette and Ronald Simpkins were married from 1951 to 1965, when they divorced. Ronald Simpkins allegedly worked from 1958 to 1964 at B&O Railroad, the predecessor company to the defendant, CSX. Simpkins, at 3. In April of 2007, Annette Simpkins died of mesothelioma which she alleged she contracted by washing her husband’s, Ronald’s, asbestos-contaminated clothes from his work at B&O Railroad. Id. at 1-2. Plaintiff sued several manufacturers of asbestos-containing products and premises/employers in Madison County Illinois. In May 2007, when the trial court considered the issue of duty, no case in Illinois had found that an employer owed a duty to protect its employees’ family members from takehome asbestos exposure. The trial court granted the defendant summary judgment. The plaintiff appealed this decision to the Fifth District Court of Appeals. The appeal involved only the claims against CSX. The appellate court began its opinion by pointing out that all three counts of Plaintiffs’ complaint “involved allegations that the risk of harm to Annette Simpkins was foreseeable.” Id. at 5. The Fifth District determined that ordinary principles of Illinois negligence law governed its analysis and the plaintiff’s arguments that employers owe a duty of care to protect family members in take-home asbestos cases. Id. at 6. Thus, the Simpkins’ court based its decision on negligence law. The appellate court stated that “the concept of duty in negligence cases is very involved, complex, and indeed nebulous.” Id. at 6-7. The court noted that every person owes every other person a duty to use ordinary care to prevent injury that might naturally occur as the reasonably foreseeable consequence of his or her own actions. Id. at 7 (citing Forsythe v. Clark U.S.A., Inc., 224 Ill. 2d 274, 291, 864 N.E. 2d 227, 238 (2007)). Further, the court found that the existence of a duty depends on whether the parties “stand in such a relationship to each other that the law imposes upon the defendant an obligation to act in a reasonable manner for the benefit of the plaintiff.” Simpkins, at 6 (citing Marshall v. Burger King Corp., 222 Ill. 2d 422, 436, 856 N.E. 2d 1048, 1057 (2006)). After these general precepts of negligence, the Fifth 6

District cited the four factors from Marshall also cited in the Nelson opinion: (1) the foreseeability of the harm, (2) the likelihood of the injury, (3) the magnitude of the burden involved in guarding against the harm and (4) the consequences of placing on the defendant the duty to protect against the harm. Simpkins at 7, citing Marshall 222 Ill. 2d at 436, 437. The Fifth District viewed this four-factor test as a method to determine whether a relationship existed between the parties that would justify the imposition of a duty upon the defendant.

The appellate court stated that “the concept of duty in negligence cases is very involved, complex, and indeed nebulous.” The court noted that every person owes every other person a duty to use ordinary care to prevent injury that might naturally occur as the reasonably foreseeable consequence of his or her own actions.

This approach is markedly different than the approach of the Second District in Nelson, which relied on the relationship of the parties and found that whether a relationship existed was separate from these same four factors. or the Simpkins’ court, these four factors, including foreseeability, determine whether a relationship exists. “Relationship” for the Fifth District in Simpkins is not a separate inquiry. After reciting these general principles, the Fifth District relied on two cases from other jurisdictions to determine that CSX owed Ms. Simpkins a duty of care. The first case on which the court relied was the Tennessee Supreme Court’s decision in Satterfield v. Breeding Insulation Co., 266 S.W.3d 347 (Tenn. 2008). In Satterfield, a 25-year old woman died from mesothelioma which she alleged she contracted by being exposed to asbestos brought home on clothes worn by her father during her childhood. Id. at 351, 352. The Fifth District’s opinion in Simpkins, pointed out that the Tennessee Supreme Court in Satterfield noted that under the Second

First Quarter 2011

Restatement of Torts §314 (1965), a person does not have a duty to act to protect others from dangers or risks, unless they themselves created the risk. Simpkins, at 8. In Tennessee, the exception to this “no duty to act rule” occurs where there is a special relationship between the plaintiff and the defendant or between the defendant and a third party whose actions create the risk to the plaintiff. Id. at 8; Satterfield, 266 S.W.2d at 359. In Satterfield, the Tennessee Supreme Court found that the employer’s own act of operating its facility in a way that allowed dangerous asbestos fibers to be transmitted on its employees’ work clothes created the danger. Satterfield, 266 S.W.3d at 364. Thus, the Fifth District in Simpkins pointed out that it was unnecessary for the Tennessee court to consider whether the plaintiff and defendant had a “special relationship” at all. Id. at 8. Presumably, the Simpkins’ court relied upon the Satterfield court’s emphasis on its conclusion that the defendant and employer created the risk to avoid the analysis utilized by the Nelson court of whether plaintiff, Annette Simpkins, and CSX had any relationship. Instead, the Fifth District’s analysis focused on forseeability. The Fifth District in Simpkins also relied upon an unpublished Washington opinion that found that a duty to prevent harm from take-home asbestos exposure can arise “even in the absence of any special relationship” if the injury is foreseeable. Simpkins, at 9, quoting Rochon v. Saberhagen Holdings, Inc., no. 585 79 7-I, page 12 (Wash. App., Aug. 13, 2007). Applying these principles, the Simpkins’ court noted that to find that an employer whose workers are exposed to asbestos owes no duty to protect others from exposure – assuming the exposure is both foreseeable and preventable without undue burden – merely because the [plaintiff] [does] not have any particular special relationship with the employer (such as an employee or a business invitee) would deny logic and lead to grossly unfair results. Simpkins, at 9. The Fifth District also cited a New Jersey Supreme Court opinion to support its conclusion that the defendant owed a duty to Annette Simpkins. In Olivo v. Owens-Illinois, Inc. 186, N.J. 394, 895 A.2d 1143 (2006), a woman died of mesothelioma allegedly as a result of being exposed to asbestos on her husband’s work clothes Id. 895 A.2d 1146, 1147. The Simpkins’ court stated that “under New Jersey law, as under Illinois law, a duty analysis involves both a determination of whether the injury was foreseeable and a consideration of public policy.” Simpkins at 9; Olivo 895 A.2d at 1148. Simpkins found persuasive the following quote from the New Jersey

Supreme Court’s opinion in Olivo: It requires no leap of imagination to presume that during the decades of the 1940s, 50s, 60s [70s], and early 1980s when Anthony [Olivo] worked as a welder [and steamfitter] either he or his spouse would be handling his clothes in the normal and expected process of laundering them so that the garments could be worn to work again. Anthony’s soiled work clothing had to be laundered [and his employer] then….should have foreseen that whoever performed that task would come into contact with the asbestos that infiltrated his clothing while he performed his contracted tasks. Simpkins, at 9-10; Olivo, 895 A.2d at 1149. The Fifth District agreed with the Olivo court’s statement that it takes little imagination to presume that when an employee who is exposed to asbestos brings home his work clothes, members of his family are likely to be exposed as well. Simpkins, at 10. “Foreseeability is the cornerstone of our duty analysis.” Id., at 11; Cocoran v. Village of Libertyville, 73 Ill. 2d 316, 326, 383 N.E.2d 177 180 (1978). The Fifth District then held that simply because a risk of harm is foreseeable, does not end the inquiry as to whether a duty exists. Simpkins, at 11. The Simpkins’ court briefly analyzed the likelihood of the injury, the burden involved in guarding against take-home exposures and the consequence of placing the burden on a defendant. Regarding each of these factors, the Fifth District found that they all weighed in favor of imposing a duty upon the defendant. Id. at 11-13. The last issue that the Simpkins’ court addressed was where to draw the line as to whom an employer owed a duty and to whom it did not. Although the facts concerned Mr. Simpkins’ spouse, the Fifth District did not limit the duty to the facts of the case. Id. at 14. “Whether any harm to any such person [other than an immediate family member] is foreseeable, depends on [an] assessment of circumstances not presented in this case.” Id. at 14. The Simpkins court cited with approval the Satterfield opinion that held that the duty extends to “any person who is foreseeably exposed through close contact with an employee’s contaminated work clothes over an extended period of time.” Id. at 14, quoting Satterfield, 266 S.W.3d at 374. According to the Simpkins court, “liability will be limited by foreseeability.” Simpkins, at 9.

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IDC Quarterly

Don’t Let Your Employees Take Work Home (Continued) Explaining the Different Result

At first glance, the decisions may be distinguishable by noting that Simpkins appears to have addressed the issue of liability for take-home asbestos exposure in terms of negligence law, while Nelson emphasized that its analysis hinged on notions of premises liability. As these two opinions demonstrated, however, this is a distinction without a difference. Both Nelson and Simpkins cited with approval the principles of duty in ordinary negligence actions espoused by the Illinois Supreme Court in Marshall. Indeed, Simpkins specifically pointed out that under ordinary negligence law in Illinois, the existence of a duty depended upon whether the parties stood in such a relationship to each other that the law imposed upon the defendant a duty of care to the plaintiff. Simpkins, at 6. It then used the same four factors in Marshall to determine whether a relationship existed; chief among these factors for the Simpkins case was foreseeability. Simpkins, at 7. Conversely, in Nelson, the Second District acknowledged that a premises-liability action was a negligence claim. Nelson, 909 N.E.2d at 934. It cited the same criteria for determining whether a duty existed as Simpkins had. See Nelson, 909 N.E.2d at 934; Marshall, 222 Ill. 2d at 437. Unlike the Simpkins decision, however, the Nelson court found that whether a relationship existed was separate from the four factors set forth in Marshall. Nelson, 909 N.E.2d at 937. It would appear then, that two Illinois appellate districts have looked at the same sky and determined that it was both blue and gray. For Nelson and the Second District, a duty existed only if the parties shared a special relationship giving rise to a duty of care. For Simpkins and the Fifth District, whether a duty existed rested primarily upon whether the occurrence and injury should have been foreseeable. It is interesting to note that though Simpkins was handed down one year after Nelson, the Fifth District did not once mention the Second District’s opinion. This may be explained by the Fifth District’s focus on foreseeability instead of the relationship of the parties. This latter distinction is what can be taken away from these two opinions and is how other jurisdictions are deciding the issue. Those courts in other jurisdictions that focus on foreseeability also do not analyze the relationship between the parties and find that take-home asbestos suits are viable negligence actions. See for example Satterfield and Olivo. Conversely, those courts that do not focus on foreseeability generally do not find liability in take-home asbestos negligence cases. See CSX Transportation, Inc. v. Williams, 278 Ga. 888, 891, 608 S.E.2d 208 (Ga. 2005) (no duty based 8

upon public policy); Glen Miller, Estate of Carolyn miller, Shawn Dean, John Roland and Alma Roland v. Ford Motor Company, 479 Mich. 498, 525-526, 740 N.W.2d 206 (Mich. 2007) (no duty based upon a lack of a relationship between the plaintiff and defendant).

It is interesting to note that though Simpkins was handed down one year after Nelson, the Fifth District did not once mention the Second District’s opinion.

There are potential problems with the approach of both the Second and Fifth Districts. Focusing on foreseeability provides less certainty regarding how far the duty extends. The Simpkins case refused to explicitly limit its holding to family members, much less spouses. Indeed, the court in Satterfield, admitted that the duty could extend to anyone who is in close contact with an employees’ clothes over an extended period of time. But, while the Nelson approach creates certainty, it does not take into account individual factors or circumstances. Adding to uncertainty is the fact that in Illinois right now, the existence of a duty in take-home asbestos cases may depend upon which appellate district is followed. What is certain is that asbestos negligence claims are continuing to be filed. The increase in claims of take-home exposures have been noted by Judge Daniel Stack of Madison County to be one reason why filings have increased in that county. But asbestos is not the only type of negligence claim that may be affected by whether a court views duty as a question of whether a relationship exists or whether an injury is foreseeable. There may be other toxins that a company’s employee could take home on his or her clothes or in his or her car that could affect others. A company’s product could injure a by-stander who did not purchase, lease or use the product. A company’s liability to a by-stander could depend in large part upon whether the court requires that the plaintiff and the defendant have a relationship for a duty to exist or whether the court requires that the injury only be a foreseeable result of the activity.

First Quarter 2011

Evidence and Practice Tips By: Joseph G. Feehan Heyl, Royster, Voelker & Allen Peoria

First District Affirms Dismissal With Prejudice as Sanction for Destruction of Electronic Evidence In Peal v. Lee, et al., 403 Ill. App. 3d 197, 933 N.E.2d 450 (1st Dist. 2010), the court affirmed the trial court’s dismissal of plaintiff’s complaint because the plaintiff had erased electronic evidence which had been stored in his personal computer. Plaintiff Richard Peal was an ice skating instructor who sued the Glenview Park District and three former coworkers for, among other things, defamation and intentional infliction of emotional distress. In August 2006, Peal filed a complaint alleging that the defendants’ wrongful conduct occurred in August and October 2005. However, the defendants had various letters which Peal had sent to them in 2004 complaining about the same conduct described in the complaint. The defendants moved to dismiss the complaint based upon the one year statute of limitations. Defendants argued that although Peal’s complaint alleged that the underlying events occurred in 2005, the 2004 letters (“2004 Documents”) established that the events took place in 2004. Accordingly, defendants contended that the complaint was untimely. In July 2007, the trial court denied defendants’ motion to dismiss. The court stated that Peal had created a question of fact by denying that he had authored the 2004 Documents. Two weeks later, defendants sent Peal’s attorney an electronic discovery preservation letter requesting that Peal be instructed to “preserve any and all computer drives. . .as well as all electronically stored files and documents contained on all computer hard drives (including external drives, flash drives, etc.) and all other electronic data that may be discovered.” Peal, 403 Ill. App. 3d at 199. Over the next year, Peal failed to respond to various discovery requests and court orders, despite being granted several extensions of time. On October 31, 2008, defendants sent a request to Peal’s attorney to obtain a duplicate copy of Peal’s computer hard drive and other storage media owned by him. Peal’s attorney initially responded to defendants’

request by offering to arrange dates to allow examination of Peal’s computers. However, Peal’s attorney later advised defendants that he could not agree to the examination of the computers due to the presence of privileged email discussions saved in the hard drive. The defendants responded by submitting a proposed “search protocol” to address these concerns and suggested that Peal’s attorney review any documents for privileged information before producing the documents. This proposal was rejected by Peal’s attorney, who asserted that the examination of the computers would not lead to any relevant information. On February 29, 2009, the defendants filed a motion to compel, requesting that Peal make his personal computers and electronic storage devices available for examination. The circuit court granted the motion and ordered Peal to make his computer available by March 13, 2009. Peal again failed to comply with the court’s order and defendants filed a motion for sanctions. The trial court denied the motion but entered another order directing Peal to produce his computer by April 10, 2009, stating that Peal’s counsel would have an opportunity to review any documents before their disclosure. Defendants’ computer forensics expert, Wolfgang Wilke, began inspecting Peal’s computer on April 10, 2009. During examination of the computer, Wilke discovered that Peal had used seven data “wiping” programs to permanently delete data from the hard drive and that four of these data wiping programs were used on April 9, 2009, immediately prior to the court’s deadline for production of the computer. The use of these programs made it impossible to recover or identify the deleted data or files. However, Wilke determined that at least 20,000 files had been destroyed. In addition, Wilke determined that the hard drive produced by Peal had been manufactured in Taiwan on October 9, 2008 and had an operating system which was installed on November 23, 2008. After discovering this information, defendants filed a motion to dismiss the (Continued on next page)

About the Author Joseph G. Feehan is a partner in the Peoria office of Heyl, Royster, Voelker & Allen, where he concentrates his practice in commercial litigation, products liability and personal injury defense. He received his B.S. from Illinois State University and his J.D. (Cum Laude) from the Northern Illinois University College of Law. Mr. Feehan is a member of the ISBA Tort Law Section Council and is also a member of the Peoria County, Illinois State and American Bar Associations. He can be contacted at [email protected]

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IDC Quarterly

Evidence and Practice Tips (Continued) complaint with prejudice as a sanction, pursuant to Supreme Court Rule 219(c). Alternatively, defendants requested that the court compel production of various other computer data storage devices. Peal responded to the motion with an affidavit which stated that he replaced his hard drive in October 2008 due to a virus. Peal further stated that a second virus required him to reinstall the operating system in November 2008. Finally, Peal stated that he regularly downloaded “cleaning programs” in an attempt to repair his infected computer. Peal’s affidavit also stated for the first time that his complaints about defendants’ conduct were handwritten and not typed on his computer. The trial court then conducted an evidentiary hearing to determine whether Peal intentionally destroyed the electronic evidence. The court considered the testimony of Peal and the defendants’ computer forensics expert, Wolfgang Wilke. Wilke testified that Peal performed a data wipe at 11:28 p.m. on April 8, 2009, an external storage device was subsequently plugged into the computer at 11:51 p.m., and another data wipe occurred at 12:20 a.m. on April 9, 2009-one day before the computer was to be produced to defendants pursuant to the court order. The trial court entered a written order finding that Peal’s spoliation of evidence warranted dismissal of all of his claims with prejudice. Peal appealed and the First District affirmed, finding that the trial court did not abuse its discretion and that dismissal of Peal’s cause of action was an appropriate sanction. In reaching this determination, the appellate court considered six factors: “(1) the surprise to the adverse party; (2) the prejudicial effect of the proffered testimony or evidence; (3) the nature of the testimony or evidence; (4) the diligence of the adverse party in seeking discovery; (5) the timeliness of the adverse party’s objection to the testimony or evidence; and (6) the good faith of the party offering the testimony or evidence.” Peal, 403 Ill. App. 3d at 203. The First District held that Peal’s actions constituted “a deliberate, contumacious and unwarranted disregard of the court’s authority” and were “the personification of bad faith.” The First District found that Peal’s arguments were “completely disingenuous” and “pure pettifoggery.” Peal, 403 Ill. App. 3d at 204-206. Peal argued that defendants could not establish that they were surprised by the lack of evidence on the computer because Peal had denied that he authored the 2004 Documents. The First District rejected this argument, stating: Peal argues that because he has denied authoring the 2004 Documents, defendants cannot claim surprise that the documents sought were not found 10

on his computer. Peal’s denial, however, is the very reason why his hard drives were sought. To argue that it is no surprise documents are not found based on mere denial, when they may have in fact been destroyed, boils down to no more than a fallacious argument circulus in probando. More to the point under these facts, the real surprise is that a litigant would have the audacity to discard his old hard drive and delete tens of thousands of electronic files with sophisticated data-wiping programs and then cry foul that his opponents should not be surprised. This sounds like the story of the children who murdered their parents and pled for sympathy as orphans. Id. at 205. Peal also argued that the defendants had not been diligent in seeking the discovery of electronic evidence, including his computer hard drive and related equipment. The First District also soundly rejected this argument, stating: Peal next argues defendants were not diligent in discovery. This is another hollow argument, since the record indicates that Peal was sent a preservation letter on July 24, 2007. Shortly after discovery commenced in January 2008, defendants sought electronic versions of the 2004 Documents through documents requests and requests to admit. Peal failed to comply with a number of these discovery requests for nearly a year. While waiting for Peal to comply, defendants requested Peal’s computer and external storage devices in October 2008. Afterwards, Peal continued to delay his compliance with any discovery requests or court orders directing him to comply. Under these facts and circumstances, it is apparent that the defendants’ efforts were sufficiently diligent while Peal was diligent only in his effort to destroy evidence that could have destroyed his claims in court. Id. at 205-206. Incredibly, Peal also claimed that there was no evidence that he had acted in bad faith in responding to defendants’ discovery seeking electronic evidence. The First District disagreed, stating: Finally, Peal claims that he did not act in bad faith. As the English might say, this argument surely takes the biscuit. As the circuit court noted in its written order, plaintiff was notified in an email on

First Quarter 2011

November 17, 2008, that his computer was subject to the litigation. On February 27, 2009, the circuit court ordered Peal to produce his computer by March 13, 2009. Peal did not comply. It was not until April 10, 2009, that Peal produced his computer. But before producing the computer, it is apparent that he was busy destroying evidence from it, including the night before he turned the computer over to the defendants. He also apparently disposed of any and all external drives he had ever used. This strikes the court as the personification of bad faith. Id. at 206.

The Peal decision emphasizes the importance of diligently pursuing electronic evidence on a timely basis, thereby creating a record of electronic preservation letters, discovery requests, and motions to compel.

The Peal decision emphasizes the importance of diligently pursuing electronic evidence on a timely basis, thereby creating a record of electronic preservation letters, discovery requests, and motions to compel. Likewise, the Peal decision highlights defense counsel’s obligations upon receiving a request for a defendant’s electronically stored evidence.

Second District Holds That Trial Court Abused Its Discretion in Refusing to Award Attorney’s Fees and Expenses in Connection With Plaintiff’s Wrongful Denial of Request for Admissions In McGrath v. Botsford, ___N.E.2d___, 2010 WL 4542895 (2nd Dist. Nov. 5, 2010), plaintiff Christopher McGrath filed suit against Stephen Botsford seeking a declaration that a contract existed between Botsford and McGrath with respect to a real estate project. McGrath contended that under the terms of the alleged contract, he and Botsford had agreed to form a partnership whereby each would own 50% of the project.

Botsford served McGrath with written discovery, including a Rule 216 request to admit facts, which contained 29 separate statements. Many of the statements related to whether the parties ever reached a “meeting of the minds” and to the terms of any potential contractual agreement. McGrath failed to respond within 28 days. Six months later, McGrath requested that the trial court grant him leave to file late responses to the request for admissions and the court granted this request. McGrath did not assert any objections and simply denied all of the facts set forth in the request for admissions. However, McGrath later admitted many of the same facts at his deposition and at a bench trial. At the bench trial, the court ruled in favor of defendant Botsford. Botsford then filed a motion pursuant to Supreme Court Rule 219(b) requesting an award of reasonable expenses, including attorney’s fees, in connection with McGrath’s wrongful denials of facts contained in the request for admissions. The trial court denied the motion, and after McGrath appealed the judgment, Botsford cross-appealed the denial of his Rule 219(b) motion. Botsford argued on appeal that the trial court abused its discretion when it denied his motion for reasonable expenses and attorney’s fees. In order to prevail on a Rule 219(b) motion, the moving party must show: “(1) proof of the truth of the matters asserted that were denied by the nonmovant; (2) that the nonmovant lacked good reason to deny the facts asserted; and (3) the materiality to the litigation of the facts as to which admissions were sought.” McGrath, 2010 WL 4542895 at *5. The Second District conducted a detailed analysis of McGrath’s deposition testimony and trial testimony. The appellate court noted that McGrath had admitted at his deposition that he had falsely denied certain requests to admit and that he could not recall why he had denied them. The appellate court also considered that McGrath never attempted to amend his wrongful denials of the request to admit following his deposition and prior to trial. The Second District reviewed the trial court’s finding that some of the requests to admit were not of substantial importance and that the wording of some of the requests was subject to various interpretations. The trial court stated that it was not willing to grant the motion unless it were “clear as a bell” that McGrath’s denials were baseless. Id. The trial court further stated that it would have to be convinced that “there was really *** almost an intent to obstruct something or an intent to make someone jump through hoops than what’s needed to go through [sic].” Id. The Second District rejected the trial court’s analysis, stating: (Continued on next page) 11

IDC Quarterly

Evidence and Practice Tips (Continued) Specifically, the trial court erred in imposing additional requirements, beyond those found in Rule 219(b) itself, for the award of reasonable expenses pursuant to that rule. The trial court stated that it would not grant the motion for expenses unless Botsford could show that, in denying all of the statements in the Request, McGrath had “almost an intent to obstruct” or “an intent to make someone jump through hoops” beyond the normal incidents of discovery. However, neither Rule 219(b) nor the rule it was designed to enforce, Supreme Court Rule 216 (134 Ill. App. 2d R. 216), provides any basis for imposing such an additional “intent to obstruct” requirement. *** Under the plain language of the rules, if a moving party can show that the nonmoving party has not complied with these affirmative obligations, the movant may obtain reasonable expenses under Rule 219(b), regardless of whether the nonmoving party had the “intent to obstruct” the progress of the litigation. The trial court therefore erred in requiring Botsford to show that McGrath had such an intent. Id. at 6-7.

proper. . .Accordingly, we reject the argument that a party has “good reason” under Rule 219(b) to deny a requested admission simply because the admission might have the effect of requiring the entry of judgment against it. In rejecting this argument, we do not mean to suggest that a party must admit facts that it has a good-faith basis to dispute, at the risk of being hit with Rule 219(b) penalties if the fact finder ultimately adopts a contrary view of the facts at trial . . . Thus, if a party has a reasonable basis on which to dispute a fact, it has “good reason” for its denial of that fact in a request to admit. For instance, in a lawsuit over a car accident, a party has good reason to deny that the traffic light was green if it knows of a competent witness who says that the light was red. In such a case, a jury’s eventual finding that the light was green would not subject the denying party to the payment of expenses under Rule 219(b). Id. at *8-9.

“Thus, if a party has a reasonable basis on which to dispute a fact, it has

McGrath also argued that the Second District should affirm the trial court’s ruling because he had “good reason” under Rule 219(b) to deny various requests because particular terms in the requests were vague and subject to various definitions. However, the Second District noted that McGrath did not file an objection to the form or content of any of the requested admissions but instead filed sworn denials to all of them. Thus, the appellate court found that McGrath had forfeited any objection which he could have raised relating to the form and content of the request to admit. McGrath also argued that he was not required to admit liability or concede his case and, therefore, this provided him with a good reason to deny all of the requested admissions. The Second District also rejected this argument, stating: We are unable to discern any legal principle that might support this broad assertion that a party need not admit facts if those facts would “concede away its whole case” . . . Thus, regardless of whether the requested admission concerns an “ultimate” fact that will have the effect of “conceding away” the case, if it concerns a fact and not a legal conclusion, it is 12

‘good reason’ for its denial of that fact in a request to admit.

For

instance, in a lawsuit over a car accident, a party has good reason to deny that the traffic light was green if it knows of a competent witness who says that the light was red.”

The McGrath decision emphasizes the importance of asserting timely good faith objections to a request to admit. McGrath also confirms that a party has a duty to amend any prior objection or denial if the party or its attorney learns of information which may be inconsistent with a previous response.

First Quarter 2011

Health Law By: Roger R. Clayton, Mark D. Hansen and Jesse A. Placher Heyl, Royster, Voelker & Allen Peoria

What Every Litigator Needs to Know About Medical Non-Disclosure Agreements As internet and social networking use has increased, members of the public have gained the power to widely disseminate a message or opinion about a topic. While disappointed patients in previous generations were limited in that they were only able to complain and voice their concerns to relatives and friends, today’s patients are able to post a message on the internet, whether on Facebook, Twitter, blogs, or a personal website. Depending on the popularity of the individual or the site on which the message was posted, that message could potentially reach hundreds to thousands of readers. This increased ability to disseminate messages about doctors and health care professionals has caused health care professionals to worry about one patient’s ability to cause them severe reputational injury. Through the internet and social networking, one upset patient may be able to unfairly (or fairly) criticize a health care professional and harm that professional’s reputation substantially. To guard against the online dissemination of harmful reviews of doctors and other health care professionals, several have begun using medical non-disclosure agreements (NDAs), which prohibit patients from posting negative reviews on the internet. Medical NDAs have become more popular in recent years and, although they have not yet been legally challenged, they have become a controversial news topic. What are Medical Non-Disclosure Agreements? Medical NDAs are agreements in which a patient agrees in writing to refrain from posting negative reviews of the medical professional on the internet.

Medical NDAs vary greatly, just like any other type of contract. First, medical NDAs take different forms in that some are a provision of a larger contract while others are a separate contract. Second, medical NDAs differ in that the reach of the prohibition may vary. Some NDAs may only restrict patients from posting reviews to online review websites. Others may prohibit the patient from negatively commenting on any internet site, including social networking sites such as Twitter and Facebook. Third, some medical NDAs are limited in duration of the prohibition while others are unlimited in duration. Health care professionals find the use of medical NDAs desirous because the NDAs provide some protection against (Continued on next page)

About the Authors Roger R. Clayton is a partner in the Peoria office of Heyl, Royster, Voelker and Allen where he chairs the firm’s healthcare practice group. He also regularly defends physicians and hospitals in medical malpractice litigation. Mr. Clayton is a frequent national speaker on healthcare issues, medical malpractice and risk prevention. He received his undergraduate degree from Bradley University and law degree from Southern Illinois University in 1978. He is a member of the Illinois Association of Defense Trial Counsel (IDC), the Illinois State Bar Association, past president of the Abraham Lincoln Inn of Court, past President and board member of the Illinois Association of Healthcare Attorneys, and past president and board member of the Illinois Society of Healthcare Risk Management and co-authored the Chapter on Trials in the IICLE Medical Malpractice Handbook.

Mark D. Hansen is a partner in the Peoria office of Heyl, Royster, Voelker & Allen. He has been involved in the defense of cases involving catastrophic injury, including the defense of complex cases in the areas of medical malpractice, products liability, and professional liability. Mark has defended doctors, nurses, hospitals, clinics, dentists, and nursing homes in healthcare malpractice cases. He received his undergraduate degree from Northern Illinois University and law degree from University of Illinois College of Law. Mark is a member of the Illinois Association of Defense Trial Counsel and is a co-chair of the Young Lawyers Committee, former ex officio member of the Board of Directors, and has served as chair for various seminars hosted by the IDC. He is also a member of the Illinois Society of Healthcare Risk Management, the Abraham Lincoln American Inn of Court, and the Defense Research Institute.

Jesse A. Placher is a 2007 Fall Associate in the Peoria office of Heyl, Royster, Voelker & Allen. He received his undergraduate degree from the University of Virginia in 2004 and law degree from Southern Illinois University in 2007. During law school, he was a member of the SIU Trial Team and was awarded the Order of the Barristers in 2007. Following graduation, he joined the firm’s Peoria office in August 2007.

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IDC Quarterly

Health Law (Continued) upset patients who publicly express their dissatisfaction. Those opposed to medical NDAs do not approve of their use because they feel that NDAs take away the First Amendment free speech rights of vulnerable patients who are likely to sign NDAs because they are in need of care. What are the Benefits of Medical Non-Disclosure Agreements?

Medical NDAs have obvious benefits for health care professionals. If NDAs are complied with, they have the effect of protecting the professional from the online dissemination of any negative patient reviews. This prevents potential patients from being scared away by online reviews, whether true or untrue. NDAs can be especially beneficial to health care professionals and to the general public in that they may prevent angry patients from posting false statements about the doctor online. This is beneficial to doctors because it protects them from the spread of rumors and lies, which could have serious consequences for their career. Medical NDAs are also beneficial to the public’s interest in obtaining truthful information about health care providers. Medical NDAs protect the public by ensuring that only truthful information is disseminated. Moreover, medical NDAs provide health care professionals protection from attacks to which they are legally unable to respond. Health care professionals are generally legally prohibited from sharing private health information about individuals by the physician-patient privilege and provisions of the Health Portability and Accountability Act (HIPAA). Aside from NDAs, patients are under no such restriction. This means that doctors and other providers are often unable to defend themselves publicly from false or misleading accusations made publicly by the patient. Medical NDAs help to mitigate this injustice by prohibiting the online dissemination of negative reviews. What Concerns are there about Medical Non-Disclosure Agreements?

Although there are many benefits to using medical NDAs, there are several concerns as well. The main concern to those opposing medical NDAs is that NDAs restrict the First Amendment rights of patients to free speech. Medical NDAs have the effect of limiting the ability of patients to criticize health care professionals, even when the criticism is true and deserved. Critics also explain that medical NDAs take advantage of prospective patients by threatening to withhold needed care in the absence of a medical NDA. Because courts have yet to rule on the enforceability of 14

medical NDAs, it is unclear whether they actually have any legal effect. Decisions filed in challenges to the enforceability of other types of contracts have called into question whether medical NDAs will withstand similar legal challenges. See, e.g., White v. Village of Homewood, 256 Ill. App. 3d 354, 628 N.E.2d 616 (1st Dist. 1993) (holding that an exculpatory agreement between an employer and employee was unenforceable because the difference in the bargaining power between the two parties was such that the agreement did not represent the free choice of the employee); Service Centers of Chicago, Inc. v. Minogue, 180 Ill. App. 3d 447, 535 N.E.2d 1132 (1st Dist. 1989) (holding unenforceable an employee confidentiality agreement because it was unlimited in duration and scope). The fact that many medical NDAs are unlimited in duration makes their enforceability questionable because many courts have held contracts of unlimited duration unenforceable. Additionally, in light of other decisions, the earlier discussed difference in the bargaining position and power of the medical professional and patient may have the effect of making the medical NDA unenforceable. Lastly, many courts have been understandably concerned about allowing restrictions of patients’ rights. Therefore, some courts may be reluctant to enforce medical NDAs, which do restrict the speech rights of patients. Another concern with medical NDAs is whether lawsuits brought against violators of the NDA would provide the affected health care professional with an adequate remedy. Any remedy sought would come after a negative review had already been posted on the internet. Therefore, the damage would have already been done. Any monetary damages would be difficult to prove because it would be unclear how many potential patients the health care professional had lost due to the negative review. Therefore, medical NDAs may not have the effect that health care professionals imagine them to have. Because patients are increasingly able to widely disseminate reviews concerning their medical care, doctors and other health care providers have begun to make use of non-disclosure agreements. These agreements have several benefits, such as protecting professionals from the wide dissemination of harmful reviews and protecting consumers from false information. However, the legality of these agreements is far from settled, and therefore, medical professionals and others who use or are considering using NDAs need to be aware that these agreements may have no legal effect. As NDAs become more popular and widespread, it is likely that they will be challenged and that the questions about their enforceability will be answered. Until then, their use will remain controversial and their enforceability will remain unclear.

First Quarter 2011

Professional Liability By: Martin J. O’Hara Much Shelist Denenberg Ament & Rubenstein, P.C. Chicago

Defending Claims for Malpractice Brought by Bankruptcy Trustees Practitioners who defend legal and accounting malpractice claims undoubtedly have observed the proliferation of actions filed by bankruptcy trustees against attorneys and accountants. Such actions have been filed throughout the United States, including Illinois. These suits can be extremely expensive to defend, and the bankruptcy trustees typically seek outlandish damages. These actions led Seventh Circuit Court of Appeals Judge Richard Posner to comment that “[j] udges must therefore be vigilant in policing the litigation judgment exercised by trustees in bankruptcy, and in imposing sanctions for the filing of a frivolous suit.” Maxwell v. KPMG LLP, 520 F.3d 713, 718 (7th Cir. 2008). Therefore, defense attorneys must be cognizant of certain legal theories that can be effective in such cases. To place context on this issue, the fact pattern in many of the cases is similar. Typically, there has been fraud committed by an insider or insiders of a corporation. At some point, the fraud is revealed and the corporation is forced to file for bankruptcy. A bankruptcy trustee or liquidation trustee will file a negligence claim against a professional alleging that the professional either conspired with the insiders to carry out the fraud, or failed to detect the fraud that was committed. In such cases, a bankruptcy trustee stands in the shoes of the company in pursuing the claim. Official Committee of Unsecured Creditors of PSA, Inc., 437 F.3d 1145, 1150 (11th Cir. 2006) (“A bankruptcy trustee stands in the shoes of the debtor and has standing to bring any suit that the debtor could have instituted when the debtor filed for bankruptcy, and there is no suggestion in the text of the Bankruptcy Code that the trustee acquires rights and interests greater than those of the debtor.”). Therefore, the claim actually involves the company whose insider committed the fraud suing the professional that had been retained by the company. The question thus becomes

whether the company that committed the wrongdoing through its agent may recover for damages that it suffered as a result of the wrongdoing, or whether the company is precluded from recovering because it was itself the wrongdoer through its agent. The answer to these questions lies in the concepts of in pari delicto and imputation. In pari delicto is a Latin phrase meaning “[e]qually at fault.” BLACK’S LAW DICTIONARY, Eighth Edition, p. 1248. The principle behind the pari delicto doctrine is that a plaintiff who has participated in wrongdoing may not recover damages resulting from the wrongdoing. Id. Imputation is a concept in agency whereby a corporation will be charged with the knowledge of its agent. In essence, when the two doctrines are put together, they stand for the proposition that a company who suffered damages as a result of the wrongdoing of its agent cannot recover from a third party for damages caused by the agent’s wrongdoing. Thus, in cases where a bankruptcy trustee for a corporation sues a third party professional for damages caused by the wrongdoing of an agent of the corporation, the professional very often defends the claim based on the in pari delicto doctrine and imputation. However, there is an important exception to the concept of imputation; namely, the adverse interest exception. The adverse interest exception applies where the agent is found to have totally abandoned the interests of the company in committing the wrongdoing. Importantly, as discussed below, total abandonment means just what it says—total abandonment. If the company benefitted to some extent, even if the benefit was short term, the adverse interest exception does not apply. A very recent decision by the Court of Appeals of New York addressed these important concepts in the context of a professional negligence claim brought by a liquidation trustee against KPMG. Kirschner v. KPMG, LLP, 2010 WL 4116609 (N.Y. Oct. 21, 2010). The court’s holding in Kirschner is very (Continued on next page)

About the Author Martin J. O’Hara, a Principal in Much Shelist Denenberg Ament & Rubenstein, P.C.’s Litigation & Dispute Resolution practice group, concentrates his practice on commercial litigation and the defense of professionals in malpractice actions. Mr. O’Hara earned his B.A. in 1990 from Illinois State University and his J.D. in 1995 from the John Marshall Law School. He is a member of the Illinois State Bar Association, the Chicago Bar Association, the Defense Research Institute, the Illinois Association of Defense Trial Counsel and the Society of Trial Lawyers. While in law school, he served on the John Marshall Law Review, and won a Graduate School Scholarship Award and the Dean Herzog Scholarship.

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IDC Quarterly

Professional Liability (Continued) helpful for attorneys defending similar claims as the court there addressed and rejected many arguments that are often raised by bankruptcy trustees to avoid the in pari delicto doctrine and imputation. Kirschner arose from the collapse of Refco, once a leading provider of brokerage and clearing services. After becoming a public company in 2004, Refco disclosed that its president and chief executive officer had orchestrated a succession of loans which hid hundreds of millions of dollars of Refco’s uncollectible debt from the public and regulators. This in turn created a falsely positive picture of Refco’s financial condition. However, the false picture allowed Refco to stay in operation and raise additional capital for the operations of the company. Following the disclosure of the fraud, Refco filed for bankruptcy protection in the United States Bankruptcy Court for the Southern District of New York. The bankruptcy court ultimately confirmed Refco’s Chapter 11 bankruptcy plan. Among other things, the plan established a Litigation Trust, which authorized Marc Kirschner as Litigation Trustee to pursue claims and causes of action possessed by Refco prior to its bankruptcy filing. Among other suits, Kirschner brought an action against KPMG alleging that as Refco’s accounting firm, KPMG was negligent in failing to discover the scheme orchestrated by Refco’s president and CEO. The suit against KPMG was transferred with other suits brought by Kirschner to the Southern District of New York. KPMG moved to dismiss the complaint asserting that the Trustee could not prevail on a claim against KPMG when insiders of Refco engaged in the fraudulent conduct that caused the damage. The District Court agreed, finding that, under New York law, the Trustee’s claims were precluded because his complaint alleged that Refco received substantial benefits from the agents’ wrongdoing. The Trustee’s claims essentially alleged that the wrongdoers stole for Refco and not from Refco. Specifically, the District Court held that “the burden of the [Refco] insiders’ fraud was not borne by Refco or its then-current shareholders who were themselves the [Refco] insiders—but rather by outside parties, including Refco’s customers, creditors, and third parties who acquired shares through the IPO.” Id. The District Court thus dismissed the claims against KPMG. On appeal, the United States Court of Appeals for the Second Circuit certified a series of questions to the Court of Appeals of New York relating to whether New York law supported the decision of the District Court. In response, the Kirschner court answered the questions by engaging in a substantive analysis of the law relating to the in pari delicto doctrine, imputation and the adverse interest exception. The 16

Kirschner court began its analysis by discussing the doctrine of in pari delicto. The court stated that the doctrine “mandates that the courts will not intercede to resolve a dispute between two wrongdoers.” Id. The court noted that the doctrine remains in effect because denying judicial relief to an admitted wrongdoer deters illegality, and because it avoids entangling courts in disputes between wrongdoers. The Kirschner court then discussed the concept of imputation. The court recognized the fundamental principle that “the acts of agents, and the knowledge they acquire while acting within the scope of their authority are presumptively imputed to their principals. Id. The law presumes imputation even where the agent exhibits poor business judgment or commits fraud. Therefore, fraud by officers and agents in the course of the corporate dealings is considered in the law to be the fraud of the corporation. However, the court also recognized that there is an important exception to imputation; namely, the adverse interest exception. The adverse interest exception applies where the agent has totally abandoned his principal’s interests for his own or another’s purposes. Where the agent is perpetrating a fraud that is intended to benefit the agent exclusively, and in the process harm the corporation itself, the concept behind imputation fails. Under such circumstances, the agent is not acting on behalf of the corporation. Conversely, the court found that where the corporate wrongdoer’s fraudulent conduct “enables the business to survive—to attract investors and customers and raise funds for corporate purposes— [the total abandonment] test is not met,” and the adverse interest exception does not apply. Id. In arguing that the adverse interest exception applied to the claims against KPMG, the Trustee contended that the fact that Refco was forced to file for bankruptcy demonstrated that Refco was harmed by the wrongdoers’ conduct. The Kirschner court rejected this argument, finding that the mere fact that an entity is forced to file for bankruptcy does not determine whether its agent’s conduct was adverse to the company at the time the conduct was committed. Likewise, the court held that any harm resulting from the discovery of the fraud—rather than the fraud itself—is not relevant to whether the adverse interest exception applies. “If that harm could be taken into account, a corporation would be able to invoke the adverse interest exception and disclaim virtually every corporate fraud—even a fraud undertaken for the corporation’s benefit—as soon as it was discovered and no longer helping the company.” Id. The Kirschner court likewise rejected the Trustee’s argument that the adverse interest exception should apply where the wrongdoers intended to benefit themselves at the corpora-

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tion’s expense, and the corporation received only a short term benefit. The court found that adopting the Trustee’s argument would mean the demise of imputation. The court explained as follows: “This is so because fraudsters are presumably not, as a general rule, motivated by charitable impulses, and a company victimized by fraud is always likely to suffer long-term harm once the fraud becomes known.” Id. The court additionally rejected the Trustee’s assertion that the in pari delicto defense should not be a total bar to recovery, but rather should be akin to a comparative negligence analysis between the defendant professional and the company. The court held that such a change would “marginalize the adverse interest exception.” Id. The court also held that “comparative fault contradicts the public policy purposes at the heart of in pari delicto-deterrence and the unseemliness of the judiciary serving as paymaster of the wages of crime.” Id. It would appear clear that based on the Kirschner decision, the Second Circuit will affirm the dismissal of the Trustee’s claims against KPMG. As a result, KPMG will avoid liability based on the legal theories that it presented, rather than having to engage in fact discovery surrounding its actions. While KPMG undoubtedly will expend a significant amount of money in achieving the dismissal, that will be a small fraction of what it would cost to take the case to trial. As stated above, Kirschner is important for all of us practitioners because it provides strong responses to many of the arguments that are raised by bankruptcy trustees to avoid the application of the in pari delicto doctrine and imputation. However, the most important thing to take away from Kirschner is that it is incumbent on defense counsel to focus on the benefits that the company received as result of the wrongful conduct. Kirschner makes clear that such benefits need not have been long term benefits, nor must they have been the intended consequence of the wrongdoers’ actions. As long as some cognizable benefit to the company was achieved as a result of the wrongdoing, the bankruptcy trustee will be precluded as a matter of law from pursuing professional negligence claims against the attorneys or accountants who performed services for the company prior to the bankruptcy. Once the benefit is identified, the attorney must aggressively pursue the in pari delicto and imputation defenses through a motion to dismiss or a motion for summary judgment. This will allow the attorney to focus the case on the legal issues, rather than the factual issues framed by the bankruptcy trustee’s allegations, and allow the attorney to obtain a resolution of the case strictly on the legal issues.

Insurance Law By: C. Kinnier Lastimosa* Sedgwick, Detert, Moran & Arnold LLP Chicago

A Setoff Provision in Underinsured Motorist Coverage for “All Sums Paid Because of Bodily Injury by or on Behalf of Persons or Organizations Responsible” Does Not Include Settlements by Non-Motorist Parties to the Accident Analyzing underinsured motorist coverage, the Illinois Appellate Court, Fifth District, finds that an insurer may not setoff settlement payments related to the accident when made by parties other than the underinsured motorist, even though such payments would fit within the language of the provision. Farmers Automobile Insurance Association v. Coulson, 402 Ill. App. 3d 779, 931 N.E.2d 1257 (5th Dist. 2010). Insurance policies provide underinsured motorist (UIM) coverage to protect insureds where the coverage limits of the motorist tortfeasor are insufficient to fully compensate the insured for the injuries suffered. Such coverage typically includes setoff provisions with, for example, the following (Continued on next page)

About the Authors C. Kinnier Lastimosa is an associate in the Chicago office of Sedgwick, Detert, Moran & Arnold LLP. He obtained his B.A. from Northwestern University (1998) and his J.D. from Washington University School of Law (2002). *The author wishes to thank Eric C. Scheiner for his assistance during the final stages of composition.

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Insurance Law (Continued) language: “The limit of liability shall be reduced by all sums paid because of bodily injury by or on behalf of persons or organizations responsible.” The language of the provision does not restrict setoff to amounts paid by the underinsured motorist. Applied literally, the language of the provision would allow an insurer to set off any amounts received by an insured in settlement or judgment by any party, even persons other than the underinsured motorist. Illinois courts, however, have not applied those setoff provisions so broadly. Setoff Provisions in Illinois

The Supreme Court of Illinois has addressed setoff provisions in other contexts. In Sulser v. Country Mutual Insurance Co., 147 Ill. 2d 548, 591 N.E.2d 427 (1992), the supreme court held that an UIM insurer may set off the amount of workers’ compensation benefits received by the insured. The UIM provision at issue explicitly stated that the insurer’s liability would be reduced by “all sums paid by or on behalf of persons or organizations who may be legally responsible for bodily injury…; [and] the present value of all amounts payable under any workmen’s compensation, disability benefits or similar law.” The first step is analyzing the Illinois Insurance Code sections concerning UIM coverage and uninsured motorist coverage. The UIM section of the Illinois Insurance Code references “amounts actually recovered under the applicable bodily injury policies, bonds or other security maintained on the underinsured motor vehicle.” 215 ILCS 5/143a-2(4). The uninsured motorist section references “proceeds of any settlement or judgment… against any person or organization legally responsible for the property damage, bodily injury or death.” 215 ILCS 5/143a(4) The court observed that the UIM statute does not refer to set-off for settlement and judgment proceeds (as the uninsured motorist statute does) and was specific to amounts recovered under insurance policies, bonds or other security on the underinsured vehicle. The supreme court nonetheless allowed the setoff of workers’ compensation benefits. While the UIM statute was silent as to the effect of workers’ compensation benefits, the court recognized that such payments were deductible under an uninsured motorist policy. It reasoned that the coverages had the same underlying purpose of placing the insured in the same position as the insured would have been if the tortfeasor possessed adequate insurance, and that it would be an absurd result for an insured to receive greater benefits under an UIM policy than under an uninsured motorist policy. The court found that the setoff did not violate public 18

policy and would not prevent the insured from being fully compensated for the injury. Thus, the court deferred to the terms of the insurance contract agreed upon by the parties, which allowed for a setoff of workers’ compensation benefits.

While the UIM statute was silent as to the effect of workers’ compensation benefits, the court recognized that such payments were deductible under an uninsured motorist policy. It reasoned that the coverages had the same underlying purpose of placing the insured in the same position as the insured would have been if the tortfeasor possessed adequate insurance, and that it would be an absurd result for an insured to receive greater benefits under an UIM policy than under an uninsured motorist policy.

The supreme court’s contemporaneous analysis of setoff provisions in the context of uninsured motorist coverage offers additional guidance. In Hoglund v. State Farm Mutual Automobile Insurance Co., 148 Ill. 2d 272, 592 N.E.2d 1031 (1992), the insured was injured by two motorists at fault, one uninsured and the other with a $100,000 bodily injury limit. There, the setoff provision provided: Any amount payable under this coverage shall be reduced by any amount paid or payable to or for the insured: a. by or for any person or organization who is or may be held legally liable for the bodily injury to the insured; b. for bodily injury under the liability coverage; or c. under any worker’s compensation, disability benefits, or similar law.

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The insured sought the $100,000 limits of her uninsured motorist coverage, claiming that her damages exceeded $200,000. The insurer denied the claims based on a complete set-off under the policy language by virtue of the $100,000 bodily injury limit of the insured motorist. The trial court granted summary judgment in favor of the insurer and found that the insurer had no payment obligations. The Illinois Supreme Court affirmed the appellate court’s reversal and held that the insurer was entitled to a set-off, but only to the extent necessary to prevent double recovery by the insured. The supreme court found that a latent ambiguity existed and rejected a literal interpretation of the uninsured motorist provision. It reasoned that the provision should be read in conjunction with the insured’s reasonable expectations, the facts of the case, and the public policy of putting the injured party in substantially the same position as if the motorist had been insured. It further observed that the insured reasonably expected coverage for damages by an uninsured motorist up to $100,000, and that while the insured was paid $100,000 for one motorist’s separate fault, she received nothing from the uninsured motorist for his fault. Based on these circumstances, the supreme court found that the latent ambiguity in the setoff provision must be construed in favor of coverage. The Illinois Appellate Court, First District, subsequently examined setoffs for insurance payments by multiple motorists. In King v. Allstate Insurance Co., 269 Ill. App. 3d 190, 645 N.E.2d 503 (1st Dist. 1994), the insured was injured by two automobiles while riding his bicycle. One of the motorists had insurance with a bodily injury limit of $100,000, and the second motorist had insurance with a bodily injury limit of $20,000. The insured received the limits of both motorists’ policies and made a claim under the UIM coverage of his own insurance, asserting that he was not fully compensated for his injuries. His policy provided $50,000 in UIM coverage per person and $100,000 per occurrence and included the following setoff provision: Damages payable will be reduced by: (a) all amounts paid by or on behalf of the owner or operator of the uninsured auto or anyone else responsible. This includes all sums paid under the bodily injury liability coverage of this or any other auto policy. . . . In addition, the limits for [underinsured motorist coverage] will be reduced by all amounts paid by or on behalf of the owner or operator of the underinsured motor vehicle. After the insurer denied the claim based on the setoff of $120,000, the insured filed a declaratory judgment action

requesting the full amount of his UIM coverage. The insurer filed a counterclaim for declaratory judgment arguing that setoffs of the $20,000 and $100,000 payments removed any payment obligation on the $50,000 UIM coverage. On cross motions for summary judgment, the trial court granted the insurer’s motion for summary judgment. On appeal, the First District reversed and held that the insurer was not entitled to set off the entire $120,000 received. Relying on the holding in Hoglund, the appellate court reasoned that a setoff of the full amount would violate public policy and would effectively negate the UIM coverage. It examined the insurance limits of each motorist individually and observed that only the second motorist qualified as an UIM. As such, it found that the $50,000 UIM coverage limit was subject to a setoff of $20,000 for the second motorist’s policy limits. The appellate court asserted that as long as there was no double recovery, the insured could recover up to $30,000 remaining on the UIM coverage. It therefore remanded the case to determine the extent of the insured’s damages in excess of the $120,000 received. The Fifth Circuit’s Analysis in Coulson

In Coulson, 402 Ill. App. 3d 779, 931 N.E.2d 1257, the Fifth District held that an insurer providing underinsured motorist (UIM) coverage was not entitled to set off amounts paid by parties unrelated to the driver. There, the insured was severely injured when a vehicle drove through a restaurant window and struck her and two others inside. The insured allegedly suffered severe injuries with damages in excess of $900,000. The motorist had his own insurance with a policy limit on bodily injury liability of $50,000, of which $24,000 was paid to the insured and $26,000 was paid to the other injured bystanders. The property owner and restaurant franchisee settled claims with the insured for $410,000. The insured’s automobile insurance policy included underinsured-motorist (UIM) coverage with a limit of $300,000 per person and also contained a setoff provision that provided that “the limit of liability for this coverage shall be reduced by all sums paid because of the ‘bodily injury’ by or on behalf of persons or organizations who may be legally responsible.” The insured made a demand for UIM benefits under the policy, but her insurer declined. The insurer asserted that it was entitled to set off the $434,000 received against the $300,000 policy limit. Because the total settlement payments exceeded the UIM coverage limit, the insurer thus claimed that it had no payment obligations to the insured. Following cross motions for summary judgment in the insurer’s subsequent declaratory (Continued on next page) 19

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Insurance Law (Continued) judgment action, the trial court granted summary judgment in the insurer’s favor. On appeal, the Fifth District reversed and held that the insurer could not set off the amounts paid by the property owner and restaurant franchisee. The court cited Hoglund, 148 Ill. 2d 272, 592 N.E.2d 1031, and found that the setoff provisions were similar. It further reasoned that a literal application of the setoff provision would deny the protection against UIMs for which premiums were paid and would frustrate the public policy of placing the insured in the same position that she would have been in had the driver been fully insured. The appellate court further reasoned that regardless of the limits of the motorist’s policy, the insured could have recovered against the property owner and franchisee because their liability was completely independent from the motorist. It also observed that an insurer is entitled to set-off for UIM coverage only to the extent necessary to prevent double recovery. Thus, it determined that the maximum amount of recovery under the UIM coverage would be $276,000, that is, $300,000 less the $24,000 paid by the driver’s insurer. Under these circumstances, the appellate court remanded to determine the total extent of the insured’s damages, which had not yet been determined. The Fifth District’s decision in Coulson provides guidance on the set-off of payments made by multiple parties in connection with an accident involving an underinsured motorist. Examined in conjunction with the Illinois Supreme Court’s prior decisions, the Coulson decision suggests that courts might not apply broadly worded set-off provisions literally where there are payments by multiple sources that are independently liable. That stated, the insurance policy remains a contract agreed to by the insurer and insured. Thus, under Sulser, provisions with specific and explicit direction regarding the qualifying sources of setoff will provide insurers with the strongest basis to reduce their payment obligations under underinsured motorist coverage where the insured has not yet obtained double recovery.

Appellate Practice Corner By: Brad A. Elward Heyl, Royster, Voelker & Allen Peoria

Direct Appeal of Final Judgments to the Illinois Supreme Court Direct appeal to the Illinois Supreme Court from final judgments of the circuit courts are permitted in certain situations as set forth in the Illinois Constitution of 1970 and the Illinois Supreme Court Rules. According to Article VI, Section 4 (a) of the Illinois Constitution of 1970: The Supreme Court may exercise original jurisdiction in cases relating to revenue, mandamus, prohibition or habeas corpus and as may be necessary to the complete determination of any case on review. Ill. Const. Art. VI, § 4(a). Section 4(b) states further: Appeals from judgments of Circuit Courts imposing a sentence of death shall be directly to the Supreme Court as a matter of right. Ill. Const. Art. VI, § 4(b). Article VI then empowers the Supreme Court to provide by rule for direct appeal in other cases. Ill. Const. Art. 6, § 4(b). Direct appeals to the Supreme

About the Author Brad A. Elward is a partner in the Peoria office of Heyl, Royster, Voelker & Allen. He practices in the area of appellate law, with a sub-concentration in workers’ compensation appeals and asbestos-related appeals. He received his undergraduate degree from the University of Illinois, Champaign-Urbana, in 1986 and his law degree from Southern Illinois University School of Law in 1989. Mr. Elward is a member of the Illinois Appellate Lawyers Association, the Illinois State, Peoria County, and American Bar Associations, and a member of the ISBA Workers’ Compensation Section Counsel.

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Court should be considered along with other means to obtain high court consideration, including Rule 381 actions for mandamus, Rule 383 motions for the exercise of supervisory authority, and Rule 315 petitions for leave to appeal. Historical Perspective

Prior to these changes, the scope of cases that fell within the Court’s mandatory jurisdiction was much broader. Under the Illinois Constitution of 1870, the Court was afforded original jurisdiction in three types of cases: revenue, mandamus, and habeas corpus. Ill. Const. 1870, Art. VI, § 2. Per Section 75 of the Civil Practice Act, the Court permitted direct jurisdiction as follows: Appeals shall be taken directly to the Supreme Court in all cases in which a franchise or freehold or the validity of a statute or the validity of a county zoning ordinance or resolution or a construction of the constitution is involved, and in cases in which the validity of a municipal ordinance is involved and in which the trial judge shall certify that in his opinion the public interest so requires, and in all cases relating to revenue, or in which the State is interested as a party or otherwise. 110 Ill. Rev. Stat. sec. 199(1) (1949). Article VI was amended in 1964 to specifically permit direct appeals from final judgments of the circuit courts in four classes of cases: revenue, habeas corpus, capital cases, and those involving a question arising under the United States or Illinois Constitution. See J. Timothy Eaton & William R. Quinlan, DIRECT APPEALS FROM THE CIRCUIT COURT TO THE ILLINOIS SUPREME COURT AFTER FINAL JUDGMENT, IICLE CIVIL APPELLATE PRACTICE, 7-2–7-4 (2008). The Court’s mandatory direct appeals were narrowed even further in the 1970 Constitution, which yields the procedures we have in place today. The Supreme Court Delineates Other Areas for Direct Appeal by Rule

Pursuant to the discretionary power afforded to the Supreme Court by Section 4, Supreme Court Rule 302 was revised effective July 1, 1971, to delineate the categories of matters for which it would entertain direct appeal. Rule 302(a) addresses those cases, other than those specifically enumerated in Article 6 of the Constitution, where direct appeal is possible: Appeals from final judgments of circuit courts shall be taken directly to the Supreme Court (1) in cases in

which a statute of the United States or of this state has been held invalid, and (2) in proceedings commenced under Rule 21(c) of this court. For purposes of this rule, invalidity does not include a determination that a statute of this state is preempted by federal law. 210 Ill. 2d 302(a). The latter sentence of Rule 302(a) was added by a July 27, 2006 amendment, effective September 1, 2006. 210 Ill. 2d R. 302(a). The two pressing questions when presented with a potential Rule 302(a) scenario are: (1) whether the underlying circuit court order is final and (2) whether the finding of unconstitutionality was a necessary part of the circuit court’s ruling. Requirement of a Final Order

Foremost, the Illinois Supreme Court has stated that as a general rule, it will only consider direct appeals from final judgments of the circuit court. Treece v. Shawnee Comm. Unit School Dist. No. 84, 39 Ill. 2d 136, 233 N.E.2d 549 (1968). Illinois considers a final judgment one that “terminates the litigation on the merits and leaves nothing to be done but to proceed to execution.” Kirwan v. Welch, 133 Ill. 2d 163, 167, 549 N.E.2d 348 (1989). To determine what constitutes a final order, the Court instructs parties to consult Rule 303, and further acknowledges that an otherwise final order in a multi-party or multi-issue litigation may be made appealable under Rule 304(a). Treece, 39 Ill. 2d at 139; see also Village of Niles v. Szczesny, 13 Ill. 2d 45, 48, 147 N.E.2d 371 (1958). At least two reported cases demonstrate that even a nonfinal order which fails to warrant review under Rule 302(a) may nevertheless be reviewed under the Court’s discretionary power pursuant to Rule 302(b). In re H.G., 197 Ill. 2d 317, 757 N.E.2d 864 (2001); Berk v. Will County, 34 Ill. 2d 588, 592, 218 N.E.2d 98 (1966). Also, an interlocutory order arising under Supreme Court Rule 307 concerning injunctions may be appealable under Rule 302(a) if it involves a ruling that a state or federal statute is unconstitutional. Garcia v. Tully, 72 Ill. 2d 1, 7, 377 N.E.2d 10 (1978) (order dissolving injunction was founded upon the circuit court’s ruling that provisions of the Illinois Revenue Act of 1939 were unconstitutional). See also Desnick v. Department of Professional Regulation, 171 Ill. 2d 510, 665 N.E.2d 1346 (1996). Proper jurisdiction should be considered in any potential Rule 302(a) scenario. Moreover, jurisdiction can be found lacking despite the parties consent or stipulation to jurisdic(Continued on next page) 21

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Appellate Practice Corner (Continued) tion. People ex rel Board of School Inspectors v. City Council of Peoria, 229 Ill. 225, 226, 82 N.E. 225 (1907). The Court may also visit the jurisdictional issue on its own motion. Berber v. Hass, 30 Ill. 2d 263, 195 N.E.2d 622 (1964). And on one occasion, the Court has sua sponte agreed to hear a case that it found otherwise lacked jurisdiction under Rule 302(a) for lack of a final order, on the ground that the case involved a significant public interest and should be heard under the provisions of Rule 302(b).

[W]hen considering whether a statute is unconstitutional, the Illinois Supreme Court will not distinguish between a circuit court order holding that a statute is facially unconstitutional from an order that a statute is unconstitutional as applied.

If jurisdiction is found lacking and the Illinois Supreme Court refuses to accept the case, the appeal simply returns to the appropriate appellate court for further proceedings. Constitutional Issue Must Dominate

Secondly, disposition of the case must hinge on the constitutionality question. The Court will not address constitutional issues that are unnecessary for the disposition of the case, even though the Court acquired jurisdiction because of the presence of the constitutional question. Evans v. Shannon, 201 Ill. 2d 424, 440-41, 776 N.E.2d 1184 (2002). Complicating matters are the alternative, non-constitutional reasons given for denying the requested relief. In Trent v. Winningham, 172 Ill. 2d 420, 667 N.E.2d 1317 (1996), the Illinois Supreme Court, speaking of its jurisdiction based upon the declared invalidity of a statute, warned, “But courts are cautioned not to compromise that stability in the first place by declaring legislation unconstitutional when the particular case does not require it.” Trent, 172 Ill. 2d at 425. There, the court found it 22

was unnecessary to address the constitutionality of the statute in question because there were other reasons to address the retroactive support issue. One additional point, when considering whether a statute is unconstitutional, the Illinois Supreme Court will not distinguish between a circuit court order holding that a statute is facially unconstitutional from an order that a statute is unconstitutional as applied. People v. Fuller, 187 Ill. 2d 1, 8, 714 N.E.2d 501 (1999). Rule 302(a) offers little guidance to practitioners as to how the direct appeal is to be taken. Reading the various rules together, however, the most logical approach is to file a notice of appeal from the circuit court final judgment directed to the Illinois Supreme Court. This notice of appeal must be filed within the standard 30 days from entry of the final judgment and should plainly state that it is being filed under Rule 302(a). 210 Ill. 2d R. 303. If the case is later deemed not appropriate for Rule 302 consideration, Rule 365 would nevertheless afford the filing timely status and the appeal could be transferred to the appropriate appellate court. 210 Ill. 2d R. 365. Application in Criminal Cases

The Illinois Supreme Court has held that the provisions of Rule 302(a) do not apply to criminal cases. People v. Miller, 202 Ill. 2d 328, 781 N.E.2d 300 (2002; People v. Truitt, 175 Ill. 2d 148, 676 N.E.2d 665 (1997). Nevertheless, criminal proceedings are subject to Rule 603, a counterpart to Rule 302(a), which specifically states that “[a]ppeals in criminal cases in which a statute of the United States or of this State has been held invalid and appeals by defendants from judgments of the circuit courts imposing a sentence of death shall lie directly to the Supreme Court as a matter of right.” 134 Ill. 2d R. 603. In 1997, the Illinois Supreme Court in People v. Truitt took a two-step approach to what it deemed appealable under Rule 603. While acknowledging that Rule 603 applied to findings of unconstitutionality, the court went on to limit its jurisdiction to only those cases that satisfied Illinois Supreme Court Rule 603. Speaking of Rule 603, the Court stated: The problem with reliance on this rule is that it was not intended to create an independent basis for appellate review. It merely specifies which court should hear a case that is otherwise appealable. Where, as here, the State takes issue with a nonfinal order entered by the circuit court in a criminal case, the

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threshold question of whether that order is appealable by the State is determined exclusively by Rule 604(a)(1). Truitt, 175 Ill. 2d at 151. According to Truitt, Rule 604(a)(1) restricts the State’s right to appeal in criminal cases to four situations, namely; an order or judgment which has the substantive effect of: (1) dismissing a charge for any of the grounds enumerated in section 114-1 of the Code of Criminal Procedure (725 ILCS 5/114-1); (2) arresting judgment because of a defective indictment, informa-

[T]he Constitution also confers power on the Illinois Supreme Court to determine what other types of cases may be considered for direct appeal. Rule 302(b) was modified in 1971 to provide a mechanism for the direct appeal of certain final judgments in which the public interest requires expeditious determination. These cases begin as a traditional appeal to the appellate court, but then may be presented to the Illinois Supreme Court for discretionary consideration.

tion or complaint; (3) quashing an arrest or search warrant; or (4) suppressing evidence. The Court retreated from Truitt in People v. Miller, finding that the true litmus test was simply whether the circuit court’s order declared a statutory provision unconstitutional. Miller, 202 Ill. 2d at 335. Rule 302(b) Direct Appeals “In Cases In Which Public Interest Requires Expeditious Determination”

As noted above, the Constitution also confers power on the Illinois Supreme Court to determine what other types of cases may be considered for direct appeal. Rule 302(b) was

modified in 1971 to provide a mechanism for the direct appeal of certain final judgments in which the public interest requires expeditious determination. These cases begin as a traditional appeal to the appellate court, but then may be presented to the Illinois Supreme Court for discretionary consideration. According to the Rule, after the filing of a notice of appeal in the appellate court in a case in which the public interest requires prompt adjudication by the Illinois Supreme Court, “the Supreme Court or a justice thereof may order that the appeal be taken directly to it.” 210 Ill. 2d R. 302(b). The parties may file a petition with the Illinois Supreme Court asking for it to accept such a case or the court may order the matter transferred on its own motion. See Roanoke Agency, Inc. v. Edgar, 101 Ill. 2d 315, 461 N.E.2d 1365 (1984) (appellant’s motion for direct appeal). Once permission is granted by the Illinois Supreme Court, any documents already filed in the appellate court “shall be transmitted by the clerk of that court to the clerk of the Supreme Court” and from that point forward, “the case shall proceed in all respects as though the appeal had been taken directly to the Supreme Court.” 210 Ill. 2d R. 302(b). As with Rule 302(a), companion Rule 302(b) offers little by way of guidance as to how to draft the motion for transfer or direct appeal. However, experience suggests that a “motion for direct appeal pursuant to Rule 302(b)” be prepared and filed with the Illinois Supreme Court asking it to accept the case and that the motion explain in detail why the appeal involves a “case in which public interest requires expeditious determination.” The motion should be accompanied by a supporting record containing the order appealed from as well as a file-stamped copy of the notice of appeal (to show timeliness) and any other documents necessary to demonstrate that the judgment meets the Rule 302(b) criteria. A proposed order should also be filed. Likewise, Rule 302(b) is silent as to what types of cases might fall within its purview – those in which the public interest requires prompt adjudication by the Supreme Court. A review of the cases of record, however, suggest that certain topics are more appropriate than others. The following cases give some insight into the types of cases accepted: ■ Orders upholding a statute as constitutional (versus those appealable under Rule 302(a) that have been found unconstitutional). Friends of Parks v. Chicago Park Dist., 203 Ill. 2d 312, 786 N.E.2d 161 (2003). ■ Matters involving elections. Maddux v. Blagojevich, 233 Ill. 2d 508, 911 N.E.2d 979 (2009). ■ Medical or health emergencies. Curran v. Bosze, 141 Ill. (Continued on next page) 23

IDC Quarterly

Appellate Practice Corner (Continued) 2d 473, 566 N.E.2d 1319 (1990). ■ Challenges against local governmental action. Landmarks Preservation Council of Illinois v. City of Chicago, 125 Ill. 2d 164, 531 N.E.2d 9 (1988). ■ Issues of taxation and revenue. In re Application of Rosewell, 127 Ill. 2d 404, 537 N.E.2d 762 (1989). ■ Utility regulations. Commonwealth Edison Co. v. Illinois Commerce Comm’n, 368 Ill. App. 3d 734, 858 N.E.2d 65 (2nd Dist. 2006); Landfill, Inc. v. Illinois Pollution Control Bd., 74 Ill. 2d 541, 387 N.E.2d 258 (1978). ■ Insurance regulations. Hobbs v. Hartford Ins. Co. of the Midwest, 214 Ill. 2d 11, 823 N.E.2d 561 (2005). ■ Matters of public policy affecting large numbers of litigants. Price v. Philip Morris, Inc., 219 Ill. 2d 182, 848 N.E.2d 1 (2005). While having your case fall within these sub-groups is significant, it does not guarantee acceptance of a motion for direct appeal. In re Petition to Dissolve and Discontinue Niles Park Dist., 244 Ill. App. 3d 127, 614 N.E.2d 53 (1st Dist.1993). The motions are evaluated by the court in the exercise of its discretion.

As an illustration of Rule 302(b) in a case of significant general importance, the rule was used in Atkins v. Deere & Co., 177 Ill. 2d 222, 685 N.E.2d 342 (1997), a case where the circuit court had certified a question of law under Rule 308(a) pertaining to application of the Illinois Structural Work Act and the legislation which repealed that Act. There, the Illinois Supreme Court granted the parties’ motion for direct appeal and consolidated the case with several other similar cases and ruled on whether the repealing legislation should be applied retroactively to terminate all pending cases, or limited to prospective application only. The issue was of significant importance, as it impacted cases across the state. As these numbers show, the total number of direct actions, whether as of right or discretionary, pale in comparison to the number of cases presented to the court on original motion per Rules 381, 382, and 383 or on leave to appeal per Rule 315, as is shown in the chart. Nevertheless, having a means to pursue direct review to the Supreme Court is a valuable tool for parties and should be utilized when it can be of assistance. Counsel should always be on the lookout for situations where Rule 302, especially subsection (b), might be applied.

Summary of Court Activity Year

Rule 302(a) – As of Right

Rule 302(b) – Discretionary

Rule 603 Invalid Statute Cases

Rule 603 Death Penalty Cases

Total As of Right

Rule 315 PLA’s

(Excludes Rule 302(b) Discretionary Cases)

(For Comparison Purposes Only)

2000

16

6

6

9

31

1,775

2001

4

7

188*

7

199

1,881

2002

5

10

72*

9

86

2,256

2003

11

17

9

4

24

1,954

2004

5

12

3

4

12

2,058

2005

6

9

4

1

11

1,885

2006

7

9

16

2

25

1,920

2007

10

3

0

2

12

1,712

2008

2

6

4

3

9

1,840

* The inflated numbers for 2001 and 2002 reflect 174 and 66 cases respectively filed on notices declaring unconstitutional all or part of PA 91-404 – sentencing enhancements for crimes committed with firearms. The “total as of right” column tallies columns 2, 4, and 5, which are non-discretionary. SOURCE: Illinois Annual Reports, Supreme Court of Illinois Caseload and Statistical Records, FiveYear Trends, 2002, 2007, 2008. 24

First Quarter 2011

Commercial Law By: James K. Borcia Tressler LLP Chicago

Gasoline Price Gouging Suit Rejected In Siegel v. Shell Oil Co., 612 F.3d 932 (7th Cir. 2010), the Seventh Circuit Court of Appeals rejected a class action lawsuit involving the high price of gasoline. The plaintiff sued five of the eight largest oil companies and sought class certification for claims under the Illinois Consumer Fraud and Deceptive Business Practices Act (“ICFA”) and the common law doctrine of unjust enrichment. The plaintiff asserted that the oil companies acted in concert by manipulating refinery margins and capacity to reduce the nation’s supply of gasoline and that this manipulation caused him to purchase the defendants’ branded gasoline at artificially inflated prices. Siegel, 612 F.3d at 933. The plaintiff moved to certify a class comprised of all Illinois retail purchasers of gasoline. Id. at 934. The District Court, Northern District of Illinois, denied class certification, concluding that the plaintiff could not establish through common proof that the allegations against the defendants proximately caused harm to each member of the putative class. The district court subsequently granted the defendants’ motion for summary judgment. Id. The plaintiff appealed the district court’s rulings, and the Seventh Circuit affirmed. Id. at 934, 938. With respect to class certification, the district court found that the plaintiff failed to demonstrate that common issues predominated over individual issues. The district court focused on the elements of an ICFA claim and concluded that it would be required to make individual determinations concerning why a plaintiff bought gasoline from a particular supplier (e.g., price, necessity, convenience, location or quality of gasoline) to determine whether the defendants’ conduct proximately caused each plaintiff’s injuries, which would require the need for individual proof of causation. As a result, the district court found that common issues did not predominate. Id. at 935-36. On appeal, the plaintiff argued that the defendants’ unfair conduct could be readily proven on a class-wide basis, without the need for individual determina-

tions. The Seventh Circuit rejected these arguments, finding that the plaintiff could not establish that the class members purchased gasoline for the same reason. The appellate court reasoned that the plaintiff himself had named a number of factors that he considered in determining whether to purchase his gasoline, and absent proof as to why a putative class member purchased a particular brand of gasoline, the plaintiff could not establish that the defendants’ conduct caused him or her to make that purchase. Id. at 936.

[T]he district court found that the plaintiff failed to demonstrate that common issues predominated over individual issues. With respect to summary judgment, the appellate court found that even if the plaintiff could establish the defendants’ practices were unfair, in order to establish harm, the plaintiff had to show that he suffered substantial injury and that he could not avoid this injury. The court found that the plaintiff could not establish harm because he testified that he could and did purchase gasoline from stations owned by non-defendants and that he continued to purchase gasoline from the defendants even after he brought this lawsuit. Thus, the plaintiff could not establish that the defendants’ conduct caused him to purchase their gasoline, because many factors contributed to his gasoline purchasing decisions. The court also affirmed summary judgment on the unjust enrichment claim, finding that it could not survive because absent a cognizable injury under the ICFA an unjust enrichment does not constitute a separate cause of action. Siegel, 612 F.3d at 937. This decision is a victory not only for oil companies, but also for any company that is pursued for claims alleging unfair pricing policies.

About the Author James K. Borcia is a partner with the Chicago firm of Tressler LLP, and is active in the firm’s litigation practice with an emphasis on commercial and complex litigation. He was admitted to the bar in 1989 after he received his J.D. from Chicago-Kent College of Law. Mr. Borcia is a member of the Chicago and Illinois State Bar Associations, as well as the IDC and DRI.

25

IDC Quarterly

Feature Article By: Rachael G. Winthrop and Jared K. Clapper SmithAmundsen, LLC Chicago

The Aftermath of Illinois Emcasco v. Nationwide Ins. Co.: Continuing to Protect the Privileged Communications Between an Insurer and Its Coverage Counsel Background: Application of the Attorney-Client Privilege and Work Product Doctrine to an Insurer’s Communications With, and Work Product Generated By, Coverage Counsel

Under Illinois law, confidential communications between an insurer and its coverage counsel, as well as the work product generated by coverage counsel, are protected from discovery. Waste Management Inc. v. Int’l Surplus Lines Ins. Co., 144 Ill. 2d 178, 579 N.E.2d 322 (1991). In Waste Management, the Illinois Supreme Court distinguished between non-privileged communications regarding the underlying litigation, and privileged communications regarding the coverage issues that may arise in a subsequent declaratory judgment action. The court held that the attorney-client privilege and work product doctrine bar disclosure of an insurer’s communications with its coverage counsel, as well as coverage counsel’s work product relating to a declaratory action. Waste Management, 144 Ill. 2d at 201, 579 N.E.2d at 332; see also Federal Ins. Co. v. Economy Fire & Cas. Co., 189 Ill. App. 3d 732, 739, 545 N.E.2d 541, 547 (1st Dist. 1989)(coverage attorney’s notes and memoranda of oral conversations, including any opinions to the insurer, are protected under the attorney-client privilege). The necessary protection afforded to an insurer’s communications with its coverage counsel, as well as any work 26

product generated by counsel, is consistent with Illinois Supreme Court Rule 201(b)(2), which expressly limits the discovery of privileged communications between an attorney and client and the attorney’s work product in preparation for trial. Indeed, such protection reinforces the public policy underlying the attorney-client privilege, which is to encourage candid discussions between an attorney and his client by removing the fear of compelled disclosure of information. People v. Adam, 51 Ill. 2d 46, 48, 280 N.E.2d 205, 207 (1972). The Emcasco Court’s Open Criticism and Refusal to Follow O’Hara

While carriers and their attorneys often rely upon Waste Management to support the privileged nature of their communications and work product, policyholders and third-party claimants continue to seek ways to circumvent the insurer’s attorney-client privilege pursuant to Western States Insurance Co. v. O’Hara, 357 Ill. App. 3d 509, 828 N.E.2d 842 (4th Dist. 2005). In O’Hara, the insurer appointed defense counsel for its insured and sought legal advice from coverage counsel with respect to settling multiple serious injury claims where the total damages could exceed the policy limit. After conducting an in camera inspection, the court held that the communications between the insurer and its attorney relating to the declaratory judgment action were subject to disclosure because the insurer and its insured shared a “common interest” in settlement of the claims. The Fourth District found that by

About the Authors Rachael G. Winthrop is an attorney in the Chicago office of SmithAmundsen LLC. She represents insurers in all aspects of their business, including claims counseling, litigation, and dispute resolution. Her practice includes the handling of issues involving commercial, primary, umbrella, excess and surplus lines, and reinsurance. She concentrates her practice specifically in the areas of bad faith, fraud, and complex insurance coverage issues.

Jared K. Clapper is an associate at SmithAmundsen’s Chicago office and is a member of the firm’s Insurance Services Practice Group. Since joining SmithAmundsen, Jared has represented insurers in many aspects of their businesses. His practice involves insurance coverage matters in the areas of professional malpractice, business liability, construction, automobile liability, uninsured/underinsured motorists, homeowners, environmental, and toxic tort as well as general commercial litigation.

First Quarter 2011

contending the settlements exhausted the policy limits, the carrier placed its good faith “at issue,” entitling the policyholder to review communications with the attorney from whom the insurer sought settlement advice. O’Hara, 357 Ill. App. 3d at 520, 828 N.E.2d at 851. However, in Illinois Emcasco v. Nationwide Ins. Co., 393 Ill. App. 3d 782, 913 N.E.2d 1102 (1st Dist. 2009), the First District openly criticized O’Hara and, following the Waste Management decision, expressly preserved the attorneyclient privilege for communications between the insurer and its attorneys regarding coverage issues arising in a declaratory judgment action. The First District recognized that the O’Hara court mistakenly assumed that an insurer seeking advice of counsel, other than defense counsel, would always seek such advice for the mutual benefit of both the insurer and its insured. The court remanded the case back to the trial court for an in camera inspection of the insurer’s materials in order to resolve the dispute over which communications were privileged.

[I]f a privilege log can readily demonstrate why the documents must be protected from disclosure, a court can rely upon the adequacy of the privilege log to deny any motion to compel. The quality and accuracy of the privilege log may ultimately prove to be an insurer’s most powerful weapon in the fight to keep coverage materials protected from discovery.

Emcasco’s Unintended Side Effect: The In Camera Inspection

and third-parties seeking production of an insurer’s privileged communications and work product generated by coverage counsel have frequently seized upon this portion of the Emcasco decision and requested an in camera review whenever the attorney-client privilege is asserted. Although the Emcasco court did not mandate in camera inspections whenever privilege is at issue, trial courts may nonetheless feel compelled to grant such requests before denying a motion to compel in light of the Emcasco court’s ruling. However, an in camera review should not be conducted merely to ease the mind of opposing counsel. The Illinois Supreme Court has set forth the following factors for trial courts to consider when determining whether to exercise their discretion to perform an in camera inspection: the volume of materials it is asked to review, the relative importance of the materials to the case, and the likelihood that the review, along with other evidence will support a finding that the attorneyclient privilege does not protect the disputed materials. In re Marriage of Decker, 153 Ill. 2d 298, 323, 606 N.E.2d 1094, 1107 (1992). While Decker involved the application of the crime-fraud exception to the attorney-client privilege, its approach is not limited to such situations. The Power Of The Privilege Log

While the Seventh Circuit has found it reasonable for a trial court to review each document contained in a half-box and has strongly discouraged arbitrary sampling methods, American Nat’l Bank v. Equitable Life Assurance Society, 406 F.3d 867, 879-80 (7th Cir. 2005)(Illinois law), whether to conduct an in camera inspection, and what exactly that entails, is left to the trial court’s discretion. When a court decides to conduct an in camera inspection, it may cause unnecessary delay in the litigation, not to mention frustration for the court. A court will likely rely upon the adequacy and level of detail in the privilege log submitted to identify the materials at issue. If a privilege log is not sufficiently detailed and does not properly reflect the privileges being asserted, the court may be more likely to scrutinize each document, or grant a motion to compel without reviewing each and every document. However, if a privilege log can readily demonstrate why the documents must be protected from disclosure, a court can rely upon the adequacy of the privilege log to deny any motion to compel. The quality and accuracy of the privilege log may ultimately prove to be an insurer’s most powerful weapon in the fight to keep coverage materials protected from discovery.

While Emcasco effectively limited O’Hara, it may have had an unintended side effect of encouraging routine in camera inspection requests in coverage litigation. Policyholders 27

IDC Quarterly

Employment Law By: Geoffrey M. Waguespack CremerSpina, LLC Chicago

Seventh Circuit Affirms Summary Judgment in Race Discrimination Case In Rayford v. Wexford Health Sources, Inc., No. 10-1454, 2010 WL 4465278, at *1 (7th Cir. Nov. 8, 2010), the plaintiff Dr. Cleveland Rayford sued his former employer, the defendant Wexford Health Sources, Inc. (Wexford), alleging that its reason for not rehiring him after a he was laid off during a downsizing was pretext to racial discrimination. On Wexford’s motion, the trial court granted summary judgment in favor of the company. Dr. Rayford appealed, and the Seventh Circuit affirmed the district court’s grant of summary judgment. Dr. Rayford, who is African American, is a medical doctor, and also holds a master’s degree in health care management. Pursuant to a contract, Wexford provides medical treatment to inmates within the Illinois Department of Corrections (IDOC). Beginning in 2000, Dr. Rayford worked for Wexford in a managerial position, overseeing all of the IDOC facilities that fell within Wexford’s contract. In July 2005, however, Wexford lost its contract and was forced to downsize. It fired several people, including Dr. Rayford. Upon Dr. Rayford’s termination, Wexford’s Chief Medical Officer, Dr. Thomas Lundquist, told him that he would be rehired if Wexford reacquired its contract in December of that year. Id. Dr. Rayford called Wexford’s Vice President of Human Resources, Elaine Gedman, to discuss the loss of the contract and a severance package. Gedman claims that, during the call, Dr. Rayford disparaged Wexford as an institution, accusing it of treating him “like a dog,” expressing dissatisfaction with its management team, and opining that the company that had taken over the IDOC contract would care for the inmates better than Wexford could. Dr. Rayford admitted to complaining that a specific Wexford employee treated him “like a dog,” but denied disparaging Wexford as an institution and denied making the other remarks. Id. In December 2005, Wexford reacquired the IDOC con28

tract, and Dr. Rayford inquired with Gedman about being rehired into a management position at a specific facility, rather than returning to his previous position. Gedman conferred with Dr. Lundquist, but Dr. Lundquist found Dr. Rayford unsuitable for managerial roles, based on his derogatory remarks to Gedman about Wexford. Gedman promptly informed Dr. Rayford that he would not be rehired into a managerial position. Dr. Rayford recalled that he was told that he would not work out in the Wexford management scheme and that he was not loyal to Wexford. He claimed that these remarks were discriminatory because they were baseless, although he acknowledged that his race was not mentioned when the remarks were made. Nevertheless, Gedman offered Dr. Rayford a position as an as-needed doctor without benefits. Dr. Rayford declined the offer, considering it to have been vindictive and discriminatory, because it was below his qualification level. Id. Dr. Rayford appealed Dr. Lundquist’s decision to the company’s CEO and president, but received a rejection notice from Gedman. He was informed that Wexford would not hire him in a management position as a result of the circumstances surrounding his departure and his subsequent communications. For six months, Wexford advertised the position sought by Dr. Rayford as open, eventually selecting a Caucasian doctor as the medical director, before hiring an African American doctor to fill the position permanently. Id. at *2. Dr. Rayford then sued Wexford for racial discrimination, because it had refused to rehire him in December 2005, in violation of 42 U.S.C. § 1981 and Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e-2(a)(1). Upon Wexford’s motion for summary judgment, the district court found that Dr. Rayford had established a prima facie case of race discrimination, but concluded that Wexford’s stated reason for not rehiring Dr. Rayford – his disparagement of the company’s management during a phone call to Gedman – could not be proven to be dishonest or pretext to discrimination. Even

About the Author Geoffrey M. Waguespack is an associate with the law firm of CremerSpina, LLC, where he concentrates his practice in employment law and general tort litigation. Prior to joining that firm, Mr. Waguespack served as the judicial law clerk to the Honorable Morton Denlow, Presiding Magistrate Judge for the United States District Court, Northern District of Illinois, and as a research staff attorney for the Appellate Court of Illinois, Second District. He earned his B.A. from the College of William & Mary in Virginia and his J.D. from Loyola University Chicago School of Law, where he was a member of a moot court team and the Executive Editor of Publications for the Loyola University Chicago Law Journal.

First Quarter 2011

if pretext or dishonesty could be proven, the district court found, Dr. Rayford could not prove that it was due to his race. Consequently, the district court granted summary judgment in favor of Wexford. Dr. Rayford appealed. Id.

The court, however, concluded that there was a requirement of evidence of intentional discrimination at the summary judgment stage, even where the plaintiff sought to prove discriminatory intent through indirect evidence. Dr. Rayford failed to show any circumstances that would permit a reasonable jury to infer that Gedman lied for a discriminatory reason. The court stated that “discrimination law would be unmanageable if disgruntled employees . . . could defeat summary judgment by . . . speculating about the defendant’s motives.”

On appeal, as an initial matter, Wexford argued that the district court improperly assessed Dr. Rayford’s prima facie case for discrimination under the indirect method of proof, by allowing him to establish his case by showing that Wexford sought other applicants while the position remained open. Instead, Wexford argued, Dr. Rayford should have been required to show that a similarly-situated employee outside his protected class, and with a similar work history, was reinstated, as was the case in Timms v. Frank, 953 F.2d 281, 286 (7th Cir. 1992). The appellate court, citing McGowan v. Deere & Co., 581 F.3d 575 (7th Cir. 2009), found Wexford’s argument “besides the point,” noting that a plaintiff can establish

a prima facie case of race discrimination by proving either (1) that the employer sought other applicants while the position remained open, or (2) that a similarly-situated employee with a similar work history and who is outside the plaintiff’s protected class was reinstated. Regardless, the appellate court stated, once Wexford offered a legitimate, non-discriminatory reason for refusing to rehire Rayford based on his alleged disparaging remarks to Gedman about Wexford, whether Rexford presented a prima facie case does not matter. Rayford, 2010 WL 4465278, at *2. Dr. Rayford argued on appeal that the court should have found that Dr. Lundquist’s reasons for refusing to rehire Dr. Rayford covered up Gedman’s racial animus towards him. In other word, Dr. Rayford alleged that Dr. Lundquist was Gedman’s “cat’s paw,” a decision-maker who is singularly influenced by and blindly relies upon a subordinate in making an employment decision. He pointed to the fact that Dr. Lundquist chose not to rehire him based on what Gedman advised Dr. Lundquist about the substance of the phone call, inferring that Dr. Lundquist simply rubber-stamped Gedman’s decision not to rehire him. Id. at *3. The appellate court noted that Dr. Rayford’s use of indirect evidence to prove Wexford’s discriminatory intent could not defeat a summary judgment motion simply by challenging a witness’s credibility at his deposition, because he also was required to present independent evidence to show why the witness was not credible. Dr. Rayford’s own deposition testimony alone was insufficient to discredit Gedman as a witness. Id. Finally, the appellate court reasoned that, even if Gedman had lied, Dr. Rayford still would have to show circumstances from which an inference could be made that the reason for lying was discriminatory. Citing to Reeves v. Sanderson Plumbing Products, Inc., 530 U.S. 133, 147 (2000), Dr. Rayford argued that Gedman’s lies could be considered as ultimate proof of discriminatory intent. The court, however, concluded that there was a requirement of evidence of intentional discrimination at the summary judgment stage, even where the plaintiff sought to prove discriminatory intent through indirect evidence. Dr. Rayford failed to show any circumstances that would permit a reasonable jury to infer that Gedman lied for a discriminatory reason. The court stated that “discrimination law would be unmanageable if disgruntled employees . . . could defeat summary judgment by . . . speculating about the defendant’s motives.” Rayford, 2010 WL 4465278, at *3 (quoting Springer v. Durflinger, 518 F.3d 479, 484 (7th Cir. 2008)). Accordingly, the appellate court affirmed summary judgment in favor of Wexford. Id.

29

IDC Quarterly

Property Insurance By: Tracy E. Stevenson Robbins, Salomon & Patt, Ltd. Chicago

able care the owner could have discovered the existence of a dangerous condition. Such an interpretation would defeat the purpose of the Act, which is to encourage opening up of a land by granting statutory immunity which would not otherwise have existed. Johnson v. Stryker Corporation, 70 Ill. App. 3d 717, 388 N.E.2d 932 (1st Dist. 1979). Definitions & Standards Within the Act

Under the express terms of the Act:

Don’t Forget the Immunity Offered by the Recreational Use of Land and Water Areas Act We often read articles about lawsuits in which plaintiffs allege negligence against various entities including local governments, villages, and cities. We hear about injuries in parks, playgrounds, and other recreational venues. What we don’t often hear about is the immunity to charges of negligence contained within the Recreational Use of Land and Water Areas Act (“Recreational Use Act” or “Act”). 745 ILCS § 65/1, et seq. This article will discuss the Recreational Use Act, the defenses to causes of action which potentially fall within the Act, and when the Act may and may not be utilized. The Purpose of the Act

The Recreational Use Act became effective on August 2, 1965. “The purpose of th[e] Act is to encourage owners of land to make land and water areas available to any individual or members of the public for recreational or conservation purposes by limiting their liability toward persons entering thereon for such purposes.” 745 ILCS § 65/1. Case law has concluded that the Act not only provides protection to those who open existing facilities to the public, but also to owners who negligently design and construct lands specifically for recreational use. Stevens v. United States, 472 F. Supp. 998 (Central Dist. Ill. 1979). In order to seek immunity under the Act, a land owner need not allow all persons to use the property at all times, but need only allow the general public access only during certain seasons or days of the week. Snyder v. Olmstead, 261 Ill. App. 3d 986, 934 N.E.2d 756 (3rd Dist. 1994). Specifically, under the terms of the Recreational Use Act, a land owner may not be held liable to a user merely if by the exercise of reason30

Except as specifically recognized by or provided in Section 6 of this Act, an owner of land owes no duty of care to keep the premises safe for entry or use by any person for recreational or conservation purposes, or to give any warning of a natural or artificial dangerous condition, use, structure, or activity on such premises to persons entering for such purposes. 745 ILCS § 65/3. Further: Nothing in this Act shall be construed to: (a) Create a duty of care or ground of liability for injury to persons or property. (b) Relieve any person using the land of another for recreational purposes from any obligation which he may have in the absence of this Act to exercise care in his use of such land and in his activities thereon, or from the legal consequences of failure to employ such care. 745 ILCS § 65/7. While the purpose of the Recreational Use Act appears quite broad in its grant of immunity, it is limited in scope to

About the Author Tracy E. Stevenson is a partner in the Chicago firm of Robbins, Salomon & Patt, Ltd., where she concentrates her practice in medical malpractice defense and insurance defense. She has defended cases on behalf of physicians and hospitals and represented various major insurance companies in claims involving fraud. Ms. Stevenson also represents corporations in litigation matters including TRO’s and shareholder actions. She is licensed in Michigan as well as Illinois and speaks at various seminars around the country.

First Quarter 2011

protect those individuals who permit the public to use their land without charge subject to expressly defined terms. “Charge” means an admission fee for permission to go upon the land, but does not include: the sharing of game, fish, or other products of recreational use; benefits to or arising from the recreational use; or contributions in kind, services, or cash made for the purpose of properly conserving the land. 745 ILCS § 65/2(d). To illustrate, if you enter an amusement park after paying the daily admission fee, the park owner may be liable for negligence in the event of an injury. On the other hand, if you enter a venue covered by the Act and no admission fee is charged for entry, the entity that owns the venue may only be liable pursuant to a willful and wanton standard. (See 745 ILCS § 65/6(a) discussed more fully below).

[U]nder the terms of the Recreational Use Act, a land owner may not be held liable to a user merely if by the exercise of reasonable care the owner could have discovered the existence of a dangerous condition. Such an interpretation would defeat the purpose of the Act, which is to encourage opening up of a land by granting statutory immunity which would not otherwise have existed.

The term “owner” is also defined by the Act. Specifically, “owner” includes the possessor of any interest in land, whether it is a tenant, lessee, occupant, the State of Illinois and its political subdivisions, or persons in control of the premises. 745 ILCS § 65/2(b). Thus, the Act, to best enforce its purposes, provides immunity through the entire chain of ownership or possessory interest and does not simply afford protection to the titled owner of the land or waterway in question. The term “land” includes roads, water, water courses, private ways and buildings, structures, and machinery or

equipment when attached to the realty, but does not include residential buildings or residential property. 745 ILCS § 65/2(a). For example, an owner of a residential home who opens it to the public for purposes of permitting use for a haunted house or a holiday display is likely not protected under the Act. What Acts are Covered?

The recreational use immunity provided for by the Act provides that land owners have no duty to keep premises safe for recreational purposes or to provide warnings to those who enter the land for recreational purposes. This immunity applies if a person uses the premises or enters for recreational purposes, whether or not the land owner allowed that individual or others to use the land for recreational purposes. Jerrick v. Norfolk & Western Railway Company, 124 F.Supp.2d 1122, Aff’d., 290 F.3d 914 (N.D. Ill. 2000). Outside of the Act there are two limited exceptions to the rule that a defendant has no duty to protect a plaintiff from an open and obvious condition. Ward v. K mart Corp., 136 Ill. 2d 132, 147, 554 N.E.2d 223 (1990). “The distraction exception” provides that a property owner owes a duty of care if there is a reason to expect that the plaintiff’s attention might be distracted so that he would not discover the obvious condition. Ward, 136 Ill.2d at 149-50 (adopting the reasoning in Restatement (Second) of Torts, § 343A, comment f, at 220 (1965)). The proper inquiry is “whether a defendant should reasonably anticipate injury to those entrants on his premises who are generally exercising reasonable care for their own safety, but may reasonably be expected to be distracted, as when carrying large bundles….” Ward, 136 Ill.2d at 152. The Jerrick case explains that the above “distraction exception” which may create an ordinary duty of care even under the open and obvious exception, only goes to the duty of care that has been expressly abrogated by the Illinois Recreational Use Act immunity. It does not go to the issue of recklessness which circumvents immunity. Jerrick, 124 F. Supp. 2d. at 1126. Numerous cases set forth examples of activities upon lands which are open to public use that may be immune from negligence. In one such case, the government’s failure to adequately warn of a danger of swimming in a rocky lake in a wildlife refuge was not willful or malicious under the terms of the Act. See Davis v. United States, 716 Fed. 2d 418 (7th Cir. 1983). Even a railroad’s removal of a railroad bridge on an abandoned line, when the railroad allegedly knew that people were driving off-road vehicles in the area, did not amount to willful and wanton conduct so as to remove the immunity (Continued on next page) 31

IDC Quarterly

Property Insurance (Continued) provided. Jerrick, 124 F. Supp. 2d 1122. The court in Jerrick made clear that absent evidence that there was a known risk for the railroad, a willful and wanton claim could not survive. The Jerrick court found that the railroad had no notice of any accident or safety complaints by recreational vehicles upon the land or at the site for the preceding twelve years even in an area that was regularly swarming with off-road recreational vehicles. Therefore, its actions in removing the railroad ties could be deemed only negligent. What is Excluded From Immunity?

There are two express exclusions to the immunity provided within the Recreational Use Act. 745 ILCS § 65/6 sets forth these exclusions as follows: Nothing in this Act limits in any way any liability which otherwise exists: (a) For willful and wanton failure to guard or warn against a dangerous condition, use, structure, or activity. (b) For injury suffered in any case where the owner of land charges the person or persons who enter or go on the land for the recreational use thereof, except that in the case of land leased to the State or a subdivision thereof, any consideration received by the owner for such lease is not a charge within the meaning of this Section. (745 ILCS § 65/6). Willful and Wanton Allegations

The Illinois Supreme Court has set the standard for willful and wanton misconduct as any act that is: intentional or . . . committed under circumstances exhibiting a reckless disregard for the safety of others, such as a failure, after knowledge of impending danger, to exercise ordinary care to prevent it or a failure to discover the danger through recklessness, or carelessness when it could have been discovered by ordinary care. O’Brien v. Township High School District 214, 83 Ill. 2d 462, 415 N.E.2d 1015, 1018 (2002). Any allegation of negligence that fails to meet the definition of willful and wanton may be subject to immunity under the Act.

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In order to survive a preliminary motion to dismiss, any allegations of willful and malicious conduct as defined within the exception to the Act must be specifically alleged. Conclusory allegations or mere characterizations of alleged acts as willful are not sufficient. Mitchell v. Waddel, 189 Ill. App. 3d 179, 544 N.E.2d 1261 (4th Dist. 1989). To that effect, 745 ILCS § 65/6(a) of the Act addresses the liability when an owner of land used for recreational purposes acts in a willful and wanton manner or willfully and wantonly fails to guard or warn against a dangerous condition, use, structure, or activity upon the land. Thus, in order to prevail under the Act, a party must allege and ultimately prove that the owner of land, as that person is defined, acted in a willful and wanton manner in causing the injury and/or caused the condition upon the land complained of. In instances where the Illinois Recreational Use Act applies, a plaintiff may not merely allege that the land owner acted negligently, but must establish that the owner acted willfully and wantonly in order to prevail. Cacia ex rel. Randolph v. Norfolk & Western Railroad Company, 290 F. 3d 914 (7th Cir. 2002). To establish a willful and wanton condition, the property owner must have actual or constructive knowledge that a concealed condition created a high probability that a person could fall or sustain substantial physical injury and that the owner failed to undertake any measure to remedy the danger. McDermott v. Metropolitan Sanitary District, 240 Ill. App. 3d 1, 607 N.E.2d 1270 (1st Dist. 1992). Charging Fees for Access

The second exception to the immunity afforded by the Recreational Use Act is that of charging for public use of the land or waterways. Thus, a private party charging a fee for use of their property might be subject to liability in a negligence claim even under the potential protection of the Act. Baggio v. Chicago Park District, 289 Ill. App. 3d 768, 682 N.E.2d 429 (1st Dist. 1997). For example, a farm owner who opens his land to the public to permit pumpkin picking during October, but charges a fee for the privilege, may have liability in negligence. However, immunity may also be barred in the instance in which a land owner generally charges persons for recreational use of the land but, for some reason, the normal fee was not paid by the injured user of the property. The mere fact that a fee was not paid does not always absolve an owner of liability. The court in Phillips v. Community Center Foundation and Children’s Farm, 238 Ill. App. 3d 505, 606 N.E.2d 447 (1st Dist. 1992) addressed this issue when a plaintiff was injured while riding upon a horse on the defendant’s property. The

First Quarter 2011 plaintiff in that case paid no fee. However, because a fee was usually paid for riding the horse upon the property, the owner was not absolved simply because in this instance the fee was not charged. In another case, Vaughn v. Barton, 402 Ill. App. 3d 1135, 933 N.E.2d 355 (5th Dist. 2010), the court held that the negligence action brought by a spectator who was injured by a thrown baseball while watching a Little League game from the bleachers free of charge, fell within the scope of the Recreational Use Act and thus, the land owner was provided immunity. There, the children who were playing in the Little League game were charged a fee to play in the league. However, the Vaughn court held that the fee charged to the children did not amount to an admission fee to come upon the land, per the definition, but rather served as a financial incentive to improve the property for the purpose of the public use. According to the court, the fee constituted a payment of “cash made for the purpose of properly conserving the land which is specifically excluded from the definition of charge under the Recreational Use Act.” 745 ILCS § 65/2(d) (West 2002).

The Recreational Use of Land and Water Areas Act was created to encourage land owners to provide recreational area for the public at large to use.

Conclusion

The Recreational Use of Land and Water Areas Act was created to encourage land owners to provide recreational area for the public at large to use. Thus, immunity is granted to those people who allow the public to use their land and waterways to benefit society. The two exceptions to the immunity provided must be pled with specificity and detail. However, even those two exceptions must be reviewed in the context of the greater purpose of the Act. The Recreational Use of Land and Water Areas Act is a broad statute and must be considered to provide a defendant landowner all of the protections which are granted within the Act in addition to the additional defenses provided by other tort immunity statutes and affirmative defenses.

Municipal Law By: Thomas G. DiCianni Ancel, Glink, Diamond, Bush, DiCianni & Krafthefer, P.C. Chicago

Lawyers Are Lawyers Even When Investigating In January, 2005, a public school district in Berwyn, Illinois was rocked by news that one of its band teachers was arrested and charged with having molested over 20 junior high school girls over a seven-year period. Criminal charges were filed against the teacher, as well as a school principal based on allegations she had information sufficient to trigger her obligation as a mandatory reporter to notify the Department of Children and Family Services about the band teacher’s conduct. A flurry of lawsuits alleging claims under various federal statutes and state law torts followed within days of the arrest, as did public outrage over the teacher’s actions and the district’s failure to prevent it. The school board wanted an investigation into what exactly happened and why, and some insight into the holes in the district’s oversight practices that allowed the serial molestation to continue for so long. To accomplish this, the school board hired the Sidley Austin law firm in Chicago to address the board and public concerns and provide the board with a report. This is the backdrop behind the Seventh Circuit opinion in Sandra T.E. v. South Berwyn School District 100, 600 F.3d 612 (7th Cir. 2010), a monumental decision (Continued on next page)

About the Author Thomas G. DiCianni is a partner in the law firm of Ancel, Glink, Diamond, Bush, DiCianni & Krafthefer, P.C. He concentrates his practice in general litigation, defense of government entities and public officials, municipal law, and the representation of governmental self-insurance pools.

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IDC Quarterly

Municipal Law (Continued) preserving the confidentiality of investigation by attorneys of corporate critical incidents. The case made its way to the Seventh Circuit after the plaintiffs in the civil lawsuits, as might be expected, wanted access to Sidley’s investigation materials and report. The plaintiffs issued a subpoena to the Sidley firm for the contents of its file, including the statements taken in the course of the investigation, and the notes and memos of the Sidley lawyers who conducted the investigation. The Sidley firm and the district objected based on attorney-client and work product privileges. The district court judge, however, denied the objections, ordered the materials released, and an immediate appeal was taken from the judge’s order. (After the appeal was filed, the Supreme Court decided Mohawk Industries, Inc., v. Carpenter, ___U.S.___, 130 S.Ct. 599 (2009), raising a question about whether the district court order was immediately appealable, but that is a topic for another column.) In jeopardy was a practice followed by municipal and private sector corporations everywhere. When critical incidents occur, accidents, allegations of sexual harassment or other prohibited employment practices, corruption or other events likely to lead to civil litigation, a common and effective practice is to have an investigation into the incidents conducted by attorneys. In doing so, the information gathered is shielded from discovery in any pending or impending litigation, allowing for a useful report addressing whatever deficiency in the system may have allowed the events to occur, without creating litigation ammunition for the plaintiffs, the risk of implied admissions of liability, or just plain bad publicity. Any comprehensive post-incident investigation inevitably provides a treasure trove to be exploited in litigation. Some courts may ask why the concern, because ultimately the story will be told. The same witnesses that lawyers interview while investigating will be deposed in the lawsuit, the documents will be produced, and the attorneys’ post-incident conclusions or recommendations for organizational improvements are likely inadmissible anyway. But any good investigation takes many turns and will produce at least some raw data that at later times may prove wrong, the product of faulty memories or mis-recorded facts, and even the most innocent or benign explanations for why something bad happened can be spun by a skillful plaintiff’s lawyer into something devious. There is a high incentive to keep an investigation and report commissioned to improve an organization from sinking its defense in litigation. The district court’s decision in Sandra T.E. threatened to upend this practice. The district court ruled that the Sidley law firm was hired not to provide legal services, but to investigate. 34

As such, they acted as investigators, not lawyers. Investigation materials had to be turned over, including the notes and memoranda of the Sidley attorneys containing their observations and mental impressions, even though such material has traditionally been excluded from disclosure under the attorney work product privilege. Even freshmen law students learn this principle in first year Civil Procedure class, in the plight of the brave Samuel Fortenbrough, in Hickman v. Taylor, 329 U.S. 495, 67 S.Ct. 385 (1947). The Seventh Circuit’s decision set the world of postincident corporate investigation back on its proper axis. The court held that the view of lawyers as investigators rather than lawyers is ill-conceived. Regardless of what lawyers are hired to do, the Seventh Circuit reasoned, investigation is involved and the notion that lawyers somehow become something other than lawyers because they engage in investigation is plainly wrong. The court was buttressed by several important factors. The plaintiffs prevailed on their argument in the district court because the district superintendent and school board president announced to residents of the district that the Sidley firm was being retained to “conduct a thorough investigation.” The Seventh Circuit, referring to a body of case law addressing similar issues, identified the fallacy in the district court’s analysis by noting that “the relevant question is not whether [the attorney] was retained to conduct an investigation, but rather, whether this investigation was related to the rendition of legal services.” Sandra T.E., 600 F.3d at 620. If even needed to be otherwise proven, the district’s retention agreement with Sidley clarified that the firm was to “investigate the response of the school administration to allegations of sexual abuse of students” and “provide legal services in connection” with the investigation. Sandra T.E., 600 F.3d at 616. In addition, the Sidley attorneys began their interviews of employees and former employees of the district with “Upjohn” warnings—a caution that the interviewer represented the corporation, not the employee, derived from Upjohn Co. v. United States, 449 U.S. 383, 101 S.Ct. 677 (1981), a seminal decision in which the Supreme Court clarified that corporate investigations conducted by attorneys in most situations produce privileged communications. Finally, Sidley’s investigation culminated with an executive summary, a written report labeled as “privileged and confidential,” “attorney-client communication,” and “attorney work product,” provided only to the school board and discussed only in executive session during school board meetings. The ever persistent plaintiffs’ attorneys reached further and argued that although Upjohn Co. and other cases relied on by the court established attorney client privileges in private sector corporate investigations, no such thing exists in

IDC Monograph — First Quarter 2011

THE IDC MONOGRAPH: Federal Preemption Defenses in Product Liability Suits: A Continuing Evaluation Robert P. Pisani McKenna Storer, LLC Anne B. Schmidt HeplerBroom LLC Madeline Orling Connolly HeplerBroom LLC

IDC Quarterly Vol. 21 No. 1

Federal Preemption Defenses in Product Liability Suits: A Continuing Evaluation Introduction

Federal Preemption has been an effective defense to product liability actions for some time. Since the landmark U.S. Supreme Court case of Cipollone v. Liggett Group, Inc.,1 made it clear that the concept of Federal Preemption applies to state common law tort actions, courts in Illinois as well as federal courts and other states’ courts have looked to this doctrine increasingly as a means by which common law tort actions can be dismissed where Congress, either itself or through delegation to federal agencies, has decided that federal law should control. Product manufacturers have been frustrated too often by the variability of potentially applicable laws of the various states, the District of Columbia, and other U.S. territories. This frustration is particularly apparent where juries evaluate design and manufacturing decisions, while facing the prospect of sending a severely injured plaintiff away with nothing. Often, these design or manufacturing decisions were made years before the accident, notwithstanding best efforts and consideration of all potentially relevant safety factors at the time. Sometimes, these decisions turn out in retrospect to be short of optimal based on the unique facts of a particular incident. Federal Preemption recognizes the utility of having one set of guidelines, designs or manufacturing techniques used to provide a measure of uniformity to products and their regulation. The guidelines are often based on consideration of a multitude of factors and uses throughout the United States. Such uniformity can have the benefit of increasing overall society safety and product performance. In the 21st Century, more and more products are coming to the consuming public from outside Illinois and outside the United States. Manufacturers and distributors need to know that once their products meet a governmentally mandated standard or guideline established after rigorous evaluation and testing, designs, materials, and manufacturing techniques that have been explicitly approved will not be subject to second guessing by an emotionally charged jury facing the unique circumstances of a particular occurrence. M-2

But, as will be seen, Federal Preemption is not an allencompassing defense with universal application. Simply because Congress has spoken generally regarding a general product type, such as an automobile or a solvent, does not automatically give rise to preemption. Instead, Congress must speak clearly in expressing its desire to set both a floor and a ceiling regarding the regulation of product design, materials, packaging, and related features. Sometimes, Congress expresses its intentions clearly as to this issue. At other times, Congress’s intent must be inferred by an encompassing set of related laws and agency regulations. This Monograph will discuss the preemption defense including, its basic concepts and operation, as well as Illinois cases where preemption has been asserted. It will provide some examples and case law discussion of various statutes where preemption might be available to the defendant. This Monograph builds upon and updates a Monograph published

About the Authors Robert P. Pisani is a partner with the Chicago law firm of McKenna Storer where he practices in the areas of toxic torts, products liability, medical malpractice, class actions, premises liability, construction related liability, governmental and civil rights liability and automobile liability. Mr. Pisani received his B.A. from the University of Wisconsin and his J.D from DePaul University. He is a member of the Illinois State Bar Association, IDC and DRI.

Anne B. Schmidt is a partner with the Hepler, Broom, MacDonald, Hebrank, True & Noce, LLC firm. She is a litigation attorney with emphasis on defense of premises liability, toxic tort cases. Ms. Schmidt graduated cum laude from University of Missouri-St. Louis in 1976 with a degree in Business Administration and graduated from Washington University Law School, St. Louis in 1984. Ms. Schmidt has over 20 years experience in defense litigation and has tried numerous civil jury and non-jury cases in state courts in Illinois and Missouri. She has represented insurance companies and their individual and corporate insureds in products and premises liability cases and in vehicular accident cases.

Madeline Orling Connolly is a first year associate at HeplerBroom LLC licensed to practice in Illinois and Missouri. She focuses her practice on trials involving complex business litigation matters including toxic torts and product liability. Madeline received her undergraduate degree from Valparaiso University and graduated from St. Louis University School of Law in January of 2010. She is a member of the Illinois and Missouri Bar Associations, the Madison County Bar Association, and the Bar Association of Metropolitan St. Louis.

IDC Monograph — First Quarter 2011

in the IDC Quarterly more than 14 years ago.2 The U.S. Supreme Court and other courts have added much to the jurisprudence of Federal Preemption since that time. Looking both back and forward since 1996 should help defense counsel in protecting their clients’ interests going forward. I. Federal Preemption – The Concept, the Law, and the Basics

The basis for Federal Preemption comes from the Supremacy Clause of the U.S. Constitution. It states: This Constitution, and the Laws of the United States which shall be made in Pursuance thereof . . . shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the Contrary notwithstanding.3 It is this clause that enables the acts of Congress (and regulations promulgated by its designees) to control over laws enacted by states or local governments. As will be seen, this also applies to common law tort suits, as verdicts and the award of money damages can have the same regulatory effect as locally enacted laws, statutes, and regulations.4 The cases discuss three types of preemption, noting that they are not always easily separated depending on the circumstances. Regardless of type, there is one major concept that pervades the analysis. This concept remains the most important policy issue involved in determining whether preemption will operate: the courts’ focus at all times on the intent of Congress. Did Congress intend for the statutory regime at issue (or regulations enacted pursuant to congressional authority) to so totally control over the issue involved in the lawsuit such that the states’ police powers – their traditional role in health and safety of their residents – should be supplanted by the federal government? A. “3½” Types of Preemption

The United States Supreme Court is well aware that historically it has been the states that used their police powers to protect health and safety of their citizens. This subject has been seen largely as a matter of local concern.5 Given the states’ historical role, the Court has indicated that preemption provisions should be read narrowly, with a presumption against their application.6 As tort litigation often involves health and safety issues, the impact of preemption on notions of federalism in this context are clear. For preemption to operate, it must

be determined that federal control over the issues that arise in the litigation at issue was the “clear and manifest” purpose of Congress. From the attempts to answer this all-important question, the types of preemption were developed.7 The first type is “express preemption,” which exists when Congress’s intent is stated clearly within the statute enacted.8 Typically, such enactments provide that a state or local government cannot legislate regarding the stated matters or even the general subject matter of the statute. The next two types of preemption fall into the general category of implied preemption. The second type is called “conflict in fact”9 or “conflict preemption,”10 where either the federal statutory scheme or regulatory regime, or both, conflict with that of a state or local government, such that a choice must be made regarding with which to comply. Under this scenario, compliance with both federal and state law would be impossible. The third type is called “field preemption,” which is arguably the most difficult to apply.11 This third method looks at the federal regulatory regime and attempts to determine whether the degree of pervasiveness reaches a level such that it reasonably can be inferred that Congress intended to occupy the entire regulatory field. In such an instance, there is no room left for the states to exercise their police powers. This third method often operates within the context of silence on the subject of preemption in the original law passed by Congress.12 A review of the cases suggests that some of these seemingly separate preemption types actually operate in conjunction with one another.13 The courts do not always apply each in a discrete fashion. Further, the lack of an express preemption provision by itself is not seen by the courts as itself an expression of intent by Congress not to preempt state law. Lastly, although not a separate “type” of preemption per se, in the last few years, commentators have discussed something dubbed “agency preemption.” This preemption occurs where a federal regulatory agency expresses its view or perception regarding the scope of preemption within a formal rulemaking, often in the preamble of such a rulemaking contained in the Federal Register. Note that preemption provisions often are not the only relevant components of expressions of congressional intent regarding the role of the states in areas where Congress has chosen to regulate. Some statutes contain “savings clauses” in addition to preemption provisions.14 Such savings clauses address the balance Congress is attempting to reach relative

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to its desire to completely supplant the role of state and local governments in their exercise of traditional police powers, and the use of these same police powers to enhance public safety and the efficacy of products used by both consumers and industry. To determine whether a case or claim is preempted, it is important to examine carefully the allegations being made in the action, as well as the multiple theories of liability being pursued. The examples below discuss several U.S. Supreme Court cases in the context of products liability. The Court, in some instances, found some liability theories preempted (mostly negligence and strict liability claims). But, the Court has allowed other theories of recovery, such as express warranty claims, to proceed based on the fact that express warranty claims are contractual claims between the parties themselves. As such, express warranty claims do not involved in the exercise of state police powers.15 B. Preemption Cases Decided by the U.S. Supreme Court in the Context of Products Liability Claims, since 1990

Since the 1990s, the United States Supreme Court has spoken to the issue of preemption in the context of products liability claims a number of times. A discussion of these cases helps to understand how this doctrine operates, and can assist defense counsel in formulating strategy to enable preemption to operate in the desired manner. Practitioners should be mindful of the observation made by the Court over 60 years ago: It is often a perplexing question whether Congress has precluded state action or by the choice of selective regulatory measures has left the police power of the States undisturbed except as the state and federal regulations collide.16

This Section explores six cases that have developed the Court’s jurisprudence regarding preemption within the context of products liability claims. 1. Cipollone v. Liggett Group, Inc.

Cipollone v. Liggett Group, Inc.17 is a good starting point, as it touches on multiple aspects of the preemption doctrine. The Court’s decision in that case laid the groundwork for subsequent decisions with ramifications for products liability cases. Cipollone was a products liability case filed in federal district court in New Jersey, alleging that Rose Cipollone deM-4

veloped lung cancer due to smoking cigarettes. Later she died (and eventually her spouse died too) and the suit was pursued by her estate. The plaintiff’s complaint asserted several bases of recovery by alleging of a number of theories of liability commonly used in products cases: negligence, strict liability, express warranty, and intentional tort. The bases asserted for recovery are important in that the Court applied the preemption principles separately to each. These bases included: (1) design defect claims arising out of the failure to use a safer alternative, and the use of the risk utility test; (2) failure to adequately warn of the hazards of smoking; (3) negligent testing, research, sale, and advertising of cigarettes; (4) breach of express warranty based on statements in advertising that minimized the dangers of smoking; (5) fraudulent misrepresentation regarding the hazards of smoking; and (6) conspiracy related to dissemination of health and safety information.18 At the district court level, the defendants argued that two statutes, the Federal Cigarette Labeling and Advertising Act of 196519 (the 1965 Act) and its successor, the Public Health Cigarette Smoking Act of 196920 (the 1969 Act) preempted the plaintiff’s suit in its entirety. The trial court rejected this argument and struck the defendants’ preemption affirmative defenses. The Second Circuit Court of Appeals found no express preemption. But that court did hold that the plaintiff’s warning and advertising based claims were preempted to the extent that they asserted that some wording or message different than what was mandated by federal regulations. After the Court denied a petition for certiorari, the case was remanded and tried by the district court. The district court found that the failure to warn, express warranty, fraudulent misrepresentation, and conspiracy claims were preempted to the extent they relied on the defendants’ actions after the effective date of the 1965 Act. A verdict for the plaintiff was obtained, and the Supreme Court eventually granted a petition for certiorari.21 The Court focused on the two statutes listed above, discussing their history and the reasons for their enactment. From this exercise, Congress’s intent was discerned. In tracing the history of the legislation, the Court discussed the differences between the two statutes and the evolution of their regulatory effect. Each of these statutes had express preemption provisions, although their text differed. The fact these provisions were present, however, led the Court to conclude that their mere presence, coupled with the belief that their presence was a reliable expression of congressional intent to supplant state authority, meant that there was no need to infer an intention

IDC Monograph — First Quarter 2011

to preempt state law from looking to the other provisions of the legislation. As such, those issues not expressly preempted by the statutes were not preempted.22 As for the 1965 Act, the Court found that the preemption provision prohibited requiring a different warning than was mandated in the Act itself. The relevant provisions were as follows: (a) No statement relating to smoking and health, other than the statement required by section 4 of this Act, shall be required on any cigarette package. (b) No statement relating to smoking and health shall be required in the advertising of any cigarettes the packages of which are labeled in conformity with the provisions of this Act.23 Section 4 of the 1965 Act contained the required warning language.24 Given the narrow reading used, the Court found that this provision was focused only on the content of the warning label and was simply a prohibition against other state and local governments mandating any other language. This ruling did not preempt other aspects of the litigation, including common law damages claims.25 The Court then looked to the 1969 Act. The relevant provision regarding preemption in the 1969 Act was as follows: (b) No requirement or prohibition based on smoking and health shall be imposed under State law with respect to the advertising or promotion of any cigarettes the packages of which are labeled in conformity with the provisions of this Act.26 The Court juxtaposed the preemption provisions of each act. In so doing, the Court found the preemption provision in the 1969 Act to be broader in that it prohibited not only different “requirements” related to warnings and advertising, but also addressed “prohibitions” imposed by state law. Further, unlike the 1965 Act, the preemption provision of the 1969 Act also focused on advertising and promotion, not just advertising. The Court decided there was a distinction between a “regulation” which it said was a positive enactment by a legislative body and a “prohibition” which the Court found encompassed common law tort actions. The Court found that common law tort cases were based on the existence of a “legal duty” and as such imposed “requirements or prohibitions.”27 The key to Cipollone is the notion that common law actions, where concepts of legal duty are an integral part, can be

preempted just like a state or locally enacted statute, law, or ordinance. This conclusion regarding potential preemption of common law actions was made by a plurality of the Court. In fact, the remainder of the opinion applying preemption principles to the various theories of liability was also contained in the plurality. Yet, as seen below, the concept of legal duties defined in common law actions being subject to preemption analysis now has evolved into a majority view at the Court. The Court nonetheless was unwilling to find all of the common law claims preempted and to sweep them all aside. Instead, the Court carefully examined each claim and theory of recovery alleged with a view towards a narrow construction of the relevant preemption statute and a strong presumption against preemption. The Court used the following test: The central inquiry in each case is straightforward: we ask whether the legal duty that is the predicate of the common-law damages action constitutes a “requirement or prohibition based on smoking and health . . . imposed under State law with respect to . . . advertising or promotion,” giving that clause a fair but narrow reading.28 The Court found any warnings-related claims which focused on conduct after the effective date of the 1969 Act alleging any different warning be used other than the congressionally mandated warning, or the lack of warnings in advertising or promotion, to be preempted. It found claims unrelated to advertising or promotion to be not preempted.29 As for the express warranty claims, the Court observed that express warranties were a private contractual matter. They did not involve a “requirement or prohibition” imposed by state law. Such agreements were found to be undertaken voluntarily and as such not preempted. It was of no matter that the basis of such claims was the advertising itself, and it did not matter that the courts were used to enforce such agreements.30 As for the fraudulent misrepresentation claims, the Court found the plaintiff’s theory asserting that the way the defendants advertised negated the effect of the mandated warning to be preempted, as this was the converse of requiring a warning in advertising, which the 1969 Act had forbidden. Another of the plaintiff’s theories of recovery alleged intentional concealment of material information. The Court found that so long as these claims did not focus on advertising or promotions (that is, a duty to disclose such information using

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means other than advertising or promotion), they would not be preempted. The Court found the latter to be grounded in a more general type of duty, a duty not to deceive, as opposed to a duty based on smoking and health which was the subject of the 1969 Act. This same rationale was used to save the plaintiff’s conspiracy claims.31 In sum, the Court in Cipollone used express preemption to find that the 1969 Act preempted the plaintiff’s common law claims, which necessarily would have involved a different warning or required a warning in advertising or promotional materials. To the extent the defendants’ writings or statements could be construed as creating an express warranty, such claims were not preempted. Tort claims based on more general duties consistent with the goals of the 1969 Act and the actions of the Federal Trade Commission in regulating consistent with the 1969 Act were also found not to be preempted.32 2. Medtronic, Inc. v. Lohr

In 1996, the Court again addressed preemption in a products liability context with its decision in Medtronic, Inc. v. Lohr.33 There, plaintiff Lora Lohr had undergone a procedure to insert a pacemaker manufactured by the defendant. Eventually, the pacemaker had to be replaced on an emergency basis. The plaintiff attributed the failure of the device to a lead, an electrical connection between the device itself and Mrs. Lohr’s heart. The plaintiff filed a suit in Florida state court alleging that defects in the pacemaker necessitated the emergency surgery. The complaint sounded in both negligence and strict liability. The defendant removed the case to federal district court. Later, the defendant moved for summary judgment asserting the preemption provisions of the Medical Device Amendments of 197634 (MDA), an act of Congress that amended the Federal Food and Drug Cosmetic Act35 to add medical devices to the list of items previously subject to at least some oversight by the federal government. The Food and Drug Administration (FDA) was the agency designated to regulate under these acts.3 The Court outlined the history of congressional action in the area of drug and medical devices and observed that the MDA contained a preemption provision which provided in relevant part: (a) General rule – Except as provided in subsection (b) of this section, no State or political subdivision of a State may establish or continue in effect with respect to a device intended for human use any requirement –

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(1) which is different from, or in addition to, any requirement applicable under this chapter to the device, and (2) which relates to the safety or effectiveness of the device or to any other matter included in a requirement applicable to the device under this chapter.37 MDA also created a hierarchy of regulation by classifying various medical devices based on perceived risk to the public. Pacemakers were listed as Class III devices and as such were to receive the most scrutiny. Class III devices were required to pass a rigorous pre-market evaluation called “pre-market approval” before being allowed to be sold. The Court, however, recognized that, because medical devices were added later to the list of regulated products, and because it would be impractical to require their sale to be ceased while the FDA performed a pre-market approval for each one, some were allowed to remain on the market pending evaluation.38 Also, new, unapproved devices could be sold absent the more intense pre-market approval process so long as the manufacturer certified that any such new device was “substantially equivalent” to a device already on the market. The approval process associated with the “substantially equivalent” standard was less rigorous than the regular standard, and sales could begin before this less encompassing equivalency approval process began. The Court observed that, because of the volume of time needed to complete the pre-market approval in combination with the volume of devices in need of pre-market approval, most medical devices were reaching the market by way of the less rigorous “substantially equivalent” process. It was through this method that the pacemaker at issue reached the market.39 The district court initially denied the defendant’s summary judgment motion as to the case in its entirety based on preemption. Later, it reconsidered in light of then-new Court of Appeals for the Eleventh Circuit precedent and granted the summary judgment motion as to all claims. At the time, some courts of appeals, including the Eleventh Circuit, had begun to hold that FDA “approval” pursuant to MDA was enough to trigger preemption.40 On appeal from the district court’s ruling, the Eleventh Circuit reversed in part and affirmed in part. In so doing, it found the preemption provisions of MDA to be vague. It then focused on regulations issued by the FDA, the agency statutorily designated to perform pre-market approvals and the “substantially equivalent” inquiry. It held that the plaintiff’s negligent design claims were not preempted, but

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that negligent manufacturing and failure to warn claims were. It applied the same analysis and ruled similarly as to the strict liability based claims.41 At the Supreme Court, the defendant argued that using express preemption, the plaintiff’s case was preempted in its entirety. This argument was rejected. The Court held that the preemption provision in MDA did not clearly prohibit all common law claims. The Court looked to the language of the preemption provision, focusing on the term “requirement.” It decided that the use of this term suggested that Congress actually was concerned with states enacting laws that created duties focused on specific devices or aspects of devices, and not with common law actions or duties that may derive from such actions. Further, the Court noted that one policy behind MDA was to provide for the safety and effectiveness of regulated devices. Congress was aware that common law cases had been litigated for years before MDA was enacted. In that sense, the Court found that parallel common law claims were both consistent with and an augmentation of this policy. The Court’s belief was that the potential of an award of money damages would help motivate safety consciousness and increase device effectiveness, notwithstanding the capacity of such claims having a possible chilling effect on product innovation. In essence, the Court found that Congress was mostly concerned with inhibiting additional, positive regulation by states, not curtailing preexisting duties under common law.42 After disposing of the more general preemption argument, the Court focused on the specific claims. The Court found that the “substantially equivalent” inquiry was not nearly as rigorous as the pre-market approval process, and was an inquiry focused on “equivalence” not “safety.” Thus, this “equivalence” inquiry provided no protection to the consumer of the device. Instead it was simply intended to maintain the status quo. For this reason, the Court found that the design defect claims were not preempted. Further, the Court found that claims based on the federal requirements themselves, that is, the failure of the device to meet applicable federal requirements for similar devices, were likewise viable and not preempted. This result occurred because the preemption statute prohibited only those “requirements” that were not equal to or substantially similar to federal requirements.43 Among the factors the Court relied on for its rulings in Lohr were the FDA-issued regulations as well as information about the medical device approval process the FDA promulgated. The Court noted that Congress had delegated to the FDA the right to implement MDA. Congress left it to

the FDA to determine the scope of scrutiny a given medical device would receive. In this sense, it appears that the plurality decided that Congress effectively gave the FDA the right to determine the potentially preemptive effect MDA would have on claims concerning a particular device. This result was due to the fact that whether a claim would be preempted was found to be dependent on whether the FDA actually created a federal “requirement” applicable to that device. Thus, the scope of the FDA scrutiny turned out to be the thing that defined the potential for preemption in Lohr. As will be seen below, the role of published agency views on the issue of preemption and any regulatory actions is itself a potential quagmire as it relates to the preemption doctrine.

The Court’s belief was that the potential of an award of money damages would help motivate safety consciousness and increase device effectiveness, notwithstanding the capacity of such claims having a possible chilling effect on product innovation.

The role of the FDA clearly was important in the Court’s decision not to preempt the Lohr plaintiff’s common law manufacturing defect and warnings claims. In finding no preemption, the Court looked closely at the MDA preemption statute. That statute indicated that preemption existed only with respect to requirements for a device that related to its safety or effectiveness. The FDA’s position, as stated in its statement regarding the regulations it issued, was that it believed there was preemption only with respect to regulations issued that pertained to a particular device or counterpart regulations. Further, the regulations indicated that preemption was not intended to operate where state and local requirements at issue applied to products other than regulated devices or to unfair labor practices with requirements not limited to devices. According to the FDA, preemption should be available only

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when there was potential for conflict between the federal regulations and state and local requirements. Claims based on the Uniform Commercial Code warranties were unaffected.44 Thus, the Court found that preemption would operate only with regard to conflicts relating to health and safety issues and where there were specific regulations (or counterpart regulations) focused on a particular device. The defendant had argued that there were regulations that governed manufacturing (called Good Manufacturing Practices45), and that claims regarding manufacturing defects should be preempted. Because the Court characterized these regulations as general and not necessarily specific to a particular device, it found that they did not provide a basis for preemption. In fact, the Court saw such general duties as providing no greater burden or duty on the defendant as would a general common law duty to use due care. In that sense, a common law duty to use due care would not be “different from, or in addition to” the FDA regulations. These general regulations’ lack of specificity meant that the preemption provision of the MDA was inapplicable to Lohr’s manufacturing defect claims.46 3. Riegel v. Medtronic, Inc.

Several years later, the Court revisited medical-devicerelated products liability litigation in Riegel v. Medtronic, Inc.,47 this time with a different result. Riegel involved a catheter that failed during a cardiac angioplasty. The plaintiffs filed a products liability suit asserting common law claims in a United States district court in New York. The defendant successfully argued preemption at the trial court level, and this result was affirmed by the Second Circuit Court of Appeals.48 The Supreme Court examined the preemption issue under the same analysis used in Lohr, and concluded that the plaintiffs’ claims in this instance were preempted.49 One key distinction between Lohr and Riegel noted by the Court was that the catheter in Riegel actually underwent the rigorous pre-market approval process, and was not simply scrutinized under the “substantially equivalent” regulation as had been the device in Lohr. As such, the regulatory issue for the catheter in Riegel was not just “equivalency,” but instead was “safety.” The catheter was actually determined by the FDA to be both safe and effective, meeting the standard for obtaining pre-market approval. It was not simply found to be equivalent to other similar devices. The FDA regulations prohibited changes to its approved design, absent a resubmission to the FDA for pre-market approval. The FDA also approved the device’s labeling, finding it neither false nor misleading.50 Given that the device in Riegel went through the rigorous M-8

pre-market approval process, the Court found that the common law action asserting the typical tort theories of recovery such as negligence, strict liability, and breach of implied warranty were preempted. It reasoned that a verdict against the defendant based on these theories would mean that the FDA’s judgment about safety was second-guessed. The Court held that allowing claims asserting common law duties different from what the FDA imposed were state “requirements” different from what Congress intended, and thus preempted. The Court observed that the FDA performed an overall costbenefit analysis as part of its work in determining whether a medical device would be allowed to be sold. It compared this analysis to a trial court verdict where juries are often focused on the individual plaintiff and costs to that individual, not the benefits to other persons or society as a whole. Although the result of a verdict for the plaintiff in a common law action was damages, and not injunctive relief or a directive that mandates specific conduct as a statute or regulation would, the Court nevertheless saw an award of money damages as way to govern conduct.51 In fact, it would appear that anytime the regulatory body engages in a congressionally mandated balancing between health and safety on one end, and efficiency and other commerce-related interests on the other, a common law claim that touches upon the balance reached usually would involve a measure of second-guessing and so be subject to preemption.52 The Court rejected the notion that the FDA regulatory activity involved in Riegel amounted to no more than giving rise to general, common law duties. It accepted the FDA’s view on its own regulatory activity as substantive and focused, not general in nature.53 One important difference between Cipollone and the more recent decision on Riegel is that the notion of common law duties being scrutinized as potentially creating duties conflicting with congressional intent is no longer the view of a plurality of the Court, but instead enjoys a solid majority. The Court did observe that, had the plaintiffs alleged that the defendant’s device did not comply with FDA regulations for the catheter in question, such claims would not be preempted. Such claims would not have involved state regulation which was “different from, or in addition to” the applicable FDA regulations. In other words, the Court would have allowed so-called “parallel claims” notwithstanding the degree of regulation that it found so important to its decision. The Court also somewhat reiterated the discussion in Lohr regarding deference to the FDA’s own conclusions about the preemptive effect of its own actions.54

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4. Bates v. Dow Agrasciences, LLC

In a decision unrelated to medical devices, the Supreme Court in Bates v. Dow Agrasciences, LLC55 discussed preemption in the context of a tort case involving damage from the use a pesticide. In that case, some Texas peanut farmers sued the manufacturer, Dow, after their peanut crop was damaged from the application of a Dow pesticide. This pesticide was subject to regulation by the United States Environmental Protection Agency (EPA) pursuant to the Federal Insecticide, Fungicide, and Rodenticide Act56 (FIFRA). The product was submitted for registration under FIFRA, a process including a submission of the pesticide’s label to enable the EPA to determine whether the product was “misbranded.” This process involves an assessment that determines whether the label contains false or misleading statements, whether it contains adequate instructions for use, and whether there are no omissions of necessary warnings or other important information. Under FIFRA, selling mislabeled products regulated by that act is illegal. FIFRA also provides for a continuing duty to submit reports of incidents involving a regulated product’s toxic effects that may not be addressed in an earlier, approved label.57 The issue with the pesticide in Bates was that it apparently damaged crops under certain soil conditions. At the time of sale in this case, there was no warning advising against its use under such conditions. After the crops were damaged, and before the next growing season, Dow sought to change the label to add a warning regarding use in such soil conditions. After unsuccessful pre-suit settlement negotiations, the farmers notified Dow of their intention to sue pursuant to the Texas Deceptive Trade Practices Act.58 In response, Dow filed a suit in federal district court, seeking a declaratory judgment of preemption of the farmers’ claims. In turn, the farmers filed a products liability counterclaim for damages based on negligence, strict liability, fraud and breach of warranty. The district court found almost all of the farmers’ claims preempted. The Court of Appeals for the Fifth Circuit affirmed.59 The Supreme Court discussed the preemption provision at issue in FIFRA, which the Court noted was added well after FIFRA and its predecessor were passed by Congress decades earlier. Initially, these statutes focused largely on labeling. In 1972, FIFRA was amended to make it a more comprehensive regulatory statute. As a result, manufacturers were required to submit information regarding use, effectiveness and safety, not just proposed labeling. A preemption provision was also added, and provided as follows:

(a) In general– A State may regulate the sale or use of any federally registered pesticide or device in the State, but only if and to the extent the regulation does not permit any sale or use prohibited by this subchapter. (b) Uniformity– “Such State shall not impose or continue in effect any requirements for labeling or packaging in addition to or different from those required under this subchapter. (c) Additional uses– (1) A State may provide registration for additional uses of federally registered pesticides formulated for distribution and use within that State to meet special local needs in accord with the purposes of this subchapter and if registration for such use has not previously been denied, disapproved, or canceled by the Administrator. Such registration shall be deemed registration under section 136a of this title for all purposes of this subchapter, but shall authorize distribution and use only within such State . . . .60 In 1978, FIFRA was again amended, this time to authorize the EPA to waive the requirement that product efficacy information be provided to the EPA, a waiver the EPA put into place in 1979. It was under this regulatory framework that Dow’s pesticide was registered. In this case, the EPA never substantively evaluated Dow’s claims regarding the lack of use restrictions based on soil conditions for the pesticide in question.61 The Court’s focus here was whether the farmer’s common law claims were an additional or different “requirement” and thus preempted under the circumstances of this case. In so doing, the Court looked at two questions it saw raised by the wording of the newly added preemption provision: (1) whether the requirement was focused on “labeling or packaging” and (2) whether such a labeling or packaging requirement was in fact additional or different than the previous one.62 The first observation the Court made was that common law claims that focused on design or manufacturing defects, negligent testing or breach of express warranty did not impose any requirements that focused on labeling or packaging. Thus, such claims were not preempted. The court of appeals

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had reasoned that a money-damages judgment based on these particular theories of recovery could induce a label change. It thought any liability theory on which tort recovery involved potential inducement for change to the label was enough for preemption to operate. The Supreme Court found a distinction between a law or statute and a verdict adverse to the defendant. It indicated that a requirement was a mandate that must be obeyed; and that a jury verdict, while potentially motivating action, was not a mandate. A verdict merely suggested optional behaviors that may avoid such verdicts in the future. The Court was critical of what it called “an inducement test” used by the court of appeals. It found this test overbroad and inconsistent with congressional intent as expressed in the preemption provision, which it believed contemplated at least some state regulatory activity.63 The Court next addressed the warnings-based claims that focused on labeling. Unlike the preemption language in Cipollone, the Court in Bates observed that the prohibition instituted by Congress in FIFRA was on requirements “in addition to or different from” what Congress or the regulatory agency imposed, and was not a complete ban on any requirements. Thus, to the extent that failure-to-warn claims asserted only duties that were the equivalent of FIFRA-imposed duties, they could survive preemption. The Court emphasized that “equivalent” did not mean “identical.” The Court remanded the case for a determination on this point.64 It is this ruling that initially gave rise to the notion that there can be “parallel requirements” in tort cases, whereby the duties imposed under common law are the same as those imposed by statute or regulation and so not preempted. To reach this conclusion, the Court relied not only on the language of the preemption statute, but also on the notion of narrowly reading such provisions. The Court found its narrow reading in Bates particularly appropriate, given the long history of tort litigation involving products regulated under FIFRA. Significant was that, despite this historical background of common law tort litigation, Congress had not done more in terms of expressing its preemptive intent. The Court found that tort claims involving labeling could aid the function of FIFRA, not hinder it. The Court brushed aside concerns about state tort litigation giving rise to a “crazy-quilt” of state-imposed warning and labeling requirements.65 Regardless, the Court suggested that claims asserting that different fonts or colors or word choices likely would be preempted, as would claims that involve divergence from specific FIFRA mandated labeling requirements.66 It appears that a warnings claim alleging something other than literal M-10

non-compliance with an EPA regulation issued under FIFRA likely would be preempted. 5. Wyeth v. Levine

More recently, the Court dealt with a preemption situation that involves what has become known as “agency preemption.” In the Court’s decision in Lohr, it relied in part on comments made by the regulatory agency (in that instance the FDA) as part of the process of determining exactly what its regulations would be. Thereafter, some agencies began to opine expressly about preemption in the preamble of regulatory announcements and otherwise. Those opinions apparently were made to try to influence the outcome of cases where preemption could become an issue. In Wyeth v. Levine,67 the Court dealt with a preemption claim involving a drug label that had been initially approved by the FDA in 1955, with some later approved changes. The Plaintiff made failure to warn claims in Vermont state court relating to the way the drug at issue was administered to her. Her claim focused on the alleged lack of warning to physicians about how it should be administered. The drug caused injuries because it was injected or pushed directly into an IV tube rather than using what was known as the IV drip method. Apparently, the IV was mistakenly placed in an artery rather than a vein. Had the drip method been used, the medication would not have entered the artery. It was well known that arterial administration of this medication rather than venous administration could have drastic, negative side effects. The drug company sought summary judgment based on preemption. It argued that the drug and its label had been approved by the FDA, and so no other warning could have been provided. The trial court rejected the preemption argument. It reviewed evidence of the interaction between the FDA and the drug company regarding labeling issues, noting that the drug company was told that any changes to the drug’s label, which were eventually approved, had to be identical to what was actually approved. At trial, the court instructed the jury that it could consider the drug company’s compliance with the FDA regulations, but that compliance was not dispositive on the issue of liability. The trial court also instructed the jury that the FDA regulations allowed for unapproved changes to warnings so long as such changes were additions to or a strengthening of approved warnings, and that the defendant advised the FDA of its actions. A seven figure verdict for the plaintiff was rendered, and the case made its way through the Vermont appellate and supreme courts.68 In its arguments before the United States Supreme Court,

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the drug company asserted implied preemption in two ways. First it argued that it was impossible to comply with both the state common law duty relating to modification of its warnings and the FDA regulation, that is, conflict in fact. At trial, the plaintiff argued for a stronger warning about using the IV push method of drug administration. Second, the defendant argued that allowing the plaintiff’s state court tort claim itself created an obstacle to the accomplishment of Congress’ objectives, that is, field preemption. In response, the Court applied the standard analysis discerning the intent of Congress and deciding whether there was some conflict between federal and state law.69 In discussing the intent of Congress, the Court noted the difference between the Federal Food and Drug Cosmetic Act70 (FDCA) and its amendments, and the Medical Device Amendments of 197671 at issue in Lohr and Riegel which governed medical devices. Unlike the Medical Device Amendments, there was no express preemption provision in FDCA. The Court found that Congress acted to preserve the potential applicability of state law by inserting a savings clause into FDCA when it was amended in 1962.72 In addressing the first preemption argument, the Court observed that “impossibility preemption” was a very demanding defense. Although the regulations did prohibit unilateral label changes, there was a provision to allow changes that strengthened or added instructions to pre-existing, approved warnings, so long as the manufacturer submitted a supplemental application to the FDA regarding the changes. The defendant argued this regulation was limited to changes necessitated by wholly new information, not a revisiting of information that was part of the initial application to the FDA. In rejecting the defendant’s interpretation of this regulation, the Court found the defendant’s reading too narrow, given the FDA requirement that adverse reactions be consistently reported even for previously approved medications. For this reason, the Court found that state law warnings claims were not preempted based on “impossibility,” as warning changes without explicit approval by the FDA were allowed. The Court found that state common law simply reinforced the existing FDA regulatory scheme.73 The Court also disposed of the second preemption argument, that the state tort claim was an obstacle to the FDA drug-labeling scheme. The drug company argued that the obstacle it faced was allowing a state court action that assessed the warning’s adequacy when the warning in question was specifically approved by the FDA, after the FDA’s assessment and rejection of alternative warnings. In rejecting this position, the Court looked to Congress’s intent in enacting

FDCA. It found that Congress had consumer protection in mind. In failing to provide a remedy to consumers for mislabeling, Congress intended for consumers to be able to avail themselves of traditional state law remedies, that is, common law actions for damages. The fact that Congress had amended FDCA in the interim yet failed to totally preclude common law actions despite its awareness of such suits being filed was seen as evidence of Congress’s intent to allow common law suits to exist in parallel to FDA oversight.74 It is at this point where the issue of agency preemption is discussed and perhaps resolved. The Court observed that notwithstanding its assessment of congressional intent, the FDA itself, in the preamble to amended regulations issued in 2006, opined about the preemptive effect of its regulatory actions. The FDA indicated that its regulations created both a floor and a ceiling relating to drug labels. It decided that its actions in approving drugs and drug labels left no room for state action. According to the FDA, suits under state common law that effectively challenged the FDA’s expertise in approving drug warnings were thus preempted.75 The Court recognized that in the past it had given regulatory bodies’ self-assessment defining the scope of regulatory action, including the potential effect on preemption, a measure of weight. But, the Court in Levine observed that it never totally deferred to an agency’s own conclusion regarding the preemptive effect of its own regulatory activity. The Court recognized an agency’s potential expertise in evaluation of products and unique understanding of the regulations issued and actions taken by that agency. But the Court said it still examined the regulatory action as a whole in combination with Congress’s intent relating to the degree to which a body of regulation would control some or an entire aspect of regulatory reach. It was through this analysis that the Court would determine whether and to what degree regulatory action could serve to preempt all or part of a suit for damages based state common law.76 In Levine, the Court looked at the FDA’s 2006 preemption statement, and found that it was not consistent with the positions on preemption the FDA had historically taken. It found the statement that accompanied the FDA’s 2006 amended regulations to be more of a unilateral declaration, without any opportunity for input by the States or affected persons. It also found it to be inconsistent with Congress’s intent. The Court found that the FDA historically had seen state common law suits as complementary to the FDA’s regulatory actions. Such suits helped to identify unknown hazards, and reinforced

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the notion that the manufacturers, not the FDA, had primary responsibility for drug labels. In essence, the Court seemed to ignore the 2006 FDA pronouncement on preemption given the position the FDA had taken for years prior to that time. In the end, the Court found the plaintiff’s state common law claims not preempted.77 6. Geier v. American Honda Motor Co.

The Court juxtaposed the situation in Levine with a prior decision, Geier v. American Honda Motor Co.,78 where it looked at the regulatory actions of the Department of Transportation in promulgating Federal Motor Vehicle Safety Standard 208.79 This standard provided options to vehicle manufacturers as to whether to provide airbags as part of a passenger restraint system. The issue in Geier was whether this Standard preempted claims by persons asserting lack of airbags as a design defect in vehicles. Because an exclusive choice of restraint mechanisms was given vehicle manufacturers, the Court in Geier preempted claims where one authorized choice regarding passenger restraint was made over another. The Court relied on the history of such regulatory actions and the agency’s explanation as to its rationale for their promulgation.80 As it relates to agency statements regarding preemption, if the agency statement is consistent with its historical position, consistent with its specific regulatory actions, and consistent with congressional intent, it is likely to get more deference than new declarations to the contrary. Note that President William Clinton issued an Executive Order on August 4, 1999 that discussed his administration’s view on federalism and the potential impact agency regulatory conduct had on preemption.81 On May 20, 2009, President Barack Obama issued a memorandum to agency heads that was more focused on preemption. It essentially prohibits agencies from issuing statements regarding preemption in the preambles of regulatory announcements unless there is a specific regulation in place regarding preemption. It also advised agency heads to review regulations issued over the prior 10 years that discuss preemption and determine whether such regulations or statements are justified under the law.82 Given that the executive branch controls most of the regulatory agencies, it is unlikely agency preemption will arise for some time. The discussion above shows some recent actions by the U.S. Supreme Court in the area of Federal Preemption. When considering whether an action or parts of an action are preempted, a careful examination of Congress’s actions over M-12

time will help to discern its intentions relative to preemption. Suits based in common law clearly can act as “requirements” which can be preempted depending on the scope of the preemption provision of a given statute or regulation; or if it can be argued that Congress intended that the federal government be the sole regulator of a product or product type involved. Further, the actions of the authorized federal regulatory agency should also be examined to see the degree to which regulated products are actually scrutinized in combination with the issue of whether a common law action serves to second guess the decisions of the agency involved. II. Preemption Cases Decided by Illinois Courts

Illinois courts have decided a number of preemption cases over the last 15 years, although not many strictly focused on products liability. Before discussing some cases, a practice caveat is in order. One trap that the defense practitioner should avoid in Illinois is failure to raise preemption as an affirmative defense at the earliest opportunity. A failure to do so can result in it being waived. In Haudrich v. Howmedica, Inc.,83 the Illinois Supreme Court held that the preemption defense was waived as it was not pled as an affirmative defense. There, the plaintiff claimed injury from a prosthetic device. The device had been subjected to pre-market approval by the FDA. After trial and an adverse verdict, the defendant argued preemption for the first time on appeal. The defendant asserted that the plaintiff’s claim was preempted by the preemption provision in the Medical Device Amendments of 1976 to the Federal Food, Drug, and Cosmetic Act,84 the same statute at issue in Lohr85 and Riegel.86 The appellate court did not address the preemption issue. The Illinois Supreme Court, however, found that the issue was waived because it was not raised in the trial court. It rejected the argument that preemption was jurisdictional in nature and so could be raised at any time.87 1. Busch v. Graphic Color Corp.

The Illinois Supreme Court has dealt substantively with preemption in tort cases a few times in the last several years. In Busch v. Graphic Color Corp.,88 a special administrator brought a wrongful death claim arising out of the decedent’s use of paint stripper while cleaning ink vats. The decedent had no training in the use of paint stripper. She was married to one of the workers for the company that had contracted to clean the vats, and for unknown reasons began to clean them herself. She apparently died after being overcome by the fumes from the paint stripper. There were issues relating

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to the way she used the product and whether the work area had been properly ventilated. The paint stripper came in cans on which a warning was affixed. The warning label warned about the risk of overexposure to vapors and the need to use the product in a properly ventilated area.89 The paint stripper was subject to regulation pursuant to the Federal Hazardous Substances Act90 (FHSA). The product supplier defendants moved for summary judgment asserting that the plaintiff’s claims, which were largely focused on the adequacy of the warnings on the cans, were preempted by an express preemption provision contained in FHSA. FHSA was passed initially to create uniform requirements for warnings on packaging for hazardous products sold for household use. When FHSA was initially effective, it did not contain a preemption provision. Later in 1966, it was amended to reflect congressional concerns about warnings related claims and the notion of having 50 separate warning labels based on regulation by all the states. A preemption provision was added to prohibit requirements involving warnings and labeling that were not identical to requirements promulgated under the FHSA.91 In Busch, the defendants argued that there could not be common law claims that established a duty to provide different or other warnings than those approved by the Consumer Product Safety Commission (CPSC), the regulatory body to which Congress had delegated regulatory responsibility to regulate warning labels on products containing methylene chloride, the chemical in the paint stripper at issue. While the label in question had not been specifically approved by the CPSC, it was virtually the same as the suggested warning issued by the CPSC for products containing methylene chloride.92 Consistent with the United States Supreme Court’s decisions discussed above, the Illinois Supreme Court examined the history of FHSA and the intent of Congress as it relates to the preemptive effect of the FHSA. It also examined the actions of the CPSC in enforcing FHSA. It noted the history and rationale for the CPSC regulatory action involving methylene chloride containing products, and its rulemaking in the face of competing interests of industry and consumer groups that gave rise to the model labeling. It determined that the CPSC had essentially decided what subjects paint stripper labels should address, that nothing different or additional need be included, and that Illinois courts should defer to this judgment. The court also expressed a willingness to defer to the CPSC’s own conclusions about the preemptive effect of its actions on warning claims, as it was not contrary to the congressional intent as determined by the court. Also important to the court

were decisions of the federal courts interpreting the preemption provision in FHSA as amended. It indicated that such decisions were controlling on Illinois courts so that federal statutes and regulations can be given uniform application.93 Finally, the court rejected the plaintiff’s claims in Busch that there was no preemption because the information the plaintiff claimed was absent from the label in question related to a different risk of injury (asphyxiation) than that addressed by the model warning the CPSC issued (cancer). Although the court agreed that this issue fell under the subject preemption provision, it still held that the plaintiff’s claims were preempted. The court found that the actions of the CPSC in creating the model language had more than one purpose even if communication of the carcinogenic risk was the primary reason for the rulemaking. The model language addressed the risk of asphyxiation and so it did address the risk that the plaintiff’s decedent confronted.94 2. Sprietsma v. Mercury Marine

A few years later, the United States Supreme Court reversed the Illinois Supreme Court in a preemption decision involving boats and outboard motors. In Sprietsma v. Mercury Marine,95 the plaintiff brought a products liability action against an outboard boat motor manufacturer after the plaintiff’s decedent was killed when struck by the propeller after falling out of a ski boat. The plaintiff asserted that the motor was defective because it did not have a propeller guard. The trial court found the action expressly preempted by the Federal Boat Safety Act of 197196 (FBSA), and the Illinois appellate court affirmed on this basis. The Illinois Supreme Court also found preemption, but not through express preemption. Instead, the court affirmed based on its finding implied preemption. It believed that the relevant regulatory agency’s decision not to require propeller guards was an affirmative decision that guards not be required at all, which created the conflict between state and federal law.97 The U.S. Supreme Court reversed and found no preemption, express or implied. As it has in the other cases involving preemption, it discerned congressional intent relating to preemption and examined the regulatory work of the Coast Guard; the agency ultimately delegated regulatory authority for outboard motors for boats. It looked first to the preemption provision contained in the FBSA, which prohibited the establishment and enforcement of performance or safety standards different from issued regulations. But, it also noted a savings clause within the FBSA that provided compliance

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with such standards would not relieve a person from liability at common law.98 The United States Supreme Court traced the history of regulatory action under the FBSA. It noted that when the FBSA was signed into law, the United States Secretary of Transportation advised that all state laws were exempt from preemption until new regulations relating to boating safety could be issued. Over time, the Coast Guard began to issue regulations, and the United States Secretary of Transportation limited the scope of the blanket exemption from preemption consistent with the regulations as they were issued. Although the Coast Guard studied the propeller guards issue extensively, no requirement for propeller guards were ever put into place.99

Although the Court recognized that one of FBSA’s goals was to create uniform manufacturing standards, the lack of regulation on this subject in combination with the broad exemptions to preemption and the belief that allowing common law actions would promote safety necessitated a finding that the plaintiff’s claims here were not preempted.

The Court rejected the application of express preemption. It found the language of the provision at issue applied to positive state legislative or regulatory enactments only, and not to common law actions. This conclusion was supported by the existence of the savings clause.100 As for implied preemption, the United States Supreme Court took issue with the notion that the decision of the Coast Guard not to require propeller guards was a mandate that guards not be required at all. The Court found that decision of the Coast Guard not to act was not an affirmative decision M-14

that no guards should be required. Instead, the Court decided that the Coast Guard’s decision not to act was simply a decision not to weigh in on this issue. It was not an authoritative statement against the use or requirement of propeller guards. The Court stated that, although a congressional or agency decision not to regulate could have preemptive effect, it did not in this instance. Although the Court recognized that one of FBSA’s goals was to create uniform manufacturing standards, the lack of regulation on this subject in combination with the broad exemptions to preemption and the belief that allowing common law actions would promote safety necessitated a finding that the plaintiff’s claims here were not preempted.101 3. Mejia v. White GMC Trucks, Inc.

There are other examples of Illinois courts dealing with preemption arguments. In Mejia v. White GMC Trucks, Inc.,102 the estate of a garbage truck driver filed a wrongful death suit after the decedent was found dead on the passenger side of the truck after an accident. He was driving a garbage truck that hit a median, collided with another vehicle, and became airborne. This truck could be operated from either side. The passenger-side door was of a type that folded back, and was not a regular type of door. The passenger-side door was designed for low speed operation with the person on the passenger side being able to frequently exit. The plaintiff alleged that the passenger-side door was defective in that the latch handle on the passenger door was exposed, such that incidental contact could cause the latch to release, that the door itself was flimsy, and that the interior latch was such that it too could release with incidental contact, causing the door to open unexpectedly.103 The defendant asserted preemption as to the plaintiff’s door and door latch design claims, and the trial court entered summary judgment as to those claims.104 On appeal, the plaintiff argued that preemption did not apply, but the court rejected this position and affirmed the grant of summary judgment. The appellate court looked at the applicable statute, the National Traffic and Motor Vehicle Safety Act105 (Traffic Safety Act), and found that Congress delegated the creation and promulgation of safety standards to the National Highway Transportation Safety Administration (NHTSA). The NHTSA, in turn, issued safety standards for door latches and locks with a mind toward minimizing the likelihood of occupant ejection. Although specific standards were promulgated, there was an exemption to those standards for the type of door in this instance. The plaintiff argued that the exception did not apply to the suit, given the complaint’s focus on the latches and not the door itself.106

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The court looked at the preemption provision in the Traffic Safety Act, in conjunction with the savings clause in the statute. This clause provided compliance with the NHTSA safety standards did not relieve anyone of liability under common law. The court found the plaintiff’s reading of the regulations to be too narrow, and decided that they did focus on occupant retention issues. It then found that the door at issue was specifically exempt from the regulations at issue as this door was not designed to retain occupants. As such, the court determined that this exception was evidence of an intentional decision to allow such doors, not merely a decision to simply not take action as in Sprietsma.107 4. Osman v. Ford Motor Co.

In Osman v. Ford Motor Co.,108 the plaintiff appealed a grant of summary judgment to Ford Motor Co. (Ford) in a case where the plaintiff’s decedent was killed in a one-vehicle accident. The decedent was ejected during the accident, as she was not wearing a manual lap seatbelt. The plaintiff argued that the vehicle was defective in that it did not have a different restraint system, nor did it provide a warning of the need to wear the manual lap seatbelt in addition to the automatic shoulder belt. Ford filed a summary judgment motion, arguing that the relevant safety standard issued by the NHTSA provided several options to vehicle manufacturers in terms of passenger restraint systems, and that the system in place in the decedent’s vehicle was in compliance with the standard. Ford argued implied preemption in that common law claims that a different system be used or that warnings related to such systems were preempted by virtue of the fact the NHTSA specifically regulated the issue of restraint devices to be used in passenger vehicles. The court agreed that the plaintiff’s action was preempted. It found that the facts that the relevant regulation gave options to vehicle manufacturers, and that Ford complied with the regulation, meant that a common law action that would create a duty to choose one option over another was preempted. This decision also included warning claims that would require Ford to warn that the restraint option it chose was unsafe.109 Clearly, Illinois courts are willing and able to consider preemption claims where appropriate. Aside from the necessary statutory enactment and body of applicable regulations, one must be certain to plead a preemption affirmative defense as soon as possible so as to preserve this very important and effective defense for a dispositive motion. Beware of how the United States Supreme Court’s analysis has changed over time. Just because an Illinois court decision of just a

few years ago might suggest a lack of preemption does not mean the same regulatory scenario would not now give rise to a different result. III. Discussion of Specific Federal Statutes

As federal preemption involves an examination of federal statutes and related regulations, it is useful to examine various statutes under which litigation has arisen so as to provide examples of court action and to serve as a resource for the defense practitioner. Below is by no means an exhaustive list of statutes in relation to which preemption has been used or discussed. Instead, these statutes are ones as to which a fair amount of court activity has occurred to provide useful examples of the operation of preemption, and hopefully an opportunity to continue to expand its use. A. Federal Cigarette Labeling and Advertising Act

The Federal Cigarette Labeling and Advertising Act110 (the FCLAA) was enacted by Congress with the intention of providing comprehensive labeling and advertising requirements for cigarettes manufactured, imported, and sold within the United States.111 Specifically, the Act requires manufacturers use particular warning labels on packages. Section 1334(b) reads: “No requirement or prohibition based on smoking and health shall be imposed under State law with respect to advertising or promotion of any cigarettes the packages of which are labeled in conformity with the provisions of this chapter.”112 These requirements necessarily preempt various state common law products liability claims. Courts have evaluated the preemption issue with various state law claims involving cigarettes, including claims for failure to provide adequate warnings,113 claims for design defect,114 claims alleging conspiracy by cigarette manufacturers,115 and state-law “Good Samaritan” claims.116 Courts have reached similar conclusions on some of these issues and differing conclusions on others. The United States Supreme Court first addressed the scope of the FCLAA’s preemption power in Cipollone v. Liggett Group, Inc.,117 where a cigarette smoker who contracted lung cancer brought claims against the manufacturer based on failure to warn, express warranty, intentional fraud, and conspiracy. A two-prong test required the Court first to examine the purpose of the FCLAA, and second to analyze the effect of the operations of the state law. The Court determined that the scope of the preemption provision was limited to the

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express language in the provision.118 Because Congress expressly defined the FCLAA’s preemptive scope, matters beyond the statute’s clearly defined reach are not preempted. In so reasoning, the Court held that the plaintiff’s claims based on a failure to warn theory, to the extent they relied on the manufacturer’s advertising or promotions, were preempted by the FCLAA.119 The claims based on express warranty, intentional fraud and conspiracy, however, were not preempted.120 Many courts have analyzed and applied Cipollone to federal preemption products liability cases; the case remains authoritative.121 In analyzing whether, and to what extent, courts have decided to preempt common law products liability claims relating to tobacco, various points of agreement are recognized. Congress may impliedly or expressly preempt state common law claims. If there is no such express language in the statute, preemption may be implied where the issue established by Congress is so pervasive as to “occupy the field.”122 A state law claim, however, may still be preempted, even if it does not occupy the entire field, if the state law makes compliance with the federal law impossible or if the state law would even be an obstacle to such compliance. In assessing preemption, courts have analyzed Congressional intent before superseding the state law claims. 1. Inadequate-Warning Claims

When confronted with failure-to-warn claims, many courts have held that such state law claims are preempted by the FCLAA. Some courts, however, have held that state law claims arising out of a manufacturer’s alleged failure to provide adequate warnings of health risks associated with smoking prior to January 1, 1966 (the effective date of the FCLAA), are not preempted by the federal law.123 Consistent with Cipollone, the United States District Court for the Western District of Pennsylvania in Stitt v. Phillip Morris Inc. held that preemption applied to post-1969 strict liability and negligence claims to the extent they were based on concealment, failure to warn, or failure to disclose.124 Also like Cipollone, this court refused to preempt state law claims based solely on the manufacturer’s research, testing, or other practices unrelated to promotion or advertising.125 A recent case from the United States District Court for the Northern District of Illinois Court held similarly in Espinosa v. Phillip Morris.126 There, the court held that preemption applied to state law claims based upon failure to warn, which would require a showing that the manufacturer failed to include additional warnings, or at least failed to articulate them more M-16

clearly.127 State law claims of fraudulent misrepresentation also have been preempted by the FCLAA. In Cipollone, the United States Supreme Court held that preemption applied to claims that the manufacturer minimized the risk of negative health effects related to smoking, through the use of advertising. It, however, also stated that claims of fraud and misrepresentation are not preempted if they arise from a state-imposed requirement related to advertising where the underlying duty is not to deceive and not based on health.128 Like Cipollone, the Texas Supreme Court in American Tobacco Co. v. Grinnell129 held preemption applied to a state law claim based on allegations that the manufacturer should have provided additional or more clearly stated warnings.130 In Cipollone, the Court clarified that the plaintiff’s state law claims based on a failure-to-warn theory prior to the FCLAA’s effective date in 1966 were viable claims and not preempted. Other courts have followed the same reasoning. In Tompkins v. R.J. Reynolds Tobacco Co.,131 the United States District Court for the Northern District of New York held that only failure-to-warn claims against the cigarette manufacturer post-1969 were preempted by the FCLAA.132 In some circumstances, courts have refused to preempt state common law claims under the FCLAA. The United States District Court for the District of Massachusetts in Johnson v. Brown & Williamson Tobacco Corp. did not hold state law claims to be preempted where the manufacturer intentionally misrepresented false statements in its advertising.133 The United States District Court for the District of Maryland in Shaw v. Brown & Williamson Tobacco Corp. allowed state law claims where the plaintiff developed cancer from secondhand smoke exposure.134 The court in that case reasoned that the FCLAA’s preemption provision regarding warnings only applied to one’s own smoking.135 2. Design Defect Claims

Generally, courts have held that design defect claims based on strict liability and negligence are not preempted by the FCLAA. For example, a federal district court in Connecticut held that the plaintiff’s claim based on the allegedly defective nature of the manufacturer’s cigarettes was not preempted.136 Similarly the Eighth Circuit declined to hold that the FCLAA preempted a design-defect claim brought against a cigarette manufacturer.137

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3. Conspiracy Claims

In this context, a conspiracy claim against a manufacturer relates to the manufacturer’s alleged prevention of other parties from releasing information to the public regarding the dangers of smoking cigarettes. In Cipollone, the United States Supreme Court reasoned that, because conspiracy claims are based on a duty not to conspire to misrepresent or commit fraud, which is not in and of itself based on smoking and health, the FCLAA does not preempt such claims.138 In accordance with this reasoning, the Florida District Court of Appeals in Lashke v. Brown & Williamson Tobacco Corp. refused to hold that the FCLAA preempted the plaintiff’s claim based on the cigarette manufacturer’s alleged conspiracy to conceal information.139 4. Good Samaritan Claims

A “Good Samaritan” claim works under the presumption that one who provides services to another, which that person should recognize are necessary to protect his life or possessions, must undertake these services exercising reasonable care. In Gunsalus v. Celotex Corp., a plaintiff who developed lung cancer from smoking cigarettes brought a “Good Samaritan” claim against the cigarette manufacturer.140 The United States District Court for the Eastern District of Pennsylvania held that the FCLAA preempted the state law “Good Samaritan” claim.141 It applied the reasoning in Cipollone and found the “Good Samaritan” claim to be premised on the plaintiff’s assertion that the manufacturer owed a duty to the plaintiff to provide information about the hazards of smoking.142 The success of the state law claim necessarily depended upon a duty to warn and therefore was preempted by the FCLAA.143 B. Federal Food and Drug Cosmetic Act

As discussed in the prior IDC Monograph on this statute, the Federal Food and Drug Cosmetic Act of 1938144 (the FFDCA) was enacted to regulate all matters related to pharmaceuticals. The Food and Drug Administration (FDA) enforces the FFDCA. Drug manufacturers must obtain approval from the FDA (based on a showing that a proposed new prescription drug is safe and effective) before marketing that drug.145 Further, for all prescription drugs, the FDA must approve the content and format of the labeling and warnings contained on the packaging.146 Both pre and post-approval, manufacturers are required by the FFDCA to disclose to the FDA both the results of product testing and any reports of adverse reactions to the marketed drug.147 A manufacturer’s

failure to comply with the FFDCA could constitute evidence of negligence in a products liability suit.148 The FFDCA does not contain an express pre-emption provision. 1. Prescription Drugs

Until the United States Supreme Court decision in Wyeth v. Levine,149 there was a split of authority among lower courts regarding whether or not the Act impliedly preempted state law cases alleging failure to warn against the manufacturers of pharmaceuticals.150 Among the majority of cases where lower courts found the Act did not preempt state law claims, In Re Zyprexa Products Liability Claims Litigation,151 illustrates the reasoning of these courts on the issue. That group of cases was initiated in the United States District Court for the Eastern District of New York due to thousands of products liability cases being filed against Eli Lilly based on failure to warn of side effects of the use of the drug, including the increased risk of hyperglycemia and diabetes. In 2000, the FDA studied whether persons taking these types of antipsychotic drugs, including Zyprexa, were at an increased risk of these conditions.152 In 2003, based on the results of the study, the FDA mandated that the manufacturers of these drugs give warnings about the connection between use of the drugs and these possible side effects.153 In response to this directive, Eli Lilly included such a warning in Zyprexa’s labeling.154 Some of the plaintiffs alleged their pre-existing diabetes was made worse from taking the drug, some that they were diagnosed with diabetes after taking the drug, and one that use of the drug caused her hyperglycemia.155 All plaintiffs asserted that the warnings placed on Zyprexa’s labeling that had been approved by the FDA were not sufficient to warn their doctors about the increased risk of the side effects of hyperglycemia and diabetes. Lilly argued that the plaintiffs’ claims that FDA approved warnings were inadequate should not be allowed. The United States District Court for the Eastern District of New York focused on two issues in its decision: first, the presumption against preemption mandated by the United States Supreme Court and second, despite this presumption, whether it should give deference to the FDA’s claim of preemption set forth in the preamble to a final rule made in 2006 on the labeling of prescription drugs.156 The FDA asserted in the preamble that, because state tort law claims threatened its charge as the agency that is responsible for evaluating and regulating drugs, in situations where the FDA had approved a particular warning, failure-to-warn claims should be preempted based on conflict with federal law.157

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After discussing various cases regarding the deference that should be given to an agency’s interpretation of its own rules, the court determined that the preamble to the final FDA rule was entitled to only some deference because it was not persuasive, and was inconsistent with its previous interpretations of the FFDCA. Further, other courts had held that the FDA approval process for labeling did not preempt state law failure-to-warn claims and that the preamble was merely an advisory statement that could be changed without public involvement and that bound the FDA only.158 As a result, the court held the defendants had not overcome the presumption against preemption, as there was no real conflict between federal law and plaintiffs’ state law failure-to-warn cases and there was no clear congressional intent to preempt.159 Horne v. Novartis Pharmaceuticals Corp.160 is a case that typifies the other group of decisions finding that the FFDCA preempts state law failure to warn cases. Horne was a case that arose when the plaintiff sued the manufacturer of Lotensin HCT, an ACE inhibitor drug used to treat hypertension. The plaintiff claimed that she took the drug while she was pregnant, until her doctor changed her prescription, and that it caused her son to be born with birth defects that caused his death.161 Her suit alleged the labeling on Lotensin HCT should have warned that the drug could cause fetal injuries if taken in the first trimester of pregnancy.162 The FDA had approved labeling for Lotensin HCT, which warned that taking the drug during the second and third trimesters could cause fetal injury and stated that no link had been established between use of the drug and fetal injuries if taken in the first trimester.163 The plaintiff’s cause of action sounded in negligence, wantonness, failure to warn, breach of warranty, fraudulent misrepresentation, and concealment.164 The court in Horne agreed with the defendant’s contention that the plaintiff’s claims conflicted with the “pregnancy category classifications and warnings approved and mandated by the FDA for products containing ACE inhibitors, such as Lotensin HCT” and held that the plaintiff’s failure-to-warn claims were preempted.165 The court spoke to the issue of how much deference to give to the FDA’s preamble regarding preemption. It agreed with the plaintiff that it would usually look to Congress’s intent in the absence of express preemption and assume in that situation that Congress did not intend to preempt state law.166 The court, however, also stated that federal law may preempt state law in the event of actual conflict, even if Congress had no intent to preempt.167 In deciding that the plaintiff’s claims were preempted, the court compared the Horne situation to the facts of Sykes v. M-18

Glaxo-SmithKline,168 wherein the United States District Court for the Eastern District of Pennsylvania found that when the FDA had approved drug labeling, the plaintiff’s proposed warning would directly conflict with the FDA-approved warning and held that federal law preempted state law claims for failure to warn.169 Similar to the findings in Sykes, the court in Horne found, regarding the plaintiff’s proposed warning, that the plaintiff had not presented any studies from the time she was pregnant that showed that birth defects could be caused if Lotensin HCT was used in the first trimester; nor had she shown that the defendant had any “reasonable evidence” at the time she was pregnant that would have required a change in Lotensin HCT’s labeling.170

The court spoke to the issue of how much deference to give to the FDA’s preamble regarding preemption. It agreed with the plaintiff that it would usually look to Congress’s intent in the absence of express preemption and assume in that situation that Congress did not intend to preempt state law.

It is against this backdrop that the United States Supreme Court decided Wyeth v. Levine and rejected the drug company Wyeth’s preemption arguments.171 The Court based its holding on the defendant’s failure to show that it was impossible for it to follow both the proposed state standard and the applicable federal standards regarding its labeling of the drug at issue and on its finding that the possible state-court-imposed standard was not an obstacle to the FDA’s labeling scheme.172 The Supreme Court’s holding in Wyeth, however, left unanswered preemption issues that remain unresolved. First, it is undecided whether or not state tort law claims are preempted on conflicts grounds if the FDA is aware of a risk and does not require a change in labeling. Next, the Court’s holding in Wyeth does not speak to the issue of whether claims against

IDC Monograph — First Quarter 2011

generic drug manufacturers are preempted because FDA regulations do not allow the labels for those drugs to deviate from those of the drugs for which they are substitutes. Colacicco v. Apotex, Inc.173 was a case decided before Wyeth in which the United States District Court for the Eastern District of Pennsylvania found that failure-to-warn claims were preempted in situations where the FDA had reviewed issues with a particular drug but had determined there was insufficient scientific evidence to warrant a change in the drug’s label. The United States Court of Appeals for the Third Circuit affirmed the decision of the district court and the plaintiffs filed a writ of certiorari with the United States Supreme Court.174 The Supreme Court, after its decision in Wyeth, vacated the Colacicco decision and remanded the case to the Third Circuit to further consider the case in light of holding in Wyeth.175 The Third Circuit vacated its judgment and remanded the case back to the district court for the same purpose.176 That case currently is pending and it is unclear whether the Court’s opinion in Wyeth will cause the district court to reconsider its holding, taking into account the Supreme Court’s declaration in that case that a strong presumption against preemption should be used in implied preemption cases and reconsider its refusal to give the FDA’s preamble on preemption much deference. The Court’s holding that it is primarily a drug manufacturer’s responsibility to assure its drugs’ safety should weaken the defense argument regarding field preemption. 2. Generic Drug Cases

Since the United States Supreme Court’s decision in Wyeth, several courts have addressed the issue of whether the Act FFDCA preempts state law failure-to-warn claims against the manufacturers of generic drugs who fail to make the labeling on their products stronger. Most of these have found against preemption.177 Mensing v. Wyeth, Inc.178 was one such case where the United States Court of Appeals for the Eight Circuit held that the FFDCA did not preempt failure-to-warn cases against generic drug manufacturers.179 The plaintiff sued the manufacturer of the drug, Reglan and generic iterations of that drug, asserting that the drug caused her to develop tardive dyskenesia and that the drug’s label failed to warn about the risk of development of that condition when the drug was used long term.180 The district court found the claims preempted under the FFDCA and the plaintiff appealed.181 On appeal the Eighth Circuit considered the Supreme Court’s prescribed presumption against preemption in Wyeth,

and stated that brand name drug manufacturers were not the Supreme Court’s only focus. The Eighth Circuit noted that it must be skeptical about any claim that Congress intended to impliedly grant tort immunity to the majority of prescription drug manufacturers.182 The defendant argued it was impossible for it to modify existing FDA-approved labeling. The court again invoked the Supreme Court’s language in noting that impossibility was a demanding defense. The Eighth Circuit noted that generic drug manufacturers are unable to make a change in labeling that is inconsistent with the brand name drug’s label. Unconvinced that this showed impossibility, the court held that the company could have proposed a label with adequate warnings. The FDA would have considered such a proposal and possibly imposed it uniformly upon all manufacturers of the drug.183 Absent clear evidence that the FDA would not have approved the proposed language, the Eighth Circuit could not conclude it was impossible for the defendant to comply with both state and federal requirements.184 The court also cited federal regulations related to generic drug manufacturers that require them to revise their labels “as soon as there is reasonable evidence of an association of a serious hazard with a drug.”185 Finally, the Eighth Circuit determined, considering the same factors that the relied upon by the Supreme Court in Wyeth, that field preemption did not apply in this case.186 C. Medical Device Amendments of 1976

At the time of the last IDC Monograph on the subject of preemption pursuant to the Medical Device Amendments of 1976 (MDA) to the Federal Food and Drug Cosmetic Act (FFDCA),187 Medtronic, Inc. v. Lohr188 had just been decided by the United States Supreme Court and its effects were not yet known. As discussed above, in that case, the Court held that state law claims alleging defective products are not always preempted by the MDA. The case was remanded to the Court of Appeals for the Eleventh Circuit.189 On remand, the Eleventh Circuit reversed the dismissal of the plaintiff’s complaint and remanded the case to the district court. 190 The MDA groups medical devices into three classes: Class I are devices that do not present an unreasonable risk of illness or injury and are only minimally regulated. Class II devices are those that have the potential to be more harmful and are required to comply with federal regulations known as “special controls.” Finally, the devices which are the subject of most litigation in this area, Class III devices, are “for a use in supporting or sustaining human life,” or present “a potential

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unreasonable risk of illness or injury.”191 Class III devices are highly regulated and subject to one of two sorts of pre-market review by the FDA before they can be placed on the market for sale. Class III devices proposed after the enactment date of the MDA must clear the FDA’s pre-market approval (PMA) process.192 PMA procedures require an entity applying for FDA approval of such a device to disclose to the FDA “all information, published or known . . . or which should reasonably be known . . . concerning investigations which have been made to show whether or not such device is safe and effective,”193 and make a statement fully explaining the design, components, and intended use of the device, describing the methods of manufacturing and processing, describing proposed labeling plus any other information the FDA may request.194 The FDA may request that a panel of experts review a proposed device’s application and file a report with its recommendations.195 The FDA will grant PMA only if it is reasonably assured that the product is both effective and safe under the conditions of use described on its label and if it has decided the label is not false or misleading.196 Manufacturers of medical devices are also subject to the FDA’s “current good manufacturing practice” requirements (CGMP requirements).197 These requirements describe detailed quality control measures that must be taken during the manufacturing process, the labeling, the packaging, the storage, and the installation of the device, to be sure the device is safe and effective. The manufacturers of the device must adopt practices in conformance with these requirements, which include inspection and quality assurance, design and manufacturing specifications, and others related to cleanliness, timing, and preventive and corrective action.198 Post-approval reporting of device failure that might have caused death or serious injury is also required.199 Medical devices can obtain FDA approval through a less onerous process known as premarket notification or the “501(k)” process. Through this process, clearance from the FDA can be sought and granted by submitting a “premarket notification” application which assures the FDA that the proposed product is either “substantially equivalent” to a Class I or a Class II device already being marketed or to a Class III device being sold before the MDA was enacted in 1976 if the FDA has not decided whether to reclassify the device as either Class I or Class II or to require PMA approval.200 The FDA will not grant 501(k) approval unless it is convinced that the proposed device will be used in the same way and is as safe and effective as the device already on the market.201 Regarding preemption, the FFDCA contains a provision M-20

that expressly preempts state law claims that impose any “requirement” that is “different from, or in addition to, any requirement applicable under this chapter” and “which relates to the safety or effectiveness of the device.”202 The United States Supreme Court has addressed the issue of preemption pursuant to the FFDCA in three seminal cases: Buckman Co. v. Plaintiffs’ Legal Committee,203 Riegel v. Medtronic, Inc.,204 and Medtronic, Inc. v. Lohr.205 In Buckman Co. v. Plaintiffs’ Legal Committee, the Supreme Court determined that the United States was the only possible plaintiff in a “fraud on the FDA” state law claim and that such claim, therefore, was preempted by the regulatory scheme.206 The Court distinguished between the FDA “policing against fraud” and a private litigant’s state common law causes of action against the manufacturers of medical devices: the former, not entitled to a presumption against preemption, and the latter entitled to such a presumption.207 Buckman should be read, in the context of Lohr and Riegel, as a narrow holding that applies to fraud on the FDA only. Medtronic, Inc. v. Lohr208 was the Supreme Court’s first interpretation of the FFDCA, and the Court decided that the FFDCA’s express preemption language does not preempt state law claims of negligence and strict liability regarding a device that was approved via the 501(k) process.209 The Court held that this process was not a “requirement” under the FFDCA’s provisions, and that state law claims were not preempted by the general manufacturing requirements of the FDA, as they were not specific to a particular device.210 Years later, in Riegel v. Medtronic, Inc.,211 the Supreme Court had the opportunity to decide the meaning of the FFDCA’s express preemption provision in the context of a Class III device for which the FDA had granted PMA. The Court concluded that states may impose different or additional remedies than those imposed under federal law with no preemption, but may not impose different or additional requirements.212 The Court noted that Class III devices that had been granted PMA had to be manufactured with “almost no deviations from the specifications in its approval application, for the reason that the FDA has determined that the approved form provides a reasonable assurance of safety and effectiveness.”213 The Court, therefore, found that state law claims are preempted only in so far as they require something different than federal law requires and that if conduct proscribed by state law is the same as that which is prohibited by the FDA, state law claims are not expressly preempted.214 Reading Lohr and Riegel together, along with the FDA’s regulations regarding certain claims exempted from preemption, might

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indicate that there are some state law claims regarding devices that comply with the CGMP requirements and that would not be preempted. Since Riegel, the decisions on preemption issues reiterate the Court’s holding that parallel state common law actions based on alleged violations of federal regulations are not preempted. Many courts, however, continue to find preemption based on imposition of ultra-stringent pleading standards pursuant to the Court’s holding in Bell Atlantic Corp. v. Twombly215 or by incorrectly requiring that state causes of action be based on CGMP requirements. Below are some courts’ holdings regarding various sorts of state law claims. 1. Design Defect

Regarding design defect claims, any such claim that calls into question the FDA’s findings as to the safety of a device’s design is preempted, as it would impose requirements different or in addition to those of the FFDCA.216 2. Failure to Warn

After being granted PMA, a manufacturer must follow strict reporting requirements so the FDA is assured that the device in question continues to be safe and effective and is not adulterated or misbranded. State causes of action for failure to warn usually are not preempted if they are based on a manufacturer’s failure to follow the regulations regarding labeling or failure to report problems with a device.217 Before Riegel, several courts had held that state law claims based on a duty to warn after the sale of a device were preempted. Gomez v. St. Jude Medical Daig Division, Inc.,218 McMullen v. Medtronic, Inc.,219 and Cupek v. Medtronic, Inc.220 are examples of such holdings. Relevant is the fact that the court in McMullen did not find a regulatory violation when a drug manufacturer failed to issue a warning before FDA approval of proposed labeling changes, despite the fact that federal regulations (21 C.F.R. 814.49 and 21 C.F.R. 821.1) allow manufacturers to “enhance” previously approved labels and require tracking recipients of the device at issue.221 A salient common factor in these cases is that the manufacturers involved apparently reported adverse events in a timely manner. Had the cases involved a scheme to evade or delay a recall or failure to timely report adverse effects pursuant to federal regulations, a different result could have been appropriate in light of Riegel.222 The preemption issue also arises in cases regarding medical devices for which the FDA approves a device and labeling

for a particular use or condition but which are actually used for some purpose other than that for which they are approved. Those cases concern failure to provide adequate label content to cover the other uses to which the device may be put.223 The FDA is cognizant that “off label” uses for medical devices occur and regulates labeling accordingly. The regulation requires a manufacturer who knows, “or has knowledge of facts that would give him notice” that a particular device will be used for some condition or purpose other than that for which it is approved, draft labeling adequate to take those other uses into account.224 To be sure these requirements were clear, the FDA issued a proclamation guiding the labeling for “off label” uses which distinguishes between the desired dissemination of information regarding unapproved uses for a device and “promotion” of the device for “off label” uses.225 Riley v. Cordis Corp.226 is a case where plaintiff avoided preemption by basing his case on the illegal promotion of a device for which adequate warnings and directions for “off label” use were not given.227 3. Breach of Warranty

Regarding express warranty claims, courts have held consistently that claims that a device failed to live up to the promises made in its labeling and package inserts are not preempted. These cases, based in a bargain between the parties, are not found to be at odds with the premarket approval process. In Mitchell v. Collagen Corp.228 the court found that the plaintiff was not claiming that the FDA-approved label for a hip replacement was defective, but rather that the hip implanted did not fit the description given on the label and that this discrepancy resulted in harm. For that reason, the plaintiff’s claim was not preempted.229 D. The National Childhood Vaccine Injury Compensation Act

The National Childhood Vaccine Injury Compensation Act230 (Vaccine Act), created a system whereby individuals injured by vaccines typically administered to children can obtain compensation without the costs of litigation. Under this approach, victims file a petition to the “Vaccine Court” and can recover damages from a trust without having to prove causation, negligence, or defect. In addition, vaccine manufacturers avoid the expenses of litigation and potentially large tort awards, which could otherwise cause manufacturers to withdraw from the childhood vaccine production industry.

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Although the Vaccine Act is intended to prevent plaintiffs from filing traditional tort actions, it includes the following provision: “State law shall apply to a civil action brought for damages for a vaccine-related injury or death.”231 Despite this savings clause, courts nevertheless have held that the Vaccine Act preempts certain state law actions. For example, the Court of Appeals for the Third Circuit in Bruesewitz v. Wyeth Inc.232 decided that the Vaccine Act preempted claims of strict liability and negligent design defect.233 In American Home Products Corp. v. Ferrari,234 the court found that the Vaccine Act does not necessarily preempt all design defect claims, but rather protects manufacturers from liability for design defect claims for vaccines deemed “unavoidably unsafe.”235 Unavoidably unsafe products are those which, “in the present state of human knowledge, are quite incapable of being made safe for their intended and ordinary use.”236 Whether a product is unavoidably unsafe is a question to be determined using case-by-case scrutiny.237 Uncertainty regarding the Vaccine Act’s preemptive scope could be clarified soon. In March 2010, the United States Supreme Court, after granting certiorari from Bruesewitz, agreed to consider whether the Vaccine Act preempts all strict liability and negligent design defect claims against manufacturers of childhood vaccines.238 In analyzing this case, the Third Circuit held that the Vaccine Act creates a mandatory forum for claims against vaccine manufacturers.239 The ambiguity within the Vaccine Act, however, exists because, although Section 300aa-22(a) permits state law claims, Subsection (b) prevents claims against manufacturers if the injury or death results from unavoidable side effects arising from a properly prepared vaccine. Because the Vaccine Act is ambiguous as to the scope of preemption of state law, the Third Circuit in Bruesewitz analyzed legislative history and concluded that the Vaccine Act’s purposes would be futile if design defect claims were permitted.240 The appellate court concluded that, taking on case-by-case analyses of whether a manufacturer conceivably could have developed a safer vaccine, which is effectively what the plaintiff in that case suggested, would be costly, time-consuming, and would frustrate congressional intent in enacting the Vaccine Act.241 The Supreme Court heard oral arguments in Bruesweitz on October 12, 2010, but as of the date of this printing has not issued an opinion. The determination, when made, should offer insight into the current scope of the Vaccine Act’s preemptive power.

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E. Federal Insecticide, Fungicide and Rodenticide Act

The Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA),242 was transformed by amendment in 1972 from a “labeling law into a comprehensive regulatory statute.”243 “As amended, FIFRA regulated the use, as well as the sale and labeling, of pesticides; regulated pesticides produced and sold in both intrastate and interstate commerce; provided for review, cancellation, and suspension of registration; and gave [the Environmental Protection Agency (EPA)] greater enforcement authority.”244 These amendments also added environmental safety as a criterion for registration.245 The EPA is given authority, pursuant to FIFRA, to register covered products, thus regulating their sale.246 A manufacturer that desires to register a pesticide must submit to the EPA a proposed label along with certain data that supports the request.247 The EPA will register the proposed pesticide if, after review, it decides that: the pesticide is effective,248 the pesticide will not cause unreasonable adverse effects on people or the environment,249 and its label does not contain language that constitutes “misbranding.”250 “Misbranding” occurs if a pesticide’s label contains any statement that is “false or misleading in any particular” (including a false or misleading statement about a pesticide’s efficacy).251 A pesticide is also considered “misbranded” if its label omits adequate instructions for the product’s use or omits needed warnings or cautionary statements.252 FIFRA contains an express preemption clause, which states: “Such state shall not impose or continue in effect any requirements for labeling or packaging in addition to or different from those required under this subchapter.”253 Historically, there have been two types of claims that potentially are preempted pursuant to FIFRA: first, that due to improper representations, warnings, instructions, or warranties given by a manufacturer about a product’s quality, crops have been damaged or a crop’s yield was not as large as it should have been; and second, claims alleging that a personal injury occurred due to exposure to a product. Cipollone v. Liggett Group, Inc.,254 a seminal case interpreting the Public Health Cigarette Smoking Act,255 was most significant and had the most influence on interpretation of FIFRA’s preemption clause. Virtually all federal courts that considered FIFRA preemption after the decision in Cipollone noted the similarity between the preemption language considered by the United States Supreme Court in that case and FIFRA’s preemption language. Each of those courts determined that FIFRA preempted any tort claim based on improper labeling or failure to warn.256 State courts, how-

IDC Monograph — First Quarter 2011

ever, were not as single minded in their analysis of FIFRA’s preemption clause.257 The lack of uniformity among the state courts on the issue,258 the United States Supreme Court’s decision in Medtronic, Inc. v. Lohr,259 and the resulting decision on remand260 set the stage for the Supreme Court to analyze FIFRA’s preemption language and to clarify its application. Lohr dealt with regulation of medical devices under the Medical Device Amendment and the applicable preemption language was very similar to that contained in FIFRA. However, the Medical Device Amendment analyzed in Lohr did not provide a detailed process for evaluation of a proposed device as opposed to FIFRA’s very detailed format for regulating the content of labels. This difference in the two statutes decreased the significance of Lohr’s impact on evaluation of FIFRA preemption. The United States Supreme Court clarified preemption pursuant to FIFRA with its decision in Bates v. Dow Agrosciences, LLC.261 The Court’s pronouncements in Bates have informed both state and federal court decisions since that time. One such case, Peterson v. BASF Corp.,262 was decided by the Minnesota Supreme Court. The case dealt with claims by farmers who were parties to a class action suit alleging that the defendant violated New Jersey state law when it deceptively marketed two herbicides. The farmers alleged that each of the herbicides at issue contained equal amounts of its active ingredients and were both registered for use on the same crops. The defendant, to pursue a marketing strategy designed to maximize profits, allegedly sought to prevent the farmers from learning that the lower priced herbicide was equal to the higher priced one.263 The Minnesota Supreme Court had the case on remand from the United States Supreme Court, which had granted the defendant, BASF Corp. (BASF), a writ on the preemption issue in light of the recently decided Bates case.264 On remand, BASF argued that the plaintiffs’ consumer fraud claims formed the basis of the case and were preempted by FIFRA.265 In considering BASF’s position, the court surveyed both FIFRA and prior case law and engaged in a detailed discussion of Bates. From the court’s reading of Bates, it concluded that the standards for finding preemption pursuant to FIFRA adopted by the United States Supreme Court in that case were narrower than the Minnesota Supreme Court had applied in its earlier decision in the case. The Minnesota Supreme Court had applied an “effects-based” test (whether one could reasonably foresee that the manufacturer, in order to avoid liability, would choose to alter the product or its label).266

The United States Supreme Court in Bates rejected that test as too broad.267 The Minnesota Supreme Court noted the United States Supreme Court’s rejection of an effects-based test, along with its determination that warranty and fraud claims based on oral representations, even those that were equal to statements on the product’s label, were not preempted because they were not requirements for labeling or packaging.268 Based on this reasoning, the Minnesota Supreme Court concluded that “state regulation must be very directly related to labeling and packaging in order to invoke FIFRA preemption.”269

The Minnesota Supreme Court found that the activities in which BASF engaged, although violative of the New Jersey Consumer Fraud Act, did not concern the labeling or packaging of the products at issue, but rather concerned deceptive advertising, literature, and misrepresentations to state authorities.

The Minnesota Supreme Court found that the activities in which BASF engaged, although violative of the New Jersey Consumer Fraud Act,270 did not concern the labeling or packaging of the products at issue, but rather concerned deceptive advertising, literature, and misrepresentations to state authorities.271 The court found that this conduct was the same as the oral representations in Bates, which the United States Supreme Court found not to be preempted by FIFRA.272 The farmers’ claims, therefore, were not preempted. Another recent case regarding FIFRA preemption arose in the United States District Court for the District of Idaho. The plaintiffs in Adams v. United States of America273 alleged that the United States Bureau of Land Management (BLM) chose and used an herbicide on range and non-crop land that, due to wind drift, damaged crops on the plaintiffs’ land. The manu-

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facturer of the herbicide at issue, DuPont, sought summary judgment based on preemption under FIFRA for claims that the labels it used on the herbicide were misleading, or false, or both, because they “did not contain adequate instructions and omitted necessary warnings.”274 The court cited Bates for the proposition that “[a] state rule that is ‘equivalent to, and fully consistent with, FIFRA’s misbranding provisions’ need not explicitly incorporate FIFRA’s standards to avoid preemption.”275 The court found that the plaintiffs’ claims “appear[ed] to track FIFRA” requirements and rejected DuPont’s argument that because the EPA had reviewed the product’s label and approved it, the plaintiffs’ claims were an attempt to impose requirements in addition to those required by FIFRA.276 F. The Federal Hazardous Substances Act

The Federal Hazardous Substances Act277 (FHSA) was enacted to “provide nationally uniform labeling requirements for adequate cautionary labeling of packages of hazardous substances which are sold in interstate commerce and are intended or suitable for household use.”278 In 1966 an amendment to the FHSA included a “limited preemption” provision, which states: [I]f a hazardous substance or its packaging is subject to a cautionary labeling requirement under Section 2(p) or 3(b) [15 U.S.C. § 1261(p) or § 1262(b)] designed to protect against a risk of illness or injury associated with the substance, no State or political subdivision of a State may establish or continue in effect a cautionary labeling requirement applicable to such substance or packaging and designed to protect against the same risk of illness or injury unless such cautionary labeling requirement is identical to the labeling requirement under 2(p) or 3(b).279 This provision seeks to prevent various states from creating their own cautionary labeling standards, while still allowing states to regulate the sale and use of hazardous substances.280 Courts have held that “when a statute only preempts state requirements that are different from or in addition to those imposed by federal law, plaintiffs may still recover under state tort law when defendants fail to comply with the federal requirements.”281 In Moss v. Parks Corp., the court concluded that a plaintiff may bring a common law tort action based on a failure to warn only if the claim is based on non-compliance with the existing federal regulations.282 A plaintiff, however, cannot seek more stringent labeling requirements.283 Such a claim M-24

would be preempted by the FHSA. In a recent decision, a federal district court in the state of Washington similarly concluded that a state law failure-towarn claim existed only if the state law labeling requirements are identical to those under the FHSA.284 More specifically, the court decided that to the extent the Washington Products Liability Act285 (WPLA) required more extensive labeling requirements than those under the FHSA, the plaintiff’s failure-to-warn claim would be preempted.286 On the other hand, to the extent the WPLA had the same requirements as under the federal regulations, the plaintiff’s claims would not be preempted. G. The National Manufactured Housing and Safety Standards Act

The National Manufactured Housing Construction Safety Standards Act287 of 1974 (the Manufactured Homes Act) was enacted to decrease deaths, injuries, property damage, and insurance costs incurred due to accidents in “manufactured homes,” and to upgrade quality and durability of those homes.288 The Manufactured Homes Act contains two preemption provisions. First, an express preemption provision, Section 5403(d), provides that “no State or political subdivision of a State shall have the authority either to establish, or continue in effect, with respect to any manufactured home covered, any standard regarding the construction or safety applicable to the same aspect of performance of such manufactured home which is not identical to the Federal manufactured home construction and safety standard.”289 Second, the savings clause, Section 5409(c), states that “compliance with any Federal manufactured home construction or safety standard issued under this chapter [of the Manufactured Homes Act] does not exempt any person from liability under common law.”290 Further, regulations made by the Department of Housing and Urban Development (HUD) pursuant to the Manufactured Homes Act contain similar preemptive language wherein no state or locality may establish or enforce any rule or regulation that “stands as an obstacle to accomplishment and execution of the full purposes and objectives of Congress.”291 The prior IDC Monograph on this subject reported that the effect of these two sections on the issue of preemption of claims based on state law had been the subject of conflicting interpretation in both state and federal courts. The issues and holdings have not changed significantly since that time, although both state and federal courts generally have found that state common law claims are not preempted, as long as the claims do not seek to enforce state manufactured home

IDC Monograph — First Quarter 2011

standards that are not identical to a federal standard applicable to the same aspect of performance. One group of cases holding that state law failure-to-warn claims are not preempted is typified by the holdings in Shorter v. Champion Home Builders Co.292 and Mizner v. North River Homes, Inc.293 In Shorter, the United States District Court for the Northern District of Ohio found that state common law failure-to-warn claims for injury due to dangerous levels of formaldehyde in a mobile home were not preempted. The court determined that, based on the legislative history of the Manufactured Homes Act, Congress’s intent of reducing personal injuries in mobile homes would not be frustrated by allowing state law claims to proceed.294 Further, the court found that reading the preemption provisions contained in the Manufactured Homes Act together indicates that they preempt state law standards but not state law claims.295 The Supreme Court of Missouri, in Mizner, allowed claims based on state laws to proceed, reading the two preemption provisions together and finding that the first provision prohibited state “standards” (legislative or administrative standards), while the second did not affect the state’s common law.296 Similarly, the United States District Court for the Eastern District of Texas, in Richard v. Fleetwood Enterprises, Inc.,297 held that the Manufactured Homes Act generally does not preempt causes of action based in state law, and noted that Section 5409(c) of the Manufactured Homes Act states that compliance with it does not exempt anyone from liability under common law. In Choate v. Champion Home Builders Co.,298 the Court of Appeals for the Tenth Circuit found that the Manufactured Homes Act does not expressly preempt common law actions nor exclusively occupy the area of construction and safety of manufactured homes so as to impliedly preempt common law actions. The court in Choate compared the preemption clauses contained in the Manufactured Homes Act to those contained in the statute interpreted by the United States Supreme Court in Geier v. American Honda Motor Co.,299 and in keeping with the Court’s interpretation of that statute, declared that the preemption clause in the Manufactured Homes Act was meant to expressly preempt only state statutes and regulations and not actions brought under state common law.300 The other group of cases includes courts that have found that common law claims against a manufacturer of mobile homes are preempted. Most notably, the Texas Court of Appeals in Macmillan v. Redman Homes, Inc.,301 found that, although claims could be brought in state court for a manufacturer’s violation of formaldehyde standards set by HUD,

claims based on formaldehyde standards other than HUD’s were preempted. The court in Macmillan explained how the two preemption sections could be read in harmony in its holding that state courts may litigate only those safety issues not covered by federal standards and that compliance with federal law does not protect a mobile home manufacturer from claims concerning areas not covered by federal law.302 Similarly, in Gianakakos v. Commodore Home Systems Inc.,303 the Court of Appeals of the State of New York held that claims regarding failure to comply with state regulations were preempted. Preemption under the Manufactured Homes Act has come up quite often in the context of state law claims for injury due to exposure to formaldehyde in manufactured homes. Both state and federal courts have found that the Manufactured Homes Act does not explicitly preempt those claims. In Richard, plaintiffs alleged there was excessive formaldehyde in the manufactured home they had purchased from the defendant and that they had been sickened by it. The district court determined that state law strict liability, gross negligence, and breach of warranty claims were not preempted.304 In its consideration of the preemption issue, the district court discussed that the Manufactured Homes Act did not preempt state causes of action explicitly, nor was there any indication of “clear or manifest congressional intent for the federal regulation of the safety and sale of manufactured housing to completely occupy the field.”305 While giving dealers and distributors a remedy against the manufacturer of a mobile home, the court noted, the Manufactured Homes Act does not provide a remedy for the purchaser of such a home. The purchaser has remedies at common law, which are not preempted.306 The Supreme Court of Appeals of West Virginia analyzed the preemption issue in Harrison v. Skyline Corp.,307 where the plaintiffs claimed that the defendant manufacturers negligently left debris containing formaldehyde-treated floor decking in the ductwork of their manufactured home. The plaintiffs alleged they were exposed “to toxic levels of formaldehyde” from the heated forced air moving over the debris.308 The court held that the plaintiffs’ state law negligence claim was not preempted, either expressly or impliedly.309 The court reviewed the Manufactured Homes Act, and citing the courts’ holdings in Geier and Richard, determined that, although HUD had specific regulations regarding the acceptable level of formaldehyde in a manufactured home, it had not established a standard for “the proper disposal of formaldehyde treated materials during the manufactured

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home construction process.”310 The plaintiffs, by their claim, the court concluded, were proposing a state common law performance standard for disposal of formaldehyde-treated materials. Because this standard was unregulated by HUD and would not “thwart” the Manufactured Homes Act’s objectives of “protecting the quality, durability safety and affordability of manufactured homes” the court held that their state law claim was not preempted.311

The court determined that, pursuant to the preemption provisions set forth in the Manufactured Homes Act, state courts may regulate matters not covered by federal standards, and that compliance with federal standards does not protect a defendant from claims regarding matters not covered by federal law. Because plaintiffs sought to enforce a standard for measuring legally permissible levels of formaldehyde in manufactured homes, which differed from that required by federal regulations, that claim was preempted.

Another group of formaldehyde exposure cases, In re: FEMA Trailer Formaldehyde Products Liability Litigation,312 concerned the use of Federal Emergency Management Agency (FEMA) trailers after hurricanes Katrina and Rita. The plaintiffs, tenants who lived in FEMA trailers, claimed that they were exposed to high levels of formaldehyde that was present in the trailers and were damaged due to the exposure and the lack of adequate warnings about the dangers of formaldehyde exposure in the trailers.313 The plaintiffs asserted that an M-26

“ambient air standard” should have been used to minimize emissions of formaldehyde in manufactured housing rather than the HUD-approved “product standard.”314 The United States District Court for the Eastern District of Louisiana held that HUD’s formaldehyde regulations for trailers were meant to preempt state and local regulations on that substance, and that if the states desired to regulate those same matters then the state regulations had to be identical to the federal.315 The court determined that, pursuant to the preemption provisions set forth in the Manufactured Homes Act, state courts may regulate matters not covered by federal standards, and that compliance with federal standards does not protect a defendant from claims regarding matters not covered by federal law. Because plaintiffs sought to enforce a standard for measuring legally permissible levels of formaldehyde in manufactured homes, which differed from that required by federal regulations, that claim was preempted.316 H. The National Traffic and Motor Vehicle Safety Act

The National Traffic and Motor Vehicle Safety Act (Traffic Safety Act) was enacted in 1966 with the intention of establishing unified standards of automobile safety317 to reduce traffic related injuries and death.318 Under the Traffic Safety Act, a state “may prescribe or continue in effect a standard applicable to the same aspect of performance of a motor vehicle . . . only if the standard is identical to the standard prescribed under this chapter.”319 Along with this preemption provision, the Traffic Safety Act includes a savings clause, which reads: “Compliance with a motor vehicle safety standard prescribed under this chapter does not exempt a person from liability at common law.”320 Courts have struggled with interpreting these two provisions together and therefore have both preempted and preserved state law claims related to the Traffic Safety Act. To better understand how the Traffic Safety Act has been held to preempt common law claims expressly, to preempt common law claims impliedly, or to not preempt claims, the following analysis focuses on cases involving the installation of airbags. Standard 208, promulgated under the Traffic Safety Act, provides automobile manufacturers with three options for protecting front-seat passengers, any of which the manufacturer could implement and be in compliance with the federal standard.321 In Johnson v. General Motors Corp., a plaintiff asserted a state law claim against an automobile manufacturer for failure to install airbags in the vehicle.322 The United States District Court for the Western District of Oklahoma found the claim to be preempted expressly by the Traffic Safety Act. It reasoned

IDC Monograph — First Quarter 2011

that the purpose of creating uniform motor vehicle standards would be frustrated if individual states were able to impose liability on manufacturers for failing to install airbags.323 In interpreting the savings clause, the court stated that the clause applies to matters not covered by the federal standards for design or manufacturing defects. Similarly, the Seventh Circuit in Hurley v. Motor Coach Industries, Inc.324 held that a claim was preempted under Illinois products liability law that was in conflict with Standard 208 of the Traffic Safety Act.325 Under the tenets of Illinois products liability law, the plaintiff was required to, and did, propose an alternative design to the alleged unreasonably dangerous condition. The proposed design would have precluded the manufacturer from exercising an option under Standard 208.326 The court concluded that the state suit is preempted when a state law forecloses one or more options under Standard 208. Some courts have reached the same conclusion, but instead have found preemption of state law claims implied through the Traffic Safety Act. The United States Supreme Court in Geier v. American Honda Motor Co.327 found that the state tort law was an obstacle to Standard 208 and posed an actual conflict to this regulation.328 As such, the Court held that the plaintiff’s claims were preempted.329 In Wood v. General Motors Corp.,330 a plaintiff filed suit against an automobile manufacturer for failing to install airbags in a vehicle in which she was injured.331 Although the goal of the design defect claim was the same as that of the Traffic Safety Act – to increase motor safety – the court concluded that the theory of recovery is preempted by Standard 208 and the Traffic Safety Act. Because the claim interfered with the methods of achieving the Traffic Safety Act’s purpose, the court held it impliedly was preempted.332 In some situations, courts have concluded that the Traffic Safety Act does not preempt state law claims. For example, in the recent decision of Durham v. County of Maui,333 the United States District Court for the District of Hawaii permitted a state law claim alleging negligence for failing to equip an automobile with side-impact airbags. The court held that federal law did not preempt the claim, because the Traffic Safety Act does not address side-impact airbags.334 Other courts simply have interpreted the savings clause as preserving common law actions in claims relating to airbags.335 I. The Locomotive Inspection Act

The Locomotive Inspection Act336 (LIA), originally known as the Boiler Inspection Act,337 was passed in 1911, and

amended in 1915 and 1924. It provides, among other things, that a railroad carrier may use or allow to be used a locomotive or tender on its railroad line only where the locomotive or tender and its “parts and appurtenances . . . are in proper condition and safe to operate without unnecessary danger of personal injury.”338 The LIA does not contain any express preemption language. The United States Supreme Court specifically considered the scope of preemption pursuant to the LIA in Napier v. Atlantic Coast Line Railroad Co.339 The Court concluded that the Boiler Inspection Act “extends to the design, the construction and the material of every part of the locomotive’s tender and of all appurtenances.”340 The Court held that “state legislation is precluded, because the Boiler Inspection Act, as we construe it, was intended to occupy the field.”341 The Court reasoned that the fact that the “[Interstate Commerce] Commission has not seen fit to exercise its authority to the full extent conferred . . . has no bearing upon the construction of the act delegating the power.”342 Preemption pursuant to the LIA was considered recently by the United States Court of Appeals for the Third Circuit in Kurns v. A.W. Chesterton Inc.,343 and the LIA’s preemptive effect, established under the provisions of its precursor, was reaffirmed.344 In Kurns, the wife and estate of a railroad worker who died from mesothelioma filed a products liability suit in a Pennsylvania state court. The plaintiffs alleged that their decedent was exposed to asbestos from the various defendants’ products, including exposure to asbestos from railroad brake shoes and engine valves used on locomotives and that this exposure caused decedent’s mesothelioma.345 After all but two defendants were granted summary judgment, the case was removed to the United States District Court for the Eastern District of Pennsylvania due to the lack of diversity.346 The manufacturers of the railroad brake shoes and engine valves filed motions for summary judgment on the grounds that the plaintiffs’ claims were preempted by the LIA.347 The district court granted the defendants’ motions for summary judgment, deciding that the plaintiffs’ state law tort claims were preempted by the LIA. Based on Napier, the district court held that the LIA “occupies the field of regulating locomotives and locomotive parts used in Interstate Commerce.”348 The plaintiffs appealed from the district court’s order. On appeal, the Third Circuit considered the plaintiffs’ assertions that state law claims sounding in failure to warn and design defect are not preempted by the LIA. The plaintiffs attempted to distinguish between regulations of locomotive equipment

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and railroad workers’ state law claims for personal injury due to a manufacturer’s failure to warn about hazardous substances released during repair of locomotives. The distinction was rejected by the court.349 The Third Circuit affirmed the district court’s holding that the LIA preempted all state law claims pursuant to field preemption and quoted Law v. General Motors Corp.:350 “It has long been settled that Congress intended federal law to occupy the field of locomotive equipment and safety, particularly as it relates to injuries suffered by railroad workers in the course of their employment.”351 The appellate court in Kurns held that brake pads and engine valves were “clearly locomotive equipment” and fell within the LIA’s scope.352 The court also discussed the LIA’s rationale and intent to “prevent the paralyzing effect on railroads from prescription by each state of the safety devices obligatory on locomotives that would pass through many of them.”353 The appellate court then noted that, although the specific issue regarding whether a state law claim arising out of workplace exposure to asbestos while working with railroad parts was one of first impression for a federal appeals court, the supreme courts in a number of states had considered the issue and virtually all held such claims to be preempted.354 The appellate court specifically discussed the Supreme Court of Appeals of West Virginia’s complete survey of all relevant case law and its conclusion that: In spite of the strong presumption against federal preemption . . . , an overwhelming body of case law persuades us that, through passage of the Boiler Inspection Act, Congress has occupied the field of railroad safety so pervasively that Plaintiffs’ claims against the defendants are preempted.355 The appellate court in Kurns agreed with “the vast majority of courts that have been called upon to decide the issue of the scope of LIA preemption.”356 The court held that because the plaintiffs’ state law claims involved the material used in locomotive parts, they were preempted.357 J. The Flammable Fabric Act

The Flammable Fabric Act358 (FFA) was enacted to prevent states from establishing their own individual standards or regulations for flammable fabrics that are not identical to federal standards,359 unless the state standard provides a higher degree of protection than the federal standard.360 The scope of remedies available under the FFA for violations of flammability standards is limited to injunctive relief, criminal penalties M-28

and seizure of materials.361 Courts, therefore, have held that the FFA does not preclude the pursuit of private remedies. In considering Congress’ concern for the plight of burn victims, courts have permitted state court recognition of civil remedies based on standards different from federal standards.362

Federal preemption can be an extremely valuable defense. Rather than filing broad based, sweeping motions to dismiss or summary judgment motions, defense counsel should look carefully at the applicable federal statutes and regulations in conjunction with the allegations in the suit to determine if some or all of the plaintiff’s claims are preempted.

In Raymond v. Riegel Textile, the Court of Appeals for the First Circuit held that the application of New Hampshire’s strict liability standard in tort actions involving flammable fabric was not inconsistent with the FFA’s purposes.363 The court recognized that the FFA was created as a means by which the United States Secretary of Commerce may continually update flammability standards when necessary.364 Such intent should not prevent strict liability standards from being applied in these types of cases. Courts have also decided that the fact that fabric surpasses flammability standards under the FFA is not conclusive evidence that the fabric is not unreasonably dangerous.365 In cases involving the FFA, courts typically allow state law claims to go forward. For example, in Davis v. New York City Housing Authority, the Appellate Division of the Supreme Court of the state of New York held that the FFA did not preempt claims of negligence, strict liability, or breach of implied warranty.366 Although courts generally have chosen not to hold that the FFA preempts state common law claims, the United

IDC Monograph — First Quarter 2011

States District Court for the Eastern District of California in Upholstered Furniture Action Council v. California Bureau of Home Furnishings367 did just that. The court reasoned that Congress intended the non-regulation by states of this particular area of law and therefore Congress sought to prohibit states from imposing statutes inconsistent with the FFA.368 As such, the court decided that a California statute governing flammability of certain upholstered furniture was in conflict with the FFA and therefore was preempted.369 Note that this result is inconsistent with the decision of courts to permit state common law claims relating to the FFA.370 Conclusion

Federal preemption can be an extremely valuable defense. Rather than filing broad based, sweeping motions to dismiss or summary judgment motions, defense counsel should look carefully at the applicable federal statutes and regulations in conjunction with the allegations in the suit to determine if some or all of the plaintiff’s claims are preempted. Once congressional intent is determined, and all applicable regulations are identified and examined, defense counsel should juxtapose the allegations against the backdrop of congressional and agency regulatory action. Look to see whether some or all of the plaintiff’s claims attempt to deviate from the regulatory framework imposed at the federal level. Then, decide whether Congress, through its enactments or the regulations or opinions of the relevant regulatory agency, determined whether claims that deviate from the existing federal regulatory framework are permitted. If not, then seek dismissal of any such claims. Courts have a receptive ear toward the applicability of preemption should the right scenario be presented.

(Endnotes) Cipollone v. Liggett Group, Inc., 505 U.S. 504, 112 S. Ct. 2608 (1992). 1

Daniel K. Cray et al., The IDC Monograph: Federal Preemption Defenses in Product Liability Cases, IDC Quarterly, Vol. 6, No. 3 (1996). 2

3



U.S. Const., art. VI, cl. 2.

Bates v. Dow Agrosciences LLC, 544 U.S. 431, 125 S. Ct. 1788 (2005); Medtronic, Inc. v. Lohr, 518 U.S. 470, 116 S. Ct. 2240 (1996); Cipollone, 505 U.S. at 504. 4

5



Lohr, 518 U.S. at 475.

6



Cipollone, 505 U.S. at 518.

Id. at 516; Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 229-31, 67 S. Ct. 1146, 1151-52 (1947). 7

8

See Cipollone, 505 U.S. at 516, 520-522.



See Pacific Gas & Elec. Co. v. State Energy Resources Conservation & Dev. Comm’n, 461 U.S. 190, 204, 103 S. Ct. 1713, 1722 (1983). 9

10

See Rice, 331 U.S. at 230.

Hines v. Davidowitz, 312 U.S. 52, 67, 61 S. Ct. 399, 404 (1941).

11

12

Cipollone, 505 U.S. at 516.

See Medtronic, Inc. v. Lohr, 518 U.S. 470, 485-91, 116 S. Ct. 2240, 2250-53 (1996). 13

Sprietsma v. Mercury Marine, 537 U.S. 51, 59-63, 123 S. Ct. 518, 524-27 (2002). 14

15

Cipollone, 505 U.S. at 525-26.

Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 230-31, 67 S. Ct. 1146, 1151-52 (1947). 16

Cipollone v. Liggett Group, Inc., 505 U.S. 504, 112 S. Ct. 2608 (1992). 17

18

Cipollone, 505 U.S. at 508-10.

Pub. L. No. 89-92, 79 Stat. 282 (1965), codified as amended at 15 U.S.C. §§ 1331-1340. 19

Pub. L. No. 91-222, 84 Stat. 87 (1969), codified as amended at 15 U.S.C. §§ 1331-1340. 20

21

Cipollone, 505 U.S. at 510-12.

22

Id. at 516-17.

Federal Cigarette Labeling and Advertising Act of 1965, Pub. L. No. 89-92, § 5 (1965) (current version at 15 U.S.C. § 1334). 23

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Id. § 4; see also Cipollone, 505 U.S. at 514.

24

Cipollone, 505 U.S. at 518-20.

25

Pub. L. No. 91-222, 84 Stat. 87 (1969), codified at 15 U.S.C. § 1334(b); Cipollone, 505 U.S. at 515. 26

Cipollone, 505 U.S. at 520-22.

Bates v. Dow Agrosciences LLC, 544 U.S. 431, 125 S. Ct. 1788 (2005). 56 7 U.S.C. § 136, et seq. (2000). 55

57

Bates, 544 U.S. at 434-39, 128 S. Ct. at 1792-95.

58

Tex. Bus. & Com. Code Ann § 17.01, et seq. (West 2002).

59

Bates, 544 U.S. at 435-36.

60

7 U.S.C. §136v, et seq. (2001), quoted in Bates, 544 U.S. at 439.

61

Bates, 544 U.S. at 437-40.

62

Id. at 443-44.

63

Id. at 443-46.

64

Id. at 451-54.

65

Id. at 451-52.

66

Id. at 449-54.

67

Wyeth v. Levine, __ U.S. __, 129 S. Ct. 1187 (2009).

68

Levine, 129 S. Ct. at 1191-93.

69

Id. at 1193-95.

27

Id. at 523-24.

28

Id. at 524-25.

29

Id. at 525-27.

30

Id. at 527-30.

31

Id. at 530-31.

32

Medtronic, Inc. v. Lohr, 518 U.S. 470, 116 S. Ct. 2240 (1996).

33

Pub. L. No. 94-295, 90 Stat. 539 (1976).

34

21 U.S.C. §§ 301 to 399 (2007); see also infra Section III.B.

35

Lohr, 518 U.S. at 475-81.

36

21 U.S.C. § 360k(a) (1993), quoted in Lohr, 518 U.S. at 481-82;.

37

Lohr, 518 U.S. at 477-48.

38



39

Id. at 475-80.

See Duncan v. Iolab Corp., 12 F.3d 194 (11th Cir 1994); Slater v. Optical Radiation Corp., 961 F.2d 1330 (7th Cir. 1992). 40

Lohr, 518 U.S. at 482-84.

21 U.S.C. §§ 301 to 399 (2007); see also supra Section I.B.2; infra Section III.B. 70

71

Pub. L. No. 94-295, 90 Stat. 539 (1976).

72

Levine, 129 S. Ct. at 1196-97.

73

Id. at 1194-97.

74

Id. at 1199-1200.

75

Id. at 1199-1200.

76

Levine, 129 S. Ct. at 1200-01.

77

Id. 129 S. Ct. at 1201-04.

41

Id. at 486-91.

42

Id. at 492-94.

43

Id. at 497-501.

44

Id. at 497-98, n.17.

45

Id. at 500-02.

46

Riegel v. Medtronic, Inc., 552 U.S. 312, 128 S. Ct. 999 (2008).

47

Geier v. American Honda Motor Co., 529 U.S. 861, 120 S. Ct. 1913 (2000). 78

Riegel, 552 U.S. at 320-21.

79

49 C.F.R. § 571.208 (1997) (Standard 208).

Id. at 330.

80

Geier, 529 U.S. at 875-86.

Id. at 317-23.

81

Exec. Order No. 13,132, 64 Fed. Reg. 43,255 (1999).

Id. at 324-26.

82

48 49 50 51

See infra Sections III.B.1 and III.C.1.

52

Riegel, 552 U.S. at 327-29.

53

Id. at 328-30.

54

M-30

Preemption, Memorandum for the Heads of Executive Departments and Agencies (May 20, 2009), 74 Fed. Reg. 24,693 (May 22, 2009). Haudrich v. Howmedia, Inc., 169 Ill. 2d 525, 662 N.E.2d 1248 (1996). 83

IDC Monograph — First Quarter 2011

21 U.S.C. §§ 301 to 399 (2007); see also supra Section I.B.2; infra Section III.B. 84

Osman v. Ford Motor Co., 359 Ill. App. 3d 367, 833 N.E.2d 1011 (4th Dist. 2005). 108

See supra Section I.B.2.

109

See supra Section I.B.3.

110

Haudrich, 169 Ill. 2d at 535-40.

111

85 86 87

Busch v. Graphic Color Corp., 169 Ill. 2d 325, 662 N.E.2d 397 (1996). 88

15 U.S.C. § 1333 (2010).

Lacey v. Lorillard Tobacco Co., 956 F. Supp. 956, 959 (N.D. Ala. 1997) (citing 15 U.S.C. §§ 1333 to 1340 (2010)). 15 U.S.C. § 1334(b) (2010).

112

Busch, 169 Ill. 2d at 345.

113

15 U.S.C. § 1261, et seq. (1988).

114

The preemption provision provided in relevant part:

115

89 90 91

[I]f a hazardous substance or its packaging is subject to a cautionary labeling requirement under section 2(p) or 3(b) designed to protect against a risk of illness or injury associated with the substance, no State or political subdivision of a State may establish or continue in effect a cautionary labeling requirement applicable to such substance or packaging and designed to protect against the same risk of illness or injury unless such cautionary labeling requirement is identical to the labeling requirement under section 2(p) or 3(b). Pub. L. No. 94-284 (codified at 15 U.S.C. § 1261(b)(1)(A) (1988)). Busch, 169 Ill .2d at 341-45.

92

Id. at 335-45.

93

Id. at 345-47.

94

Sprietsma v. Mercury Marine, 537 U.S. 51, 123 S. Ct. 518 (2002).

95

46 U.S.C. §§ 4301-4311 (1971).

96

Sprietsma, 537 U.S. at 54-55.

97

See infra Section III.A.1. See infra Section III.A.2. See infra Section III.A.3. See infra Section III.A.4.

116

Cipollone v. Liggett Group, Inc., 505 U.S. 504, 112 S. Ct. 2608 (1992); see also supra Section I.B.1. 117

Cipollone, 505 U.S. at 517.

118

Id. at 530-31.

119

120

Id. at 531.

121

Farina v. Nokia Inc., 625 F.3d 97, 118-21 (3d Cir. 2010).

Beverly L. Jacklin, Annotation, Federal Pre-emption of State Common-law Products Liability Claims Pertaining to Tobacco Products, 97 A.L.R. Fed. 890 (1990). 122

See, e.g., Gunsalus v. Celotex Corp., 674 F. Supp. 1149 (E.D. Pa. 1987); Laschke v. Brown & Williamson Tobacco Corp., 766 So.2d 1076 (Fla. Dist. Ct. App. 2000). 123

Stitt v. Philip Morris Inc., 245 F. Supp. 2d 686, 692 (W.D. Pa. 2002). 124

Id. at 57-59.

125

Id. at 57-62.

126

98 99

Id. at 62-64.

100

Id. at 64-70.

101

Mejia v. White GMC Trucks, Inc., 336 Ill. App. 3d 702, 784 N.E.2d 345 (1st Dist. 2002). 102

Mejia, 336 Ill. App. 3d at 703-04.

103

Id. at 704.

104

49 U.S.C. § 30101, et seq. (2000).

105

Mejia, 336 Ill. App. 3d at 707.

106

Osman, 359 Ill. App. 3d at 372-80.

Stitt, 245 F. Supp. 2d at 692.

Espinosa v. Phillip Morris USA, Inc., 500 F. Supp. 2d 979 (N.D. Ill. 2007). Espinosa, 500 F. Supp. 2d at 983 (citing Cipollone v. Liggett Group, Inc., 505 U.S. 504, 524, 112 S. Ct. 2608 (1992)). 127

128

Cipollone, 505 U.S. at 529.

129

American Tobacco Co. v. Grinnell, 951 S.W.2d 420 (Tex. 1997).

130

Grinnell, 951 S.W.2d at 440.

Tompkins v. R.J. Reynolds Tobacco Co., 92 F. Supp. 2d 70, (N.D.N.Y. 2000). 131

132

Tompkins, 92 F. Supp. 2d at 86.

Id. at 705-10.

107

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IDC Quarterly Vol. 21 No. 1

Johnson v. Brown & Williamson Tobacco Corp., 122 F. Supp. 2d 194, 203 (D. Mass. 2000). 133

Shaw v. Brown & Williamson Tobacco Corp., 973 F. Supp. 539, 547 (D. Md. 1997). 134

Shaw, 973 F. Supp. at 545.

135

Izzarelli v. R.J. Reynolds Tobacco Co., 117 F. Supp. 2d 167, 175 (D. Conn. 2000). 136

Boerner v. Brown & Williamson Tobacco Corp., 394 F.3d 594, 600 (8th Cir. 2005).

See Requirements on Content and Format of Labeling for Human Prescription Drug and Biological Products, 71 Fed. Reg. 3922 (Jan. 24, 2006). 157

In re Zyprexa, 489 F. Supp. 2d 230, 272-74 (E.D.N.Y. 2007) (citing Auer v. Robbins, 519 U.S. 452, 117 S. Ct. 905 (1997); Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 104 S. Ct. 2778 (1984); and Skidmore v. Swift & Co., 323 U.S. 134, 140, 65 S. Ct. 161 (1944)). 158

159

137

Cipollone v. Liggett Group, Inc., 505 U.S. 504, 530, 112 S. Ct. 2608, 2624-25 (1992); see also supra Section I.B.1. 138

In re Zyprexa, 489 F. Supp. 2d at 274, 276.

Horne v. Novartis Pharms. Corp., 541 F. Supp. 2d 768 (W.D.N.C. 2008). 160

161

Horne, 541 F. Supp. 2d at 772.

162

Id. at 772-73.

163

Id. at 773-75.

164

Id. at 775.

Gunsalus, 674 F. Supp. at 1157.

165

Id.

Id.

166

Laschke v. Brown & Williamson Tobacco Corp., 766 So.2d 1076, 1078 (Fla. Dist. Ct. App. 2000). 139

Gunsalus v. Celotex Corp., 674 F. Supp. 1149, 1155 (E.D. Pa. 1987). 140

141 142

Id. at 1156-57 (quoting Cipollone v. Liggett, 789 F.2d 181, 187 (3d Cir. 1986)). 143

21 U.S.C. §§ 301 to 399 (2007); see also supra Section I.B.2.

Id. at 781 (quoting New York State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 654, 115 S. Ct. 1671 (1995)). 167

Horne, 541 F. Supp. 2d at 781.

168

Sykes v. Glaxo-SmithKline, 484 F. Supp. 2d 289 (E.D. Pa. 2007).

169

Horne, 541 F. Supp. 2d at 782.

170

Id. at 783.

171

See supra Section I.B.5.

172

See supra note 73 and accompanying paragraph.

144

Id. § 355.

145

21 C.F.R. § 314.70(b)(3)(i) (2008).

146

Id. §§ 314.80(c), (j); 314.81(b)(2)(i).

147

21 U.S.C. § 352 (2006).

148

Wyeth v. Levine, __ U.S. __, 129 S. Ct. 1187 (2009); see also supra Section I.B.5. 149

Courts in the following cases did not find preemption: Horne v. Novartis Pharms. Corp., 541 F. Supp. 2d 768 (W.D.N.C. 2008); Sykes v. Glaxo-SmithKline, 484 F. Supp. 2d 289 (E.D. Pa. 2007); In Re Zyprexa Prods. Liab. Litig., 489 F. Supp. 2d 230 (E.D.N.Y. 2007); Perry v. Novartis Pharms. Corp., 456 F. Supp. 2d 678 (E.D. Pa. 2006); Adesina v. Aladan Corp., 438 F. Supp. 2d 329 (S.D.N.Y. 2006); Levine v. Wyeth, 944 A.2d 179 (Vt. 2006). 150

In re Zyprexa, 489 F. Supp. 2d 230 (E.D.N.Y. 2007).

151

In re Zyprexa, 489 F. Supp. 2d at 248.

152

Id.

153

Id. at 249.

154

Colacicco v. Apotex, Inc., 521 F.3d 253 (3d Cir. 2008), judgment vacated by 129 S. Ct. 1578 (2009) (mem.) (remanding the case for further consideration in light of Wyeth v. Levine, __ U.S. __, 129 S. Ct. 1187 (2009)). 173

174

Colacicco v. Apotex, Inc., 129 S. Ct. 1578, 1578 (2009) (mem).

175

Colacicco, 129 S. Ct. at 1578.

See Colacicco v. Apotex, Inc., No. 05-5500, 2009 WL 4729883, at *1 (E.D. Pa. Dec. 10, 2009). 176

See, e.g., Demahy v. Actavis, Inc., 593 F.3d 428 (5th Cir. 2010); Mensing v. Wyeth, Inc., 588 F.3d 603 (8th Cir. 2009); Bartlett v. Mutual Pharm. Co., 659 F. Supp. 2d 279 (D.N.H. 2009); Morris v. Wyeth, Inc., 642 F. Supp. 2d 677 (W.D. Ky. 2009); Schrock v. Wyeth, Inc., 601 F. Supp. 2d 1262 (W.D. Okla. 2009). 177

Id. at 253-62.

178

Mensing v. Wyeth, Inc., 588 F.3d 603 (8th Cir. 2009).

Id. at 240.

179

Mensing, 588 F.3d at 614.

155 156

M-32

IDC Monograph — First Quarter 2011

See Mensing v. Wyeth, 562 F. Supp. 2d 1056, 1057 (D. Minn. 2008). 180

Id. at 1064-65.

181

207

Id. at 349 (quoting 21 U.S.C. § 337(a)).

Medtronic, Inc. v. Lohr, 518 U.S. 470, 116 S. Ct. 2240 (1996); see also supra Section I.B.2. 208

Mensing, 588 F. 3d at 607.

209

Lohr, 518 U.S. at 484, 502.

Id. at 608.

210

Id. at 500-02.

Id. at 610-11.

211

182 183 184

Id. at 608-09 (quoting 21 C.F.R. § 201.57(e) (2009)).

185

Id. at 612; see also Demahy v. Actavis, Inc., 593 F.3d 428 (5th Cir. 2010); Stacel v. Teva Pharmaceuticals, 620 F. Supp. 2d 899 (N.D. Ill. 2009).

Riegel v. Medtronic, Inc., 552 U.S. 312, 128 S. Ct. 999 (2008); see also supra Section I.B.3. 212

Riegel, 555 U.S. at 330 (citing Lohr, 518 U.S. at 495).

213

Id. at 323.

214

See 21 U.S.C. § 360k(a)(2) (2006).

186

21 U.S.C. §§ 301 to 399 (2007); see also supra Section I.B.2 and Section III.B. 187

Medtronic, Inc. v. Lohr, 518 U.S. 470, 116 S. Ct. 2240 (1996).

188

Lohr, 518 U.S. at 503.

189

Lohr v. Medtronic, Inc., 98 F.3d 618 (11th Cir. 1996).

190

21 U.S.C. § 360c(a)(1)(A)-(C) (2006).

191

Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S. Ct. 1955 (2007); see also Heisner ex rel. Heisner v. Genzyme Corp., No. 08-C593, 2008 WL 2940811 (N.D. Ill. July 25, 2008) (dismissing claims of product defect but allowing plaintiff to amend complaint to plead sufficient facts regarding violation of FDA reporting requirements). 215

Horowitz v. Stryker Corp., 613 F. Supp. 2d 271, 284 (E.D.N.Y. 2009); see also Bausch v. Stryker Corp., No. 08-C-4248, 2008 WL 5157940 (N.D. Ill. Dec. 9, 2008). 216

Id. §§ 360c(a)(1)(C); 360e; 360e(b)(1)(A).

217

Id. § 360e(c)(1)(A).

218

192 193

Id. § 360(c)(1)(B)-(G); see also 21 C.F.R. § 814.20 (2010).

194

21 C.F.R. § 814.40 (1997).

Gomez v. St. Jude Med. Daig Div. Inc., 442 F.3d 919 (5th Cir. 2006). 219

McMullen v. Medtronic, Inc., 421 F.3d 482 (7th Cir. 2005).

220

Cupek v. Medtronic, Inc., 405 F.3d 421 (6th Cir. 2005).

221

McMullen, 421 F.3d at 489-90.

195

21 U.S.C. § 360e(d)(1)(A), 360e(d)(2) (2006).

196

Id. § 360j(f); 21 C.F.R. § 820, et seq. (2010).

197

21 C.F.R. § 820.1 (2010 ).

198

Id. § 803.50(a)(1)-(2); see also 21 U.S.C. § 360(i)(a)(1) (2006).

199

Medical Devices; Order for Certain Class III Devices; Submission of Safety and Effectiveness Information, 74 Fed. Reg. 16,214-02 (Apr. 9, 2009).

See Heisner ex rel. Heisner, 2008 WL 2940811, at *5; but see In re Medtronic, Inc. Sprint Fidelis Leads Prods. Liab. Litig., 592 F. Supp. 2d 1147, 1159-61 (D. Minn. 2009). 222

223

See 21 C.F.R. § 801.4 (1999).

224

Id.

225

99 C.F.R. §§ 101(a)(3-4); 103(a)(4)(i).

226

Riley v. Cordis Corp., 625 F. Supp. 2d 769 (D. Minn. 2009).

227

Riley, 625 F. Supp. 2d at 783-84.

228

Mitchell v. Collagen Corp., 126 F.3d 906, (7th Cir. 1997).

229

Mitchell, 126 F.3d at 915.

230

42 U.S.C. §300aa-1.

231

Id. § 300aa-22(a).

232

Bruesewitz v. Wyeth Inc., 561 F.3d 233 (3d Cir. 2009).

200

See 21 U.S.C. § 360c(i)(1)(A).

201

Id. § 360k(a) (2006).

202

Buckman Co. v. Plaintiffs’ Legal Comm., 531 U.S. 341, 121 S. Ct. 1012 (2001). 203

Riegel v. Medtronic, Inc., 552 U.S. 312, 128 S. Ct. 999 (2008); see also supra Section I.B.3. 204

Medtronic, Inc. v. Lohr, 518 U.S. 470, 116 S. Ct. 2240 (1996); see also supra Section I.B2. 205

Buckman Co., 531 U.S. at 348.

206

Riegel, 552 U.S. at 334.

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IDC Quarterly Vol. 21 No. 1

Bruesewitz, 561 F.3d at 242.

233

American Home Prods. Corp. v. Ferrari, 284 Ga. 384, 668 S.E.2d 236 (2008). 234

American Home Prods. Corp., 668 S.E.2d at 242.

235

Id. at 239 (quoting Restatement (Second) of Torts § 402A cmt. K (2010)). 236

Id.

237

Bruesewitz v. Wyeth Inc., ___ U.S. ____, 130 S. Ct. 1734 (2010).

238

Bruesewitz, 561 F.3d at 235.

239

Id. at 246.

240

Id. at 249.

241

7 U.S.C. § 136, et seq. (2006).

claims, which are based on labeling and packaging, and misrepresentation claims arising from false statements in advertising and promotional materials). See Schuver v. E.I. DuPont De Nemours & Co., 546 N.W.2d 610 (Iowa 1996) (holding FIFRA preempts farmers’ claims for injury or crop loss); Jenkins v. Amchem Prods., Inc., 256 Kan. 602, 886 P.2d 869 (1994) (same); Goodwin v. Bacon, 896 P.2d 673 (Wash. 1995) (same); Gorton v. American Cyanamid Co., 194 Wis. 2d 203, 533 N.W.2d 746 (1995) (holding, at least as to claims based on promotional materials, advertisements, and oral statements, that they were not preempted). 257

See Kuiper, 913 F. Supp. at 1236; Etcheverry v. Tri-Ag Serv., Inc., 22 Cal. 4th 316, 993 P.2d 366 (2000); American Cyanamid Co. v. Geye, 79 S.W.3d 21 (Tex. 2002). 258

Medtronic, Inc. v. Lohr, 518 U.S. 470, 116 S. Ct. 2240 (1996); see also supra Section I.B.2. 259

260

242

Ruckelshaus v. Monsanto Co., 467 U.S. 986, 991, 104 S. Ct. 2862, 2867 (1984). 243

Ruckelshaus, 467 U.S. at 991-92.

Bates v. Dow Agrosciences LLC, 544 U.S. 431, 125 S. Ct. 1788 (2005); see also supra Section I.B.4. 261

262

Peterson v. BASF Corp., 711 N.W.2d 470 (Minn. 2006).

263

Peterson, 711 N.W.2d at 473.

264

Id. at 474.

265

Id. at 475.

266

Id. at 478.

267

Bates, 544 U.S. at 445; see also supra Section I.B.4. Peterson, 711 N.W.2d at 479.

244

Id. at 992.

245

7 U.S.C. § 136a(c)(1)(c) (2006).

246

Id.

247

Id. § 136a(c)(5)(a).

Lohr v. Medtronic, Inc., 98 F.3d 618 (11th Cir. 1996).

248

Id. § 136a(c)(5)(c).

268

250

Id. § 136(c)(5)(B); 40 C.F.R. § 152.112(f) (2009).

269

Id.

7 U.S.C. § 136(q)(1)(A) (2006); 40 C.F.R. § 156.10(a)(5)(ii) (2009).

270

N.J. Stat. Ann. § 56.8-2 (West 2001).

271

Peterson, 711 N.W.2d at 479.

272

Id. at 481.

273

Adams v. United States, 622 F. Supp. 2d 996 (D. Idaho 2009).

274

Id. at 1009.

249

251

7 U.S.C. §§ 136(q)(1)(F), (G) (2006).

252

Id. § 136v(b).

253

Cipollone v. Liggett Group, Inc., 505 U.S. 504, 112 S. Ct. 2608 (1992); see also supra Section I.B.1. 254

15 U.S.C. §§ 1331-1340 (2006).

255

See Worm v. American Cyanamid Co., 5 F.3d 744 (4th Cir. 1993) (holding that a claim by farmers for injury to crops was preempted, but the claims for negligent testing, manufacturing, and formulating were not); King v. E.I. DuPont De Nemours & Co., 996 F.2d 1346 (1st Cir. 1993) (finding that Maine tort law claims based on failure of herbicide manufacturer to provide adequate warnings on product labels were preempted); Shaw v. Dow Brands, Inc., 994 F.2d 364 (7th Cir. 1993) (finding that state failure-to-warn claims based on defect in label preempted); Kuiper v. American Cyanamid Co., 913 F. Supp. 1236 (E.D. Wis. 1996) (rejecting distinction between failure-to-warn 256

M-34

Id. at 1010 (quoting Bates v. Dow Agrosciences LLC, 544 U.S. 431, 447, 125 S. Ct. 1788, 1788 (2005)). 275

276

Id.

277

15 U.S.C. § 1261, et seq. (1988).

House Comm. on Interstate & Foreign Commerce, Federal Hazardous Substances Labeling Act, H.R. Rep. No. 1861, 86th Congress, 2d Session 3 (1966), reprinted in 1966 U.S.C.C.A.N. 4095, 4096; Moss v. Parks, 985 F.2d 736, 739 (4th Cir. 1993). 278

279

Pub. L. No. 94-284 (codified at 15 U.S.C. § 1261(b)(1)(A) (1988)).

IDC Monograph — First Quarter 2011

Chemical Specialties Mfrs.’ Ass’n, Inc. v. Allenby, 958 F.2d 941, 950 (9th Cir. 1992). 280

Mattis v. Carlon Elec. Prods., 295 F.3d 856, 862 (8th Cir. 2002) (citing National Bank of Commerce of El Dorado v. Kimberly-Clark Corp., 38 F.3d 988, 993 (8th Cir. 1994)).

306

Id. at 655, 657.

307

Harrison v. Skyline Corp., 224 W. Va. 505, 686 S.E.2d 735 (2009).

308

Harrison, 686 S.E.2d at 739.

309

Id. at 515-16.

310

Id. at 745.

281

Moss, 985 F.2d at 740.

282

283

Id.

Wilson v. Sherwin-Williams, No. C09-5333, 2010 WL 2569179, at *6 (W.D. Wash. June 22, 2010). 285 Wash. Rev. Code Ann. § 7.72.030 (West, Westlaw through Laws of 2011). 284

Wilson, 2010 WL 2569179, at *7.

286

Id. at 745-46 (citing 42 U.S.C. § 5401(b)(1)).

311

In re FEMA Trailer Formaldehyde Prods. Liab. Litig., 620 F. Supp. 2d 755 (E.D. La. 2009). 312

In re FEMA Trailer Formaldehyde Prods. Liab. Litig., 620 F. Supp. 2d at 756. 313

42 U.S.C. §§ 5401-5426 (2000).

314

42 U.S.C. § 5401 (2000).

315

287 288

42 U.S.C § 5403(d) (2000).

289

Id. § 5409(c).

Id. at 765 (citing Macmillan v. Redman Homes, Inc., 818 S.W.2d 87 (Tex. Ct. App. 1991)). 316

290

24 CFR § 3282.11(d) (2007).

291

Shorter v. Champion Home Builders Co., 776 F. Supp. 333, (N.D. Ohio 1991).

Id. at 763.

Id. at 766.

See Pokorny v. Ford Motor Co., 902 F.2d 1116, 1122 (3d Cir. 1990). 317

318

49 U.S.C. § 30101 (1995).

319

Id. § 30103(b)(1) (1995).

320

Id. § 30103(e).

Shorter, 776 F. Supp. at 338.

321

49 C.F.R. § 571.208 (1979).

Id.

322

292

Mizner v. North River Homes, Inc., 913 S.W.2d 23 (Mo. Ct. App. 1996). 293

294 295

296

Mizner, 913 S.W.2d at 25.

Richard v. Fleetwood Enterprises, Inc., 4 F. Supp. 2d 650, 657 (E.D. Tex. 1998).

Johnson v. General Motors Corp., 889 F. Supp. 451 (W.D. Okla. 1995). 323

297

Choate v. Champion Home Builders Co., 222 F.3d 788, 796-97 (10th Cir. 2000). 298

Geier v. American Honda Motor Co., 529 U.S. 861, 120 S. Ct. 1913 (2000); see also supra I.B.6. 299

Choate, 222 F.3d at 793-94.

300

Macmillan v. Redman Homes, Inc., 818 S.W.2d 87 (Tex. Ct. App. 1991). 301

Macmillan, 818 S.W.2d at 97.

Hurley v. Motor Coach Industries, Inc., 222 F.3d 377 (7th Cir. 2000). 324

325

Hurley, 222 F.3d at 381.

326

Id. at 383.

Geier v. American Honda Motor Co., 529 U.S. 861, 120 S. Ct. 1913 (2000); see also supra I.B.6. 327

328

Geier, 529 U.S. at 881.

329

Id. at 886.

330

Wood v. General Motors Corp., 865 F.2d 395 (1st Cir. 1988).

331

Wood, 865 F.2d at 396.

332

Id. at 408.

333

Durham v. County of Maui, 696 F. Supp. 2d 1150 (D. Haw. 2010).

302

Gianakakos v. Commodore Home Sys. Inc., 285 A.D. 2d 907, 727 N.Y.S.2d 806 (N.Y. App. Div. 2001). 303

Richard v. Fleetwood Enterprises, Inc., 4 F. Supp. 2d 650, 657 (E.D. Tex. 1998). 304

Richard, 4 F. Supp. 2d at 657.

305

Johnson, 889 F. Supp. at 457.

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IDC Quarterly Vol. 21 No. 1

Durham, 696 F. Supp. 2d at 1160.

334

See, e.g., Nelson v. Ford Motor Co., 108 Ohio App. 3d 158, 670 N.E.2d 307 (Ct. App. 1995) (holding that the Traffic Safety Act preserves common law claims and therefore does not preempt a state claim against a manufacturer for failing to install airbag). 335

336

49 U.S.C. § 20701-20703 (2010).

Kurns v. A.W. Chesterton Inc., No. 09-1634, 2010 WL 3504312, at *4 n.3 (3d Cir. Sept. 9, 2010).

Kurns, 2010 WL 3504312, at *5; see, e.g., General Motors Corp. v. Kilgore, 853 So.2d 171, 176-80 (Ala. 2002); Schneiding v. General Motors Corp., 22 Cal.4th 471, 993 P.2d 996, 998-1004 (2000); Darby v. A-Best Prods. Co., 811 N.E.2d 1117, 1125-26 (Ohio 2004); In re W. Va. Asbestos Litig., 215 W. Va. 39, 592 S.E.2d 818, 822 (2003). 354

355

In re W. Va. Asbestos Litig., 592 S.E.2d at 822.

356

337

Kurns, 2010 WL 3504312, at *5.

357

Id. at * 6.

338

358

15 U.S.C. § 1203 (2008).

Napier v. Atlantic Coast Line R.R. Co., 272 U.S. 605, 47 S. Ct. 207 (1926).

359

Id. § 1203(a).

360

Id. § 1203(b).

49 U.S.C. § 20701.

339

Napier, 272 U.S. at 611.

340

Id. at 613.

341

Id.

342

Kurns v. A.W. Chesterton Inc., No. 09-1634, 2010 WL 3504312, at *1 (3d Cir. Sept. 9, 2010).

Raymond v. Riegel Textile Corp., 484 F.2d 1025, 1026 (1st Cir. 1973). 361

362 363

343

Raymond, 484 F.2d at 1028. Id. at 1027.

364

Id.

Kurns, 2010 WL 3504312, at * 7.

365

Brech v. J.C. Penney Co., Inc., 698 F.2d 332, 334 (8th Cir. 1983).

Id. at *1.

366

344 345

Id.

346

Id.

347

Davis v. New York City Hous. Auth., 246 A.D.2d 575, 668 N.Y.S.2d 391 (1998). Upholstered Furniture Action Council v. California Bureau of Home Furnishings, 415 F. Supp. 63 (E.D. Ca. 1976). 367

Id.

368

Upholstered Furniture Action Council, 415 F. Supp. at 65.

Id. at *5.

369

Id.

Law v. General Motors Corp., 114 F.3d 908 (9th Cir. 1997).

370

348 349 350

Kurns, 2010 WL 3504312, at * 4 (quoting Law, 114 F.3d at 910).

351

Kurns, 2010 WL 3504312, at *4.

352

Id. (quoting Oglesby v. Delaware & Hudson Ry. Co., 180 F.3d 458, 460 (2d Cir. 1999)). 353

M-36

See Wilson v. Bradlees of New England, 96 F.3d 552, 559 (1st Cir. 1996) (concluding that the plaintiff’s common law claims of design defect and failure to warn regarding shirts that caught fire was not preempted by the FFA); Pack v. E.R.O. Industries, 669 N.Y.S.2d 995, 996 (N.Y. App. Div. 1998) (holding the FFA does not preempt the plaintiff’s claims for negligence, strict liability, and breach of implied warranties); Askenazi v. Hymil Mfg., 648 N.Y.S.2d 895, 900 (N.Y. App. Div. 1996) (permitting the plaintiff’s state law tort claims against fabric manufacturers despite the recent narrowing of the holding in Cipollone by the court in Medtronic Inc. v. Lohr).

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government. The plaintiffs pointed to In Re: A Witness Before The Special Grand Jury 2000-2, 288 F.3d 289 (7th Cir. 2002), where the Seventh Circuit held that former Governor George Ryan’s general counsel could not assert the attorney client privilege to avoid giving testimony against Ryan before a federal grand jury. In Sandra T.E., the Seventh Circuit recognized that the policy reasons for limiting the attorney related privileges in federal grand jury proceedings did not exist in the civil context. The court found it perfectly acceptable, indeed commendable, for government entities to take precautions to avoid liability, including shielding internal investigations from the reach of opposing civil litigants. The court found that “the public interest is best served when agencies of the government have access to the confidential advice of counsel regarding the legal consequences of their past and present activities and how to conform their future operations to the requirements of the law.” Sandra T.E., 600 F.3d at 621. Any abrogation of the attorney-client privilege would frustrate this interest. Sandra T.E provides a roadmap for how to ensure that the confidentiality of an internal investigation conducted by counsel regarding some critical incident likely to result in litigation can be preserved. The assignment should begin with a retention agreement which clarifies that the retention is for legal services, along with any other related work necessary to provide the legal representation. Where in-house government counsel might be assigned the task, some clear written direction from the government administration should serve the same purpose. “Upjohn” warnings, or some form of them appropriate in the governmental context, should precede each witness interview. Although monikers declaring a particular document “privileged” will not create a privilege where the substance does not support it, labeling the lawyer’s written communications and report to the government as “confidential” and “privileged” could only support an argument to a court doing an in-camera review that the parties considered the relationship subject to legal representation related privileges. Finally, investigative results should be confined to the decision making authorities who requested or would benefit from legal analysis. Sandra T.E. preserves the ability of governmental entities to find out what exactly went wrong, why it went wrong, and with a way to obtain the expertise on how to fix it, without proving the plaintiff’s case.

Supreme Court Watch By: Beth A. Bauer HeplerBroom LLC Edwardsville On September 29, 2010, the Illinois Supreme Court allowed Petitions for Leave to Appeal in the following civil cases of general interest.

May a Nursing Home Resident’s Estate Recover Punitive Damages? Vincent v. Alden-Park Strathmoor, Inc., Gen. No. 110406, Second District No. 2-09-0625

The plaintiff filed a three-count complaint against the defendant for personal injuries that the plaintiff’s decedent sustained prior to her death and while in the defendant nursing home’s care. The plaintiff alleged violations of the Nursing Home Care Act (the “Act”), 210 ILCS § 45/1-010 et seq. (West 2006), and wrongful death. Additionally, the plaintiff alleged that the defendant’s willful and wanton conduct violated the Act and formed the basis for the plaintiff to reserve the right pursuant to 735 ILCS § 5/2-604.1 (West 2006) to seek punitive damages. The defendant moved to strike the plaintiff’s reservation under § 2-604.1, arguing that the punitive damages claim did not survive the decedent’s death. The trial court granted the defendant’s motion to strike. Further, the trial court allowed plaintiff’s motion for leave to file an interlocutory appeal pursuant to Supreme Court Rule 308(a). (Continued on next page)

About the Author Beth A. Bauer is a partner of HeplerBroom LLC. Ms. Bauer is a litigation attorney with a primary emphasis in the defense of complex, multi-party civil cases and class actions, involving all aspects of consumer fraud, personal injury, products liability, pharmaceutical, construction, and insurance litigation. Ms. Bauer also regularly handles appeals and consults with others in the firm on appellate issues. Ms. Bauer is a member of IDC and the Illinois Appellate Lawyers Association. She earned her B.A. in Secondary Education and English Literature from Washington University in St. Louis in 1997 and her J.D., cum laude, from Saint Louis University School of Law in 2000.

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Supreme Court Watch (Continued) The Illinois Appellate Court for the Second District granted the plaintiff’s Rule 308 petition. Vincent v. Alden-Park Strathmoor, Inc., 399 Ill. App. 3d 1102, 928 N.E.2d 115 (2nd Dist. 2010). The certified question reads as follows: Whether common-law punitive damages are available in an action brought by the personal representative of the estate of a deceased nursing home resident based on the Survival Act for willful and wanton violations of the Nursing Home Care Act which caused injuries that ultimately claimed her life. The Second District found that “[t]here [was] no statutory basis for punitive damages and no equitable considerations warrant[ed] such a remedy.” Vincent, 399 Ill. App. 3d at 1103, 928 N.E.2d at 117. The appellate court relied on the Illinois Supreme Court’s reasoning in Mattyasovszky v. West Town’s Bus Co., 61 Ill. 2d 31, 330 N.E.2d 509 (1975), which held “‘for more than a hundred years,’ this state has limited recovery under the Survival Act to compensatory damages.” Id. The Second District reasoned that because the Act itself is devoid of any provision for punitive damages, the plaintiff is not entitled to assert a claim for punitive damages. Vincent, 399 Ill. App. 3d at 1106, 928 N.E.2d at 119. Additionally, the appellate court noted the plaintiff cited no case in which a court found that punitive damages are provided for by the Act. The Second District also reviewed “the legislative history for the Nursing Home Care Act and found that . . . the General Assembly did not intend that punitive damages were recoverable under the Act.” Id. Consequently, the appellate court concluded there was no basis on which to find that strong equitable considerations required punitive damages to remain available to a plaintiff pursuing a survival action under the Act. The plaintiff argues that the Illinois Supreme Court should reverse the opinion of the Second District because that opinion has an on-going negative impact on the lives of thousands of nursing home residents. According to the plaintiff, the Second District’s opinion undermines the intent of the Act, which is to protect the rights of nursing home residents, particularly those who are at risk of suffering serious abuse and neglect. The denial of punitive damages to a nursing home resident’s estate eviscerates the intent of the Act. The plaintiff further contends the Second District’s opinion is in conflict with Dardeen v. Heartland Manor, Inc., 186 Ill. 2d 291, 300, 710 N.E.2d 827 (1999). According to the plaintiff, Dardeen held that under the amended version of the Act, a plaintiff may recover common law punitive damages upon proof of willful and wanton misconduct by a defendant. Because the Dardeen case was brought in the name of an ad36

ministrator of the nursing home resident’s estate, the Second District should have allowed the plaintiff here seek punitive damages as well. Finally, the plaintiff asserts that the appellate court erred in finding that equitable considerations do not justify allowing punitive damages to survive the death of a nursing home resident. The defendant argues that Grunloh v. Effingham Equity, Inc., 174 Ill. App. 3d 508, 528 N.E.2d 1031 (4th Dist. 1998) establishes equitable factors that would allow punitive damages to survive the death of a nursing home resident even without specific statutory authorization.

Is a Non-Binding Arbitration Endorsement to Underinsured Motorists’ Coverage Void as Against Public Policy? Phoenix Insurance Co. v. Rosen, Gen. No. 110679, First District No. 1-08-2776

The defendant was a named insured under an automobile policy issued by the plaintiff insurer when the insured was involved in an accident with another driver. The other driver was insured for bodily injury with a $25,000 limit. As such, the insured demanded arbitration pursuant to the applicable provision of the policy’s underinsured motorists’ coverage. The policy contains an endorsement that allows either the insurer or the insured to demand arbitration by three arbitrators, in writing, when the insurer and insured do not agree to: (1) whether the insured is legally entitled to recover damages under the endorsement; or (2) the amount of damages. If a majority of the arbitrators agree, their decision is binding regarding whether the insured is legally entitled to recover damages and the amount of damages. But, the decision is not binding if the amount of damages exceeds the minimum limit for bodily injury liability specified by the Illinois Safety Responsibility Law. If the amount of damages exceeds that limit, the endorsement allows either party to demand a right to trial. This endorsement is also called the trial de novo clause. The arbitration panel found in favor of the insured. The insurer filed a complaint in the trial court alleging that the arbitration award exceeded the financial responsibility limit of $20,000 and that it rejected the award and demanded trial by jury. In its answer, the defendant admitted the relevant allegations and attached the arbitration award and the policy. But, the insured denied that the non-binding arbitration provision of the policy was valid and enforceable. She asserted an affirmative defense that non-binding arbitration was invalid and unenforceable by the insurer as against public policy and further filed a counterclaim seeking confirmation of the

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approximately $380,000 arbitration award. The insurer filed a motion to strike the counterclaim for failure to state a claim upon which relief could be granted pursuant to 735 ILCS § 5/2-615. The trial court granted the insurer’s § 2-615 motion, dismissed the defendant’s affirmative defense and counterclaim with prejudice, and entered judgment in the insurer’s favor on the counterclaim. The Illinois Appellate Court, First District, reversed the trial court and remanded the case for further adjudication. The appellate court found that trial de novo provisions lack mutuality of remedy, unfairly favor the insurer over the insured, and are contrary to public policy. Phoenix Ins. Co. v. Rosen, No. 1-08-2776 (Ill. App. Ct. 1st Dist. June 4, 2010). The insurer argues the Illinois courts are in conflict regarding the enforceability of trial de novo clauses in an underinsured motorists’ arbitration provision of an automobile policy. The insurer cites the following cases that have enforced trial de novo clauses as written and allowed either party to reject an award above the statutory prescribed level. See e.g. Reed v. Farmers Ins. Group, 188 Ill. 2d 168, 720 N.E.2d 1052 (1998); Mayflower Ins. Co. v. Mahan, 180 Ill. App. 3d 213, 535 N.E.2d 924 (1st Dist. 1988); Zappia v. St. Paul Fire & Marine Ins. Co., 364 Ill. App. 3d 883, 847 N.E. 2d 597 (1st Dist. 2006). Conversely, other Illinois courts have held that an insurer may not reject an arbitration damage award above $20,000. See, e.g., Samek v. Liberty Mut. Ins. Co., 341 Ill. App. 3d 1045, 793 N.E.2d 62 (1st Dist. 2003); Parker v. American Family Ins. Co., 315 Ill. App. 3d 431, 734 N.E.2d 83 (3d Dist. 2000); Firemen’s Fund Ins. Co. v. Bugailiskis, 278 Ill. App. 3d 19, 662 N.E.2d 555 (2nd Dist. 1996). Further, the insurer cites Kost v. Farmers Automobile Ins. Assn., 328 Ill. App. 3d 649, 766 N.E. 2d 676 (5th Dist. 2002) in which the appellate court noted that a trial de novo clause appeared to be a contract of adhesion but refused to invalidate the clause, which would have deprived the insured of a right for which it had paid a premium. The insurer further points out that the Illinois Supreme Court should settle this issue because many of these conflicting decisions occur within the same appellate district. The insurer alleges that the trial de novo clause does not lack mutuality of remedy when either the insured or the insurer is free to reject an award that exceeds $20,000. Finally, the insurer notes that the Illinois Insurance Code provides for non-binding arbitration regarding uninsured motorists. 215 ILCS § 5/143a(1) (West 2009). The insurer argues that if a trial de novo clause is the public policy of Illinois when it is part of a statutorily mandated uninsured motorists’ arbitration, the same clause cannot be found as against public policy of underinsured motorists’ arbitration.

Feature Article By: John F. Watson Craig & Craig Mattoon

Judicial Selection: A Discussion of Elective and Appointed Systems in Light of Current Developments in the Law On October 5, 2010, the Illinois Association of Defense Trial Counsel partnered with four other legal associations in Illinois (the Illinois State Bar Association, the Chicago Bar Association, the Cook County Bar Association and the Women’s Bar Association) to present a symposium on the judicial selection process in Illinois.1 The joint effort was in furtherance of the commitment by IDC to reach out to other bar organizations in the state to advance the balanced interests of the legal community. The symposium not only provided an overview of the judicial selection process but also addressed historical efforts at reform through the opinions and presentation of legislators, former judges, and lawyers with policy roles relating to the judiciary. The speakers, panelists, and attendees all support promoting a fair, qualified, unbiased and independent judiciary. Many of the panelists and speakers (Continued on next page)

About the Author John F. Watson is a Partner with Craig & Craig in the Mattoon office. Mr. Watson graduated with a Bachelor of Science in Mechanical Engineering from Bradley University in 1990 and received his Juris Doctorate, with Honors, from The John Marshall Law School in 1993. During law school, Mr. Watson served as an Associate Editor for The John Marshall Law Review. Mr. Watson’s fields of practice include general civil litigation, medical malpractice defense, municipal liability defense, insurance coverage and insurance law, intellectual property and criminal defense litigation.

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IDC Quarterly

Judicial Selection (Continued) also view diversity as a significant factor in improving our judiciary. The issue of judicial selection in Illinois has become a much discussed topic for several reasons. First, the well publicized election in 2004 for the Illinois Supreme Court Justice vacancy for the Fifth District generated concerns with regard to the amount of money that was raised by both judicial candidates. The campaigns of Justices Karmeier and Maag raised approximately $9.3 million in their respective efforts to seek out the vacant Supreme Court position. Jacer Aguilar, et al., JUDGING ILLINOIS JUDICIAL SELECTION: AN ANALYSIS ON THE NEED AND METHOD FOR REFORM, Final Report of the 2009-2010 University of Illinois Civic Leadership Practicum (2010).

The symposium speakers also discussed in depth diversity in the judiciary. The Hon. William Cousins, Jr., retired Justice of the First District Appellate Court, believes that diversity on the bench is a substantial goal to pursue in any judicial system, which includes both gender and minority representation. Senator Dale Righter believed that diversity can more easily be achieved by an elected system versus a merit selection system.

The Karmeier-Maag campaign was followed by the 2009 U.S. Supreme Court decision in Caperton v. Massey, __ U.S. __, 129 S.Ct. 2252 (2009). In Caperton, the owner of a private company in West Virginia spent approximately three million dollars towards the campaign fund of a state supreme court justice. Id., at 2257. After the election, that state supreme court justice became the deciding vote to overturn a 50 million dollar verdict against his contributor’s private company. Id., at 38

2258. On June 8, 2009, in a five-four decision, the U.S. Supreme Court held that elected judges must recuse themselves from cases where the contributions create an appearance of partiality. Id., at 2266. The Caperton decision was followed by Citizen’s United v. The Federal Election Committee, __ U.S. __, 130 S.Ct. 876 (2010), another landmark case. In Citizen’s United, the Supreme Court invalidated portions of the 2002 Bipartisan Campaign Reform Act holding unconstitutional the limitation on independent expenditures by corporations as violative of the First Amendment. Id. at 917. In light of the developing expanse in campaign finance expenditures for judges, discussion turns to the use of a merit selection process over our current elective process. Support for merit selection is currently being carried on by retired Associate Justice of the United States Supreme Court Sandra Day O’Connor who notes that the amount of money involved in judicial selection, the partisanship of the campaign process, and a dramatic change in the public perception suggests that we should move toward a merit selection process.2 Panelists and speakers, including State Representative Barbara Flynn, suggested that polls indicate public perception favors merit selection to achieve an independent judiciary. Dawn Clark Netsch, a former Illinois legislator, comptroller, and 1994 Democratic gubernatorial candidate3, explained that merit selection has been proposed previously both legislatively and constitutionally. In 1951, a legislative commission was assembled to develop a new article on the judiciary that suggested a merit selection proposal via appointment. Sears, New Judicial Article for Illinois: From the 1848 Horse and Buggy Days to 1955, 40 A.B.A. J. 755 (1954). In 1954, an “appointed judiciary” article was defeated, but certain provisions eventually were adopted by the Judicial Article of 1964, which allowed vacancies and associate judges to be handled by appointment. Ill. Const. 1870, art. VI, § 9 (amended 1964). The Constitutional Convention of 1970 made two proposals with regard to the selection of the judiciary: Proposition 2(a) set forth an elective proposal, whereas Proposition 2(b) set forth a merit selection proposal. PROPOSED 1970 CONSTITUTION BY THE SIXTH ILLINOIS CONSTITUTIONAL CONVENTION (as Adopted on September 3, 1970), pp. 11-12. A scanned copy of the publication can be found at http://www.idaillinois.org/cdm4/document. php?CISOROOT=/isl2&CISOPTR=12571&REC=11. Proposition 2(a) for elective system defeated merit selection by a margin of 50% in favor of Proposition 2(a) and 43% percent in favor of Proposition 2(b). Dawn Clark Netsch indicated that the most interesting aspect of the vote was that Proposition 2(b) was carried by Cook County despite vigorous opposition by Mayor Richard J. Daley.

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State Representative Elaine Nekritz, member of the Judiciary Committee and the Chair of the Elections and Campaign Reform Committee, believes that our electorate and its legislators generally only respond by constitutional amendment to a perceived crisis; however, after the Karmeier-Maag campaign and the Citizen’s United decision, Illinois may be approaching such levels of concern. A merit selection process is not without its shortcomings. It is recognized that a merit selection process itself can be politicized and bias can become entrenched in the process. In particular, a repeated comment initially raised by Senator Kirk Dillard is “who picks the pickers?”4 Senator Kwame Raoul believes that there was no way to achieve a completely unbiased or non-political process as subjectivity is always involved. Senator Raoul suggested the process can only be improved when we acknowledge bias and then adopt a system that depoliticizes the process. An audience member of the symposium commented, “merit selection frankly scares me.” Senator Donald Harmon set forth that it is our obligation as lawyers and legislators to improve the judiciary’s independence and caliber as well as the public’s perception of the judiciary. However, even as there might be broad agreement as to these obligations, Senator Harmon notes there is disagreement as to what a better judiciary looks like. Senator Dale Righter expressed concern over a substantial change in judicial selection that would remove power from the voters. Moving from an elective system to a merit selection process may remove authority from the voters, and in turn, bestow that power on people who are already close to others in power. Senator Righter commented that an elective process helps keep government accountable. Further, Senator Righter cautioned that an appointment process could more easily be “improperly” influenced as compared to an elective process. Even recognizing concerns with merit selection, Senator Righter expressed support for reforms such as restricting campaign financing and conducting non-partisan elections. Senator Dillard also expressed support for discussions on public funding for supreme court elections and non-partisan elections for judges. The symposium speakers also discussed in depth diversity in the judiciary. The Hon. William Cousins, Jr., retired Justice of the First District Appellate Court, believes that diversity on the bench is a substantial goal to pursue in any judicial system, which includes both gender and minority representation. Senator Dale Righter believed that diversity can more easily be achieved by an elected system versus a merit selection system. The symposium also addressed merit as a goal of the judiciary. The Hon. Joy Cunningham, Justice for the First

District Appellate Court, who has both been appointed to the bench and suffered through an election, indicated that an election can be exhausting, expensive (she was shocked as to the amount of money she spent in her election) and achieves “serendipitous” results. Justice Cunningham felt that “surprising” voting results may make for good reality television, but it is not desirable in elections of our judiciary. Retired Justice Gino L. DeVito, formerly a Judge of the Circuit Court of Cook County and Justice of the First District Appellate Court, set forth the proposition that the goal of a judicial candidate in an elective system is to (1) raise the most campaign finances that one can achieve, (2) seek out the most publicity that one can achieve, and (3) obtain the most support because of race, gender, ethnicity or political identity. None of these goals, however, are relevant to doing the work of a judge. If merit and independence are the goals, then an elective system may defeat those objectives. Paula Hudson Holderman, the VicePresident-Elect for the Illinois State Bar Association, stated that one of our greatest fears is that a judge will answer to someone other than the rule of law. Justice William Cousins, in speaking on behalf of the elective process, believes that we should not apologize for a system that requires you to raise some amount of money and to put your credentials before the people. He believes that democracy works and that the electorate usually does the right thing. In one hundred years, Justice Cousins does not believe that any states have come up with a good merit selection system. There was discussion with regard to the process as adopted by other states noting that public perception had not faired any better in states that have adopted an appointment process. Justice Gino DeVito believes that we have a very good judiciary, but the quality of our judiciary is “in spite of” the current system, not because of it. Paula Holderman expressed that substantial efforts have been made by the ISBA and other bar associations to inform the electorate on candidates for judicial election or retention. Professor Ann Lousin, on the other hand, felt that our bar associations, current judiciary, and citizens do not do enough to remove incompetent judges when the opportunity arises. Paula Holderman responded that the electorate does not pay attention to judicial ratings, which are designed to better educate voters and the public regarding judicial candidates’ credentials. Judge Michael B. Hyman also agreed that one of the problems with the current elective process is that the voters do not know much about the credentials, competency, and independence of the judicial candidates. Further, Judge Hyman noted a substantial distinction between the election of other public officials, namely the executive and legisla(Continued on next page) 39

IDC Quarterly

Judicial Selection (Continued) tive branch, versus the judicial branch. Both the executive and legislative branches can offer campaign promises, can take positions with regard to political issues, and can favor certain persons or classes of persons over others. In contrast, judicial candidates cannot promise what they will do, other than to uphold the law, and cannot favor one class of persons over the other.

Although many of the panelists and speakers recognize that there is no imminent solution to the perception of judicial independence, retired Justice Gino DeVito has made specific proposals that involve a non-partisan elective process.

Although many of the panelists and speakers recognize that there is no imminent solution to the perception of judicial independence, retired Justice Gino DeVito has made specific proposals that involve a non-partisan elective process. DiVito, Judicial Selection in Illinois: A Third Way, 98 ILL. B. J. 624 (2010). Justice DeVito proposes a constitutional amendment that retains the election of judges through a process open to all registered voters in a non-partisan contest held concurrently with primary elections. Id., at 625-27. If none of the judicial candidates receive more than fifty percent of the vote in the initial non-partisan contest, then a non-partisan elective contest would be held during the general election between the two candidates receiving the most votes. Id., at 625. One of the primary concerns of Justice DeVito is that election of our judges occurs at the primary level of the dominant political party. Id., at 625. For example, a downstate predominately Republican community, for which there may not even be a Democrat running in the general election, will decide its judicial election by the Republican primary vote. Id., at 625. Not only does such an election exclude the registered Democratic voters, but will also exclude the independent voters that did not choose a Republican primary ballot. Id., at 625. 40

Similarly, in Cook County, where the Democrat candidate is almost virtually assured of winning the general election, the Democratic primary ballot for judge becomes the election. Id., at 625. Therefore, in Cook County, the Republican voters and independent voters are virtually excluded from the elective process of their judiciary. Therefore, our current system, for many counties, excludes a substantial portion of the electorate in selecting our judicial candidates. Id., at 625-27. A proposal for a non-partisan election would serve to remedy such concerns. It is clear that the overall goals of the judicial selection process in Illinois should be to obtain a well credential, unbiased, independent, diverse and accountable judiciary. Concerns are raised over both merit selection systems and a politicized elective process. In a merit selection system, politically connected, hand-selected elites may wield ultimate power over judicial selection or the nomination of electors. A merit selection process may be more susceptible to corruption than an elective process. On the contrary, the current elective process of our judiciary is testing public confidence in the independence and competence of ultimate interpreters of the law. A view towards reigning in campaign financing to achieve an independent judiciary, as well as a non-partisan elective process for judges may guide the way to a more independent judiciary while furthering the public’s perception of a qualified, unbiased and fair judicial system.

1

An archive of the webcast and the symposium materials can be found at the Chicago Bar Association’s website located at http:// www.chicagobar.org/source/Meetings/cMeetingFunctionDetail. cfm?section=Calendar&product_major=C0710W&functionstartdispl ayrow=1.

2

Justice Sandra Day O’Connor participated in several conferences from 2006 to 2010 which culminated in her presence with THE SANDRA DAY O’CONNOR PROJECT ON THE STATE OF THE JUDICIARY AT GEORGETOWN UNIVERSITY LAW CENTER. For more information, see http://www.law.georgetown.edu/judiciary/.

3

Dawn Clark Netsch is currently a professor at Northwestern University and is a Board Member of the Illinois Campaign for Political reform (ICPR).

4

Senator Kirk Dillard has been the chief sponsor of legislation furthering Illinois campaign financing reform. Ed Wojcicki, STILL THE WILD WEST? A 10-YEAR LOOK AT CAMPAIGN FINANCE REFORM IN ILLINOIS, Paul Simon Public Policy Institute, Southern Illinois University(Sep. 2006).

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Recent Decisions By: Stacy Dolan Fulco and Katherine K. Haussermann CremerSpina, LLC Chicago

Evidence Of Settling Defendants’ Conduct Is Admissible Illinois Supreme Court Resolves An Unclear Issue From Ready v. United/Goedecke Services I

In Ready v. United/Goedecke Services, ___N.E.2d ___, 2010 WL 4126244 (October 21, 2010), the Illinois Supreme Court provided clarification as to an unclear issue following its initial decision in Ready, 232 Ill. 2d 369, 905 N.E.2d 725 (2008). In 1999, Michael Ready was killed in an accident at a power plant where scaffolding fell eight stories and struck him in the shoulder during a pipe-fitting project. 2010 WL 4126244 at *1. Michael’s wife Terry, as the administrator of the estate, filed a wrongful-death suit against the general contractor on the project, BMW Constructors, Inc., and the scaffolding subcontractor, United/Goedecke Services, Inc. Those defendants then filed a third-party contribution action against Michael’s employer, Midwest Generation. Terry settled with Midwest and BMW and proceeded to trial against United. Id. Prior to trial, the plaintiff filed motions in limine to exclude evidence regarding the conduct of Midwest and BMW. Id. The plaintiff argued that her good-faith settlement with those companies prevented the jury from apportioning fault to them. As to Midwest, she also argued that certain United employees made judicial admissions that United was in charge of the project. Id. In response, United argued that there was plenty of evidence that would allow the jury to decide that BMW’s or Midwest’s conduct was the sole proximate cause of Michael’s death and by eliminating the United’s ability to bring in the conduct of BMW and United, the court would be precluding the defense from making that case and establishing that theory. Id. The trial court granted the plaintiff’s motion and ruled that section 2-1117 of the Code of Civil Procedure (735 ILCS 5/2-1117 (West 2002)) does not permit apportionment of fault to settling defendants, making evidence of their conduct irrelevant. Id. The trial court also noted that it felt that the sole proximate cause argument could not be borne out by the

evidence. Id. at *2. United filed a motion to reconsider but it was denied. Id. At the end of the plaintiff’s case, United moved for a directed verdict, asserting that the negligence of BMW and Midwest were the sole proximate cause of the accident, but the motion was denied. United then tendered a sole proximate cause jury instruction and the trial court declined to use the instruction, stating: “As I had ruled earlier, I think case law prohibits me from admitting evidence of BMW and Midwest’s negligence in this case since they have settled in good faith, and so far as I know there … shouldn’t be any evidence in the record of Midwest and BMW’s negligence.” The jury returned a verdict in favor of the plaintiff and judgment was entered. Id. United filed a post-trial motion arguing that the trial court erred in excluding evidence regarding the conduct of BMW and Midwest as the sole proximate cause of the accident. United also argued that the trial court erred in refusing its sole proximate cause jury instruction. The trial court denied the motion and United appealed. Id. The appellate court affirmed in part and reversed in part, holding that under section 2-1117 a non-settling defendant’s fault should be assessed relative to the fault of all defendants, including those who have settled in good faith. Id. Therefore, the appellate court held that BMW and Midwest should have been included on the verdict form for purposes of fault apportionment. The appellate court did not address the proximate cause issue. A plurality of the Illinois Supreme Court reversed the appellate court, holding that section 2-1117 did not permit apportionment of fault to settling defendants. Id. at *3 (citing Ready, 232 Ill.2d 369, 905 N.E.2d 725 (2008) (plurality opinion)). The opinion was then modified to include (Continued on next page)

About the Authors Stacy Dolan Fulco is a partner at the Chicago law firm of CremerSpina, LLC. She practices primarily in the areas of premises liability, products liability and wrongful death defense. She received her undergraduate degree at Illinois State University and her J.D./M.B.A. degree from DePaul University. She is a member of the IDC.

Katherine K. Haussermann is an associate at the law firm of CremerSpina, LLC. She practices primarily in the areas of general tort defense and premises liability. She received her undergraduate degree at the University of Illinois at UrbanaChampaign and her J.D. from Loyola University Chicago School of Law. She is a member of the IDC.

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Recent Decisions (Continued) comment that the case was being remanded to the appellate court for a decision on United’s claim that the jury should have been instructed on sole proximate cause. Id. On remand, the appellate court decided that the trial court abused its discretion in excluding the evidence of the settling defendants’ conduct and remanded the case for a new trial. However, the appellate court also noted that it need not address United’s contention that the trial court erred when it refused United’s jury instruction on sole proximate cause. Id. (citing Ready, 393 Ill.App.3d 56, 60, 911 N.E.2d 1140, 1144). The Illinois Supreme Court then allowed the plaintiff’s petition for leave to appeal. Id. at *3. The first issue before the Illinois Supreme Court was whether the appellate court followed the mandate of the Court and it was determined that the mandate was followed. The second issue was whether the appellate court’s decision on the sole proximate cause issue was correct. Like the appellate court, the Supreme Court began its analysis with Leonardi v. Loyola University of Chicago, 168 Ill. 2d 83, 658 N.E.2d 450 (1995). Id. at *4. In Leonardi, the plaintiff filed a medical malpractice action against the hospital where the decedent received treatment and against several doctors who treated her. The plaintiff settled with one doctor prior to trial. The plaintiff then filed a motion in limine seeking to bar evidence regarding the alleged negligence of any person other than the remaining defendants. The trial court denied the motion and during the trial, allowed the defendants to question witnesses regarding the conduct of the settling defendant. The jury found for the defendants and the plaintiff appealed but the appellate court affirmed the ruling. Id. The Supreme Court then heard Leonardi and ruled that the trial court did not err in denying the motion in limine and did not err in instructing the jury on sole proximate cause. Id. at *4 (citing Leonardi, 168 Ill. 2d at 95, 101, 658 N.E.2d at 456, 459). In making its ruling the Court stated that “an answer which denies that an injury was the result of or caused by the defendant’s conduct is sufficient to permit the defendant in support of his position to present evidence that the injury was the result of another cause.” Id. at *4 (citing Leonardi, 168 Ill. 2d at 94, 658 N.E.2d at 456 (quoting Simpson v. Johnson, 45 Ill. App. 3d 789, 795, 360 N.E.2d 144, 148 (3rd Dist. 1977))). The Court also explained, “A defendant has the right not only to rebut evidence tending to show that defendant’s acts are negligent and the proximate cause of claimed injuries, but also has the right to endeavor to establish by competent evidence that the conduct of a third person, or some other causative factor, is the sole proximate cause of plaintiff’s injuries.” Id. at *4 (citing Leonardi, 168 Ill. 2d at 101, 658 N.E.2d at 459). 42

Last year, the Court reiterated that a defendant has a right to introduce evidence that some other person or entity was the sole proximate cause of the plaintiff’s injury. Id. at *4 (citing Nolan v. Weil-McLain, 233 Ill. 2d 416, 910 N.E.2d 549 (2009)). In so doing, the Court held that “our well-settled rules of tort law” provide that “the plaintiff exclusively bears the burden of proof to establish the element of causation through competent evidence, and that a defendant has the right to rebut such evidence and to also establish that the conduct of another causative factor is the sole proximate cause of the injury.” Id. at *5 (citing Nolan, 233 Ill. 2d at 444, 910 N.E.2d at 564).

The Court explained, “A defendant has the right not only to rebut evidence tending to show that defendant’s acts are negligent and the proximate cause of claimed injuries, but also has the right to endeavor to establish by competent evidence that the conduct of a third person, or some other causative factor, is the sole proximate cause of plaintiff’s injuries.”

Based on these prior rulings, the Illinois Supreme Court held that the trial court in Ready erred in excluding evidence that would have supported the defendant’s sole proximate cause defense. Id. at *5. United was entitled to present evidence to support a sole proximate cause jury instruction. Id. This clarification confirms that even though settling defendants are no longer named on the jury verdict form and are not allocated fault, evidence regarding the conduct of the settling defendants remains admissible. Id. The Court’s analysis did not stop there because the Court next evaluated whether the evidence in this case would have entitled United to such an instruction. Id. There must be some evidence in the record to justify an instruction, and the second paragraph of IPI Civil (2000) No. 12.04 should be given where there is evidence, albeit slight and unpersuasive, tending to show that the sole proximate cause of the accident was the

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conduct of a party other than the defendant. Id. at *5 (citing Leonardi, 168 Ill. 2d at 101, 658 N.E.2d at 459). After evaluating the evidence in this case, the Court ruled that the trial court’s error was harmless because even a properly instructed jury would not have reached a different verdict because there was significant evidence that United was a proximate cause of the accident. For these reasons, the judgment of the appellate court was reversed and the trial court’s judgment on the jury’s verdict was affirmed. Id. at *6-7. Of note, Justice Garman submitted a concurring opinion and used that opportunity to again express his continued disagreement with the holding of the Court’s initial decision in Ready I, 232 Ill. 2d 369 (2008), that section 2-1117 prohibits the jury from apportioning fault to settling defendants. Justice Karmeier joined in this special concurrence as well. Id. at *7-8.

Pharmacy Duty Of Care Pharmacy Had No Duty to Warn Based on Learned Intermediary Doctrine

In DiGiovanni v. Albertson’s, Inc., ___N.E.2d___, 2010 WL 3359645 (5th Dist. August 25, 2010), the plaintiff, Charles DiGiovanni, as Special Administrator of the Estate of Laverne DiGiovanni, filed suit against defendants Albertson’s, Inc., d/b/a Osco Drug, the pharmacy, Gericare, Ltd and Dr. Shastri, the prescribing physician, alleging wrongful death. DiGiovanni, 2010 WL 3359645 at *1. The decedent was a longtime patient of Dr. Shastri and for 10 years, she was prescribed lithium for her manic depressive psychosis. Id. On January 16, 2003, Dr. Shastri prescribed Tenoretic for the decedent’s high blood pressure and the prescription was filled on January 20, 2003 at Osco. Id. Prior to filling the prescription, the pharmacist called Dr. Shastri. Id. The pharmacy computer indicated that there would be an interaction between lithium and Tenoretic, called lithium toxicity. Dr. Shastri told the pharmacy to fill the prescription and he would monitor the patient. A note memorializing the conversation was placed in the decedent’s pharmacy file. Dr. Shastri testified he had no recollection of the conversation. A refill of Tenoretic was filled on January 27, 2003. The pharmacist saw the note in the decedent’s file that the doctor was monitoring the patient so the pharmacist did not call the doctor about the potential interaction. The decedent became ill and subsequently died on February 3, 2003 from lithium toxicity. Id. Osco filed a motion for summary judgment and it was denied. The plaintiff then filed a motion for partial summary

judgment, claiming there was a duty to warn on January 27, 2003 and there was no dispute that the warning was not given. Id. The court denied the motion, holding that it was a question of fact whether the January 20, 2003 warning was sufficient to cover the refilling of the prescription on January 27, 2003. The case was docketed for a jury trial and Osco presented a motion in limine, alleging that it was under no duty to warn either the physician or the patient of drug interaction. The trial court took the motion under advisement. The following day, Dr. Shastri and Gericare were dismissed pursuant to a settlement. Id. The trial court then dismissed Osco from the case, reversing its prior ruling and finding that Osco had no duty to warn under the learned intermediary doctrine. Id. The trial court also ruled that Happel v. Wal-Mart Stores, Inc., 199 Ill. 2d 179, 766 N.E.2d 1118 (2002), was distinguishable. Id. The plaintiff’s motion to reconsider was denied and the plaintiff filed an appeal. Id. The issues raised on appeal were: (1) whether the trial court correctly held that the learned intermediary doctrine did not require Osco to warn the customer of a potential drug interaction; and (2) whether the trial court correctly concluded that Happel was distinguishable from the instant case. Id. at *2. As to the first issue, the appellate court first explained that the learned intermediary doctrine provides that manufacturers of prescription drugs have a duty to warn prescribing physicians of the drugs’ known dangerous propensities, and the physicians, in turn, using medical judgment, have a duty to convey the warnings to their patients. Id. (citing Kirk v. Michael Reese Hospital & Medical Center, 117 Ill. 2d 507, 517, 513 N.E.2d 387, 392 (1987)); Fakhouri v. Taylor, 248 Ill. App. 3d 328, 330, 618 N.E.2d 518, 520 (1st Dist. 1993)). As a result, the doctrine prevents imposing a duty upon drug manufacturers to warn patients directly. Kirk, 117 Ill. 2d at 519, 513 N.E.2d at 392; Fakhouri, 248 Ill. App. 3d at 330, 618 N.E.2d at 520. The doctrine has also been applied to exempt pharmacies and pharmacists from giving warnings to patients. Id. at *2 (citing Eldridge v. Eli Lilly & Co., 138 Ill. App. 3d 124, 127, 485 N.E.2d 551, 553 (4th Dist. 1985); and citing Leesley v. West, 165 Ill. App. 3d 135, 137-38, 518 N.E.2d 758, 760 (2nd Dist. 1988); and citing Fakhouri, 248 Ill. App. 3d at 332-33, 618 N.E.2d at 521). The court summarized the holdings in Eldridge, Leesley and Fakhouri and came to the same conclusion. Id. at *3. The court found that the pharmacist properly filled the prescription that the physician wrote, took notice of the warning in the system regarding a possible interaction between the two drugs and notified the physician of the potential interaction prior to filling the prescription. Id. The physician then indicated that (Continued on next page) 43

IDC Quarterly

Recent Decisions (Continued) he would monitor the patient, the pharmacy filled the prescription and noted everything in the file. Under the circumstances, the court ruled that based on the rulings in Eldridge, Leesley and Fakhouri, the pharmacist was under no duty to warn the customer of the possible interaction between the two drugs under the learned intermediary doctrine. Id. The court noted that to hold otherwise would impose a greater duty on the pharmacist than on the drug’s manufacturer, as the duty of extending warnings to patients concerning prescription drugs belongs with physicians. Id. The court next looked at whether the trial court properly held that Happel was distinguishable from the circumstances presented in this case and the appellate court agreed that it was distinguishable. Id. at *4. In Happel, the plaintiff was allergic to aspirin, ibuprofen and acetaminophen and experienced a severe reaction after taking Toradol, a pain reliever prescribed by her physician. The plaintiff filled the Toradol prescription at the Wal-Mart pharmacy. The plaintiff had used the Wal-Mart pharmacy many times before and each time she was asked about any allergies and she provided the necessary information. The trial testimony confirmed that the plaintiff’s allergy information was in the pharmacy computer and once the Toradol prescription was entered, a “drug interaction” warning would have flashed, requiring a call to the physician and a system override before the prescription could be filled. However, the pharmacist could not recall if the physician was called. After taking the medication, the plaintiff became ill. Id. In Happel, the Illinois Supreme Court found a narrow duty to warn outside of the learned intermediary doctrine under the circumstances presented because: (1) it was undisputed that the pharmacy was aware of the patient’s allergies and that the drug was contraindicated for the plaintiff based on her allergy (superior knowledge); (2) the burden was minimal, as it required the pharmacist to phone the physician and notify him/her of the contraindication or notify the patient; and (3) there were no real consequences to Wal-Mart as it already had a practice of notifying physicians of a patient’s drug allergies. Id. at *4 (citing Happel, 199 Ill. 2d at 187-88, 766 N.E.2d at 1123-1124). In the present case, the appellate court ruled that the same circumstances were not present because Osco did notify the physician of the potential drug interaction and made a notation of the conversation in the patient’s file. Id. at *5. The court noted that even if it applied the Happel holding to this case, Osco acted within its duty by notifying the physician of the possible interaction before filling the prescription because the Happel court indicated that the duty was discharged upon notification to the physician or the patient. Id. at *5 (citing Happel, 199 Ill. 2d at 187, 766 N.E.2d at 1124). For these reasons, the trial court’s ruling was affirmed. Id. 44

Medical Malpractice By: Dina L. Torrisi and Edna McLain HeplerBroom, LLC Chicago

The Scope of the “Sufficiently Close Relationship” Test; How Porter v. Decatur Is Changing the Landscape of Relation Back The decision of the Illinois Supreme Court in Porter v. Decatur Mem. Hosp., on January 25, 2008, expanded the circumstances under which plaintiffs could amend their pleadings to add new claims after the expiration of the statute of limitations as codified in 735 ILCS 5/2-616(b). 227 Ill. 2d 343, 882 N.E.2d 583 (Ill. 2008). The Illinois Supreme Court

About the Authors Dina L. Torrisi is a partner at HeplerBroom, LLC. Ms. Torrisi focuses her practice in the area of professional liability defense and general negligence. She has extensive litigation experience in defending hospitals, physicians and nurses. Ms. Torrisi received her B.S. from University of Illinois, Champaign-Urbana, and her J.D. from The John Marshall Law School. She is admitted to the bars of Illinois, the Northern District of Illinois, and the U.S. Supreme Court. Ms. Torrisi is a member of the Illinois Association of Defense Trial Counsel and Illinois Association of Healthcare Attorneys. She is also an Arbitrator for the Cook County Mandatory Arbitration Program.

Edna McLain is an associate attorney of HeplerBroom, LLC. Ms. McLain graduated from the University of Illinois, Champaign-Urbana, in 1991, with a Bachelor of Arts degree in English, and she received her Juris Doctorate from the Saint Louis University School of Law in 2002. She is admitted to the bars of Illinois, Missouri and Wisconsin and the U.S. District Court of the Northern District of Illinois. Ms. McLain focuses her practice in the areas of medical malpractice, insurance defense and toxic torts. She is a member of the Illinois Association of Defense Trial Counsel.

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adopted the “sufficiently close relationship” test to determine whether a new claim will relate back to an original complaint. “Under that test, a new claim will be considered to have arisen out of the same transaction or occurrence and will relate back if the new allegations as compared with the timely filed allegations show that the events alleged were close in time and subject matter and led to the same injury.” Porter, 227 Ill. 2d at 360, citing, In re Olympia Brewing Co., 612 F. Supp. 1370, 1373 (N.D. Ill. 1985). This new test essentially provided plaintiffs with a subjective standard that simplified and expanded the circumstances under which a plaintiff could add new claims and factual allegations after the expiration of the statute of limitations. Since its publication, several Illinois courts have interpreted and applied Porter. This articles examines a few of the decisions applying Porter, and provides practical tips regarding responding to a 2-616(b) situation. History of the “Sufficiently Close Relationship” Test

The “sufficiently close relationship” test was originally enunciated by the Northern District of Illinois in the case of In re Olympia Brewing Co. Securities Litigation. 612 F. Supp. 1370 (N.D. Ill. 1985). In Olympia Brewing, the Northern District addressed whether an amendment to a complaint adding a claim under the RICO Act and adding factual allegations in support of the claim would relate back to the original complaint under Federal Rule of Civil Procedure 15(c). Id. The Northern District stated it was clear that a party could amend a pleading to include a new legal theory based on previously alleged facts, but a party could not add a new theory based on a set of facts different from the original pleading. Id. at 1372. The Olympia court provided several examples of situations where new facts or claims were found not to relate back. In these cases, the Northern District noted that the newly added claims or facts were found not to relate back because of a significant lapse in time between the new and original facts, the new and original claims were of a different character, or the new and original facts led to different injuries. Olympia Brewing, 612 F. Supp. at 1372. Cases where new claims or facts were found to relate back involved new factual allegations that were close in time or subject matter as the original complaint. Id. However, the Northern District stated that temporal proximity and consideration of “the general character of the sets of factual allegations and whether the facts are all part of the events leading to the originally alleged injury” are factors to consider but not dispositive. Id. at 1373. In Olympia Brewing, the Northern District found the “additional facts pertinent to the new RICO allegations, then,

are so closely linked to the original frauds that they are part of the general fact situation originally alleged,” and permitted the amendment to plaintiffs’ complaint. 612 F. Supp. at 1375. In 2008, the Illinois Supreme Court adopted the “sufficiently close relationship” test in Porter. Applying the Northern District’s reasoning in Olympia, the court found that the plaintiff’s new factual allegations and new claims related back to his original complaint. The case involved events during plaintiff’s admission to Decatur Memorial Hospital following an automobile accident on January 12, 2001, until he underwent surgery performed two days later. Porter, 227 Ill. 2d at 346-48. A physician evaluated the plaintiff in the emergency department upon admission and diagnosed him as having an incomplete spinal cord injury. He admitted Mr. Porter to the intensive care unit. Id. at 346. That physician ordered an MRI to be done once Mr. Porter was stable from a pulmonary standpoint, and he further ordered the discontinuation of the C collar and spine board upon admission to the ICU. Id. The original complaint filed on March 25, 2002, named the admitting physician as a defendant in Count I and alleged he was negligent for the discontinuation of the C collar and spine board prior to an MRI, for the discontinuation of spinal immobilization prior to fully appreciating the spinal injury, for failure to timely obtain an MRI on January 12, 2001, and for failure to appreciate decreasing blood pressure and leg function as a sign and symptom of further spinal injury. 227 Ill. 2d at 347. Count II of the original complaint named the hospital as a respondent in discovery. Id. The plaintiff’s first amended complaint filed on January 6, 2003, added the hospital as a defendant and alleged that hospital personnel, including nurses, aides, attendants and others, failed to perform hourly neurological checks and to report the outcome of those checks to the attending neurosurgeon. 227 Ill. 2d at 348. Approximately five months after the expiration of the statute of limitations, plaintiff filed a motion for leave to file a second amended complaint adding a new allegation of negligence against the admitting physician. The proposed amended complaint also added a third count against the hospital, alleging a radiologist was an apparent agent of the hospital and that the hospital’s agents and employees failed to properly interpret a CT scan of plaintiff’s cervical spine, failed to appreciate the cervical fractures revealed on the CT scan, and misread and misinterpreted the CT scan. 227 Ill. 2d at 348-49. On appeal, the Illinois Supreme Court addressed whether the new allegations in the second amended complaint related (Continued on next page) 45

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Medical Malpractice (Continued) back to the timely-filed claims. The Illinois Supreme Court found the third count against the hospital related back to the allegations of the original complaint. Applying the “sufficiently close relationship” test, the court emphasized that the timely filed first amended complaint, alleged that hospital personnel, including nurses, aides, attendants and others, failed to report the plaintiff’s diminishing neurological status to the attending neurosurgeon, and as a result, his neurological injury was undiagnosed and untreated and caused him to lose neurological function in one of his legs. Porter, 227 Ill. 2d at 361 (emphasis added). It found that the new allegations in the second amended complaint concerning the radiologist’s failure to interpret and correctly read the CT scan were sufficiently close in time and subject matter and resulted in the same injury as plead in the originally timely filed complaint. Id. Furthermore, the hospital was on notice from the first amended complaint that the plaintiff believed that its agents and employees were negligent for failing to notice and treat his diminishing neurological status. Porter, 227 Ill. 2d at 362. The allegations concerning the radiologist and his misreading and misinterpretation of the CT scan were simply “amplifications” “that grew out of the earlier allegation about failing to report diminishing neurological function, both of which arose out of the same transaction or occurrence.” Id. at 364. Recent Applications of “Sufficiently Close Relationship” Test Announced in Porter v. Decatur Memorial Hospital

The most recent case to discuss and apply Porter comes from the Illinois Appellate Court for the First District, Lewandowski v. Jelenski, 401 Ill. App. 3d 893, 929 N.E.2d 114 (1st. Dist. 2010). In Lewandowski, the original complaint set forth claims against the defendant for an accounting, a constructive trust, and breach of fiduciary duty for money paid to the defendant for a joint venture to acquire and develop a parcel of property. 929 N.E.2d at 117-18. Plaintiff subsequently amended her complaint three times prior to the expiration of the statute of limitations. Following a bench trial, the trial court allowed plaintiff to amend Count VIII of her third amended complaint for an accounting to state a cause of action for unjust enrichment to conform the pleadings to the proof. Id. The amendment was nearly one year and six months after the expiration of the statute of limitations for an unjust enrichment claim. The original claim required plaintiff to establish the existence of a fiduciary relationship, but a claim for unjust enrichment did not require the existence of a fiduciary rela46

tionship between the parties before plaintiff could recover. Lewandowski, 929 N.E.2d at 123. In fact, the trial court had found that plaintiff did not establish the existence of a fiduciary relationship between the parties. Id. However, it also found that the defendant was unjustly enriched. Id. Therefore, the only way for plaintiff to recover against the defendant was if the unjust enrichment claim was found to relate back. Following the amendment, the trial court entered judgment in plaintiff’s favor as to Count VIII and ruled against the plaintiff on all remaining counts. Lewandowski, 929 N.E.2d at 118. The defendant appealed the trial court’s order and argued that the claim was time-barred and did not relate back to the original complaint. On appeal, the First District applied the “sufficiently close relationship” test enunciated in Porter and found that the unjust enrichment claim related back to the timely third amended complaint. The Court reasoned that the plaintiff’s claims from the third amended complaint were based on factual allegations that money was paid to the defendant, the money was not used for its intended purpose, and the money was never returned to the plaintiff. Lewandowski, 929 N.E.2d. at 123. The unjust enrichment claim was based on the same predicate facts, and as such, the First District found that the claim grew out of the same transaction or occurrence. Id. In the case of In Re Safeco Insurance Companies of America, the Seventh Circuit examined whether the state court certification defining the class of plaintiffs related back to the original complaint filed prior to the enactment of the Class Action Fairness Act (CAFA). 585 F.3d 326 (7th Cir. 2009). If so, the state court certification would not constitute a new action for purposes of removal to federal court. The court looked to both Illinois and federal case law concerning relation back. The Seventh Circuit noted that Illinois’ relation-back doctrine was identical to the federal rule. In Re Safeco, 585 F.3d at 331. Citing Porter, the court stated “An amendment will relate back to the original complaint if the amendment alleges events ‘close in time and subject matter’ to those previously alleged, and if they ‘led to the same injury.’” Id. at 331, citing, Porter v. Decatur Mem. Hosp., 227 Ill. App. 3d 343, 360, 882 N.E.2d 583, 593 (Ill. 2008). The Court further stated that the “essential inquiry” in determining whether a new claim will relate back is whether the original pleadings provided defendant with notice of the events that comprise the new claim or allegations. In Re Safeco, 585 F.3d at 331 (emphasis added). Safeco argued that it had no notice prior to the state court class certification that the plaintiffs sought to hold it liable for

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adjusting the claims of its affiliated companies. But, examining various pleadings filed in state court by the parties, the court concluded that the original complaint contained allegations against Safeco and its affiliated companies sufficient to put Safeco on notice that the petitioners sought to hold it liable for the use of its computer program to adjust accounts of its affiliates’ policyholders. Id. at 334. Therefore, the court concluded that the class definition related back to the original pre-CAFA complaint. Consequently, the court affirmed the district court’s decision to remand the case to state court. The In Re Safeco case suggests that the “sufficiently close relationship” test is only one part of the equation in determining whether an amendment will relate back. The Seventh Circuit’s statement that the “essential inquiry” is really whether the original pleadings provided a defendant with sufficient notice of the events comprising the new claim is even more expansive than the current test enunciated in Porter. Even though In re Safeco is a federal court decision, the Illinois Supreme Court relied heavily on federal law for guidance in Porter, and it would not be surprising if Illinois courts likewise turned to federal cases such as In Re Safeco to find support for a plaintiff’s amended pleading. Suggested Practice Tips to Avoid Porter Pitfalls

The above cases demonstrate a liberal trend in which courts applying the “sufficiently close relationship” test have found that new claims or allegations related back to timely filed complaints. These cases also demonstrate it is relatively easy for a plaintiff to argue a new claim or allegation grew out of the same transaction or occurrence as the timely filed complaint because the test allows for subjectivity and no one factor, i.e., temporal proximity, is dispositive. It is too easy to characterize these cases as examples of the plaintiff-friendly nature of the judiciary. Instead, what these cases should signal is caution on the part of the defense bar to not only scrutinize carefully every motion for leave to amend a complaint, but also how plaintiff’s cause of action is pled from the outset. Consider that the Illinois Supreme Court in Porter stated that Decatur Memorial Hospital was on notice that the conduct of the radiologist could form the basis of a new claim of negligence based on the fact that the first amended complaint concerned the conduct of hospital personnel, including nurses, aides, attendants and others. It was the “and others” language that was said to put the hospital on notice that the conduct of any agent or employee, including the radiologist, could be at issue. How many complaints have defense attorneys seen

where similar language is used, and how many times has such language been allowed to stand? After Porter and its progeny, practitioners may want to challenge a plaintiff’s complaint with such broad language. For example, consider filing a motion to dismiss or to strike generic allegations pertaining to “others” or for “otherwise negligent actions.” Another option is to seek a bill of particulars so that a defendant can be put on notice of specific allegations. In addition to pleadings, defense attorneys may alter their strategy during the discovery phase. For example, for those defending a hospital, thorough analysis is essential before pointing the finger at an individual physician who treated a plaintiff during a hospital admission, but who was not named as a party prior to the expiration of the statute of limitations. Porter suggests that, depending on how the original claim was pleaded, a hospital could potentially be held liable for the conduct of any individual who came in contact with the plaintiff during his or her admission even if that individual was not an actual agent or employee of the hospital. According to Porter, even after a statute of limitations has expired, a plaintiff may be able to successfully amend a complaint under § 2-616(b) to state a claim against an individual physician by imputing the conduct of the alleged apparent agent to the hospital. While not adding a new defendant to the complaint, the plaintiff avoids this legal hurdle by characterizing the individual’s conduct as a new claim against the hospital. Finally, defense counsel must be diligent in forcing a plaintiff to disclose all potential opinions and theories prior to any expert depositions. In Porter, the basis for the allegation that the CT scan had been misread and misinterpreted came from the deposition testimony of a plaintiff’s expert taken a year after the expiration of the statute of limitations. The best way to avoid a 2-616(b) situation is to fully understand Porter and its progeny. Recent 2-616(b) cases have demonstrated a general trend favoring plaintiffs’ arguments that amended claims relate back to the original complaint. However, with careful forethought and practice, some of these unjust outcomes may be prevented.

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Product Liability By: James W. Ozog and Brian J. Benoit Wiedner & McAuliffe, Ltd. Chicago

The Duty to Preserve Evidence – Revisited Gathering and preserving evidence is a critical concern in any product liability case. Product destruction or alteration most always significantly impacts the outcome of the case. In the most recent appellate court opinion to address evidence spoliation in a product liability case, the court in Brobbey v. Enterprise Leasing determined whether a defendant may disclaim the duty to preserve evidence by simply providing notice to the plaintiffs of a product’s availability for inspection prior to disposal. Brobbey v. Enterprise Leasing Company of Chicago, No. 1-08-3474, 2010 Ill. App. Lexis 899, (Ill.App. 1st Dist. August 27, 2010). The plaintiff, John Brobbey, rented a 2003 Chevrolet Astro van from Enterprise Leasing to travel to a church retreat in Minnesota. At the time of rental, Brobbey noticed that the van “wobbled and jerked” whenever he applied the brakes. He expressed his concerns to an Enterprise rental agent who assured him that there was nothing wrong with the vehicle. An accident occurred on the third day of rental, April 20, 2003. While returning from Minnesota, the driver of the vehicle who took over for Brobbey noticed the wobbling and shaking of the vehicle at speeds exceeding 55 miles per hour. While exiting the highway at a speed of 75 miles per hour, the van rolled over several times causing serious injuries to the ten passengers inside, including Brobbey and several minors. After the accident, Enterprise conducted a vehicle investigation and sent a letter on September 23, 2003 to Brobby and another plaintiff informing them that having found no defect or malfunction, “Enterprise would be releasing the van on September 30, 2003, unless the recipients responded.” The plaintiffs were unable to respond because they were either still in the hospital or had suffered severe injuries. Enterprise released the van on October 17, 2003 and the van was destroyed on January 10, 2004. Brobbey, 2010 Ill. App. Lexis 899, at *4. The plaintiffs brought an action for strict liability, neg48

ligence, and spoliation of evidence against Enterprise. They alleged that Enterprise supplied a van with a design defect which caused the driver to lose control of the vehicle and roll over, causing plaintiffs’ injuries. The model van in question was in fact recalled by General Motors a year after the accident due to a defect in the suspension which could result in a loss of control. Enterprise filed a motion for summary judgment on the negligence and strict liability claims and a motion to dismiss pursuant to 735 ILCS § 2-619 on the spoliation count of the plaintiffs’ complaint. Defendants General Motors and City Chevrolet settled with the plaintiffs prior to the court’s ruling on the motions. The circuit court granted summary judgment in favor of Enterprise on the strict liability and negligence claims and granted the defendant’s motion to dismiss on the spoliation count. The plaintiffs appealed. On appeal, the Illinois Appellate Court, First District reviewed the trial court’s ruling de novo, addressing each of plaintiff’s claims separately. Strict Liability Claim: “Actual Knowledge” Requirement of 735 ILCS § 5/2-621

On appeal, the plaintiffs maintained that the trial court erred in granting summary judgment on their strict liability claims on the grounds that Enterprise did not have notice of the alleged defect. The First District upheld the trial court’s grant of summary judgment on the strict liability claims on

About the Authors James W. Ozog is a partner in the Chicago firm of Wiedner & McAuliffe, Ltd. He received his undergraduate degree from Northwestern University and law degree from Washington University in 1977. Mr. Ozog concentrates his practice in product liability defense matters and commercial litigation. In addition to his Illinois defense practice, he is National Trial Counsel for several product manufacturers. He has appeared as lead defense counsel in over twenty-eight states and tried cases to verdict in seven states besides Illinois. He also represents clients on a regular basis in matters before the United States Consumer Products Safety Commission. He is a member of the American Bar Association, DRI, IDC and the Propane Gas Defense Association.

Brian J. Benoit is a litigation associate at Wiedner & McAuliffe, Ltd. in Chicago, Illinois. His nationwide state and federal practice is focused primarily on product liability actions involving consumer products and fire and casualty. Brian is an active member of IDC and DRI’s Young Lawyers Committees and DRI’s Product Liability Committee. He has authored articles on NFPA 921 and international product liability and has presented to the National Fire Prevention Association on the use of NFPA 921 and its legal implications.

First Quarter 2011

different grounds. In addressing the requisite elements of strict liability, the court recognized the commonly known “seller’s exception” to a strict liability claim under section 2-621 of the Code of Civil Procedure, 735 ILCS § 5/2-621 (West 2008). The “seller’s exception” allows a non-manufacturer defendant to be dismissed from a strict product liability claim upon certifying the correct identity of the manufacturer of the allegedly defective product. The rationale behind the seller’s exception is to enable the non-manufacturer defendant to defer liability to the ultimate wrongdoer, the manufacturer. Saieva v. Budget Rent-A-Car of Rockford, 227 Ill. App. 3d 519, 526, 591 N.E.2d 507 (2nd Dist. 1992). To avoid dismissal under the seller’s exception, plaintiff must show that the non-manufacturer had significant control over the design or manufacture of the product, or had actual knowledge of the defect, or created the defect. 735 ILCS § 5/2-621(c). Applying the seller’s exception to the case at bar, the court held that plaintiff could only overcome dismissal upon a showing that Enterprise had “actual knowledge” of the specific defect, since it did not have control over the design or manufacture of the van. The court held that Enterprise did not have “actual knowledge” of the specific defect that was the subject of the recall until the recall bulletin one year after the incident. In upholding the trial court’s ruling, the appellate court held that the plaintiffs’ allegation that Enterprise was generally aware of a problem by virtue of the shaking and steering of the van prior to the accident was insufficient to show “actual knowledge” of the specific defect causing the accident. Negligence and Notice of Potential Defect

The trial court granted summary judgment in favor of defendant on the plaintiffs’ negligence claims because under Restatement (Second) of Torts §388 pertaining to a supplier’s duty to warn, Enterprise had no knowledge of a defect. But, the appellate court held that the trial court had improperly relied on Section 388 of the Restatement (Second) of Torts. The Court instead addressed Enterprise’s liability under Restatements Section 408 which delineates duties of donors, lenders, and lessors of chattel. Unlike Section 388, which requires actual knowledge of the defect on the part of the supplier in order to establish liability, Section 408 sets forth a separate duty for lessors to exercise reasonable care. Section 408 states that: “[O]ne who leases a chattel as safe for immediate use is subject to liability to those whom he should expect to use the chattel, or to be endangered by its probable use . . . if the lessor fails to exercise reasonable care to make it safe for such use or to disclose its actual condition to those who may be expected to use it.” Restatement (Second) of Torts § 408, at 366 (1965).

Contrary to the trial court’s finding made in reliance on §388, the appellate court held that a question of fact existed as to defendant’s negligence under §408. Section 408 created an issue of fact as to whether defendant failed to conduct a reasonable inspection of the van as recommended in the manual. The appellate court held that genuine issues of material fact existed as to the proximate cause of the accident and whether the defect was discoverable upon reasonable inspection. The plaintiffs’ experts believed that Enterprise should have inspected the van at a 3,000 mile interval and that upon reasonable inspection the defect should have been discovered. The appellate court held that these factual issues concerning proximate cause were questions for the jury and therefore summary judgment as to negligence was improper. Spoliation of Evidence

The court then turned to the spoliation issues. Under Illinois law, a party may allege a separate count for negligent spoliation of evidence. Boyd v. Travelers Insurance Company, 166 Ill. 2d 188, 652 N.E. 2d 267 (1995). Spoliation is seen as a form of negligence. To state a cause of action for spoliation of evidence, plaintiff must show: (1) that the defendant owed the plaintiff a duty to preserve evidence; (2) the defendant breached that duty; and (3) defendant’s breach proximately caused the plaintiff to be unable to prove the underlying cause of action. To determine whether a duty to preserve the evidence exists, the court employs a two-prong test. Under the first prong, the plaintiff must show that the duty arose through agreement, contract, statute, special circumstance, or voluntary undertaking. Dardeen v. Kuehling, 213 Ill.2d 329, 336, 821 N.E.2d 227 (2004). The second prong requires plaintiff to show that the duty extends to the evidence at issue. In other words, the second prong requires a finding that a reasonable person should have foreseen that the evidence was material to a potential civil action. Enterprise advanced several defenses to the spoliation of evidence claim. First, Enterprise maintained that plaintiffs waived their right to inspect the van and were culpable for the evidence spoliation because they did not respond to Enterprises’ letter. Enterprise’s notice letter gave the ailing Plaintiffs one week to express their intent on inspecting the evidence. In response to Enterprise’s argument, the court stated: [T]he letter sent to plaintiffs was dated September 23, 2003, and only provided plaintiffs until September 30, 2003, to request preservation of the can, thus providing plaintiffs with less than a week’s time to (Continued on next page) 49

IDC Quarterly

Product Liability (Continued) respond. We find imposing such a short time-frame on plaintiffs to respond extremely troubling, especially given the severity of the accident and plaintiffs’ injuries. Further, Enterprise offers no authority for finding a waiver of a clearly established duty to preserve evidence, nor has research revealed any. Brobbey, 2010 Ill. App. Lexis 899, at *28. The court observed that no authority was provided, and that it knew of no authority standing for the proposition that a party may waive or relieve another party of its duty to preserve evidence by not responding to a demand for notification of an intent to inspect evidence. Enterprise also argued that “to the extent [p]laintiffs allege, and the circumstances show, that Enterprise assumed a duty to preserve the van, it is axiomatic that an undertaken duty is self-limited by the scope of the undertaking itself.” Id. at *29 The court indicated that “[c]uriously, however, Enterprise cites no authority for this asserted ‘axiomatic’ proposition either. While generally this proposition is true for a voluntary undertaking, we find no such limitation in Boyd and its progeny regarding the duty to preserve evidence for potential litigants.” Id. Third, Enterprise contended that the manufacturer recall did not constitute a “special circumstance.” Enterprise contended that it had no knowledge of the recall prior to the destruction of the van and thus it could have no duty to preserve the evidence. In addressing the issue of what constitutes a “special circumstance” the court relied on the Dardeen holding which evaluated special circumstances from the lens of the Miller v. Gupta case which involved the disappearance of x-rays in a medical malpractice action. Miller v. Gupta 174 Ill.2d 120, 672 N.E.2d 1229 (1996). Dardeen held that unlike in Miller, the situation did not rise to the level of a special circumstance where the plaintiff never contacted the defendant to ask it to preserve evidence, never requested evidence from defendant and never requested that defendant preserve the evidence, a sidewalk, or even document its condition. Dardeen, 213 Ill.2d at 338. The Brobbey court, unlike Dardeen, found that Enterprise had a duty to exercise reasonable care to preserve the van for the benefit of plaintiffs as potential litigants. Employing the Dardeen analysis, the appellate court found that facts of the case constituted “special circumstances.” These facts included: the plaintiffs had complained before and after the accident about a defect causing the van to wobble, the steering wheel to shake, and the brakes to 50

malfunction; Enterprise undertook to preserve the van to conduct an independent investigation of plaintiffs allegations; Enterprise was in possession and control of the van; and plaintiffs had requested to inspect the van although the request was made after the vehicle was destroyed. Brobbey, 2010 Ill. App. Lexis, 899 at *31. Such circumstances were deemed to be remarkable enough such that a reasonable person would preserve the evidence. Lastly, Enterprise asserted that it had no relationship with the other nine passengers of the van because it did not lease the van to them. Enterprise argued that it did not owe a duty to the other plaintiffs. The First District emphasized Illinois case law which provides that any potential litigants are owed a duty to preserve evidence and rejected Enterprises’ argument that the spoliation claim should be dismissed on that ground. In summary, the Brobbey decision stands for the proposition that notice in and of itself, especially when it is likely insufficient to elicit a response, is insufficient to insulate a party from a claim of spoliation. A party must make reasonable efforts to evaluate the circumstances of a potential claim or lawsuit and preserve evidence as is necessary. Until a party has received confirmation that another party or any potential parties do not want to inspect or evaluate evidence, under the circumstances, there is a duty to preserve evidence. Practice Pointers

■ While there are no common law or statutory guidelines which govern the specific steps a party must undertake to preserve evidence, the informed practitioner (either plaintiff or defendant) should research and follow any industry standards and practices that address evidence inspections and preservation. ■ In fire and explosion cases, the National Fire Protection Association (NFPA) and its publication NFPA 921, Guide for Fire and Explosion Investigations proscribes specific steps by which evidence should be evaluated, collected, and preserved. See, in particular, sections 11.3, 16.3, 16.4, and 16.11. ■ For other product cases, involved counsel and their experts must consider the guidelines of ASTM E 860, the Standard Practice for Examining and Preparing Items that Are or May Become Involved in Criminal or Civil Litigation.

First Quarter 2011

The Defense Philosophy By: Willis R. Tribler Tribler Orpett & Meyer, P.C. Chicago

Respect and Reasonable Deference It annoys me when people say that lawyers are crooks. That is not true. The vast majority of lawyers are honest, and to say that they are crooks is similar to the misguided person who votes “no” on every judicial retention ballot in the hope that “we will get someone good.” There is no way that we can get everyone to love lawyers, but we can do our best not to give credence to low opinions of lawyers. This distaste for lawyers can arise out of unpleasant experiences in court. People who are called for jury duty often are apprehensive that they will be abused or insulted or, at the very least, observe insulting or obnoxious conduct toward others. One thing about obnoxious conduct is that nobody likes it. That includes the other lawyers, the court personnel, the parties, the jurors, and, above all, the judge. Jurors in particular do not like the “firesnorter,” the lawyer who argues every issue with flared nostrils, attacks all witnesses, is dismissive to the judge, and then in closing argument asks the jury not to hold his conduct against his or her client. I cannot see how such a statement can overcome the damage that has been done already. The difficulty is that you must walk a tightrope in providing zealous representation for your client while not acting in a way that brings discredit to the courts. Several factors can make this task hard to do. The key to acting professionally is to show respect in all circumstances. It is best to abide by the rule that a person is entitled to respect and reasonable deference until he or she proves not to deserve it. For instance, personal invective has no place in court. Refusing to use abusive and insulting language goes a long way toward making jury service or an appearance as a witness a positive experience. As hard as it can be at times, it is important to show respect to the other lawyer. Even though another lawyer can be extremely annoying, that lawyer is entitled to respect and

reasonable deference. When you are tempted to “tell off” another lawyer, keep in mind that you have similar life experiences. Each of you sweated out law school applications, worried about flunking out of law school, worried about failing the bar exam, and had the same rough patches while learning to survive in the practice. On several occasions, I have had to take another lawyer aside to tell him in as nice a way as possible that he was making a fool of himself. My friendly approach worked in most of those instances.

The key to acting professionally is to show respect in all circumstances. It is best to abide by the rule that a person is entitled to respect and reasonable deference until he or she proves not to deserve it. For instance, personal invective has no place in court. Refusing to use abusive and insulting language goes a long way toward making jury service or an appearance as a witness a positive experience.

But that little talk might not work. There will be times when you are confronted with the toxic combination of a (Continued on next page)

About the Author Willis R. Tribler is a director of the firm of Tribler Orpett & Meyer, P.C. in Chicago. He is a graduate of Bradley University and the University of Illinois College of Law, and served as President of the IDC in 1984-1985.

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IDC Quarterly

The Defense Philosophy (Continued) hostile and overly combative lawyer who has a client who demands hostile and combative representation. When that happens, you must resist the strong temptation to jump down into the pit and start slinging mud. No matter how bad it gets, you must hold yourself above the fray and present your case in a firm and professional manner, all the time refusing to knuckle under in a way that would compromise your client’s case. The other side of this coin comes up when you yourself have a nasty client who wants you to “get after” the other side by presenting a combative case. In such a situation, you have to be able to “ramp it up” a bit without being obnoxious, all the while pointing out to your client that extremely combative conduct is counterproductive and, as a last measure, be ready to tell the client that unless he changes his attitude, you will have to seek leave to withdraw.

You must maintain a correct professional relationship in dealings with other lawyers, no matter who they might be, especially when the opposing lawyer is a close personal friend.

There is another problem, one that arises mostly in smaller counties. You must maintain a correct professional relationship in dealings with other lawyers, no matter who they might be, especially when the opposing lawyer is a close personal friend. There are clients who not only want a “fighter” but who will regard any friendly conversation with an opposing lawyer as a sign that you will be willing to sell the client down the river for the sake of your relationship with the other lawyer. This is not the way it works, but the client may not know that, and you must be careful not to give the wrong impression. There is nothing more discouraging than to have your client tell the world that he lost his case because his lawyer was “palsy-walsy” with the other side. None of this is easy to do, but no one ever told you that litigation would be easy.

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Amicus Committee Report By: Michael L. Resis SmithAmundsen LLC Chicago

In Vincent v. Alden-Park Strathmoor, Docket No. 110406, the Illinois Supreme Court will decide whether the Nursing Home Care Act (the Act), 210 ILCS 45/1-101, et seq., authorizes common law punitive damages in a survival action for willful and wanton conduct. The appellate court (399 Ill. App. 3d 1102, 928 N.E.2d 115 (2nd Dist. 2010)) answered the question certified for immediate interlocutory appeal under Supreme Court Rule 308 by holding that punitive damages are not available in a survival action brought under the Act. The court noted that common law punitive damages do not survive the decedent’s death, and that absent specific statutory authority or very strong equitable consideration, punitive damages are not permitted in a survival action. The court held that there was no statutory basis for punitive damages when the Act was devoid of any provision for punitive damages. Further, the legislative history reflected that the General Assembly did not intend to allow punitive damages to be recoverable under the Act. The court referred to the legislative repeal of the treble damages provision in 1995 and the General Assembly’s rejection of attempts to amend the Act and to explicitly provide for recovery of punitive damages on three occasions since 1995. Finally, the court concluded that, in addition to the (Continued on next page)

About the Author Michael L. Resis is a founding partner and chairman of SmithAmundsen’s appellate department. He concentrates his practice in the areas of appeals, insurance coverage and toxic, environmental and mass torts. He has practiced law in Chicago for 20 years and handled more than 400 appeals. Mr. Resis has represented government, business and professional organizations as amicus curiae before the Illinois Supreme Court and the Illinois Appellate Court. He received his B.A. degree, magna cum laude, from the University of Illinois at Champaign-Urbana in 1978, and a J.D. degree from the University of Illinois at Champaign-Urbana in 1981. Mr. Resis currently serves on the Board of Directors for the IDC.

First Quarter 2011

legislative history, no equitable considerations warranted such a remedy when the Act allowed for attorney’s fees in addition to compensatory damages and civil and criminal penalties to deter violations of the Act. Daniel W. Farroll and Patrick Barkley of HeplerBroom LLC are to be commended for their efforts in preparing the amicus brief on behalf of the IDC in support of the defendant. As a reminder for future submissions, the following are the Amicus Committee members: Committee Chairman Michael L. Resis SmithAmundsen, LLC 150 North Michigan Avenue Suite 3300 Chicago, Illinois 60601 (312) 894-3249 [email protected]

Fifth Judicial District Stephen C. Mudge Reed, Armstrong, Gorman, Coffey, Thompson, Gilbert & Mudge 101 North Main Street P.O. Box 368 Edwardsville, Illinois 62025-0368 (618) 656-0257 Although our committee cannot prepare an amicus brief in every case in which we are asked, we encourage your participation in making the views of our members known to the reviewing courts on the legal issues that affect us. We need your input and your support. If you are interested in writing an amicus brief or submitting a case for review by the committee, please contact any of us.

First Judicial District John J. Piegore Sanchez & Daniels 333 W. Wacker Drive, Suite 500 Chicago, Illinois 60606 (312) 641-1555 Second Judicial District James DeAno DeAno & Scarry 2100 Manchester Road, Suite 101A Wheaton, Illinois 60187 (312) 690-2800 Third Judicial District Karen L. Kendall Heyl, Royster, Voelker & Allen 124 SW Adams Street Bank One Building, Suite 600 Peoria, Illinois 61602 (309) 676-0400

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Fourth Judicial District Robert W. Neirynck Costigan & Wolrab, P.C. 308 E. Washington Street P.O. Box 3127 Bloomington, Illinois 61701 (309) 828-4310

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IDC Quarterly

Holiday Party and Toy Drive

Young Lawyers Report

The IDC’s Annual Holiday Party was held on December 16th at Lloyd’s. Thank you to all of those who attended, and to everyone who contributed to this year’s Toy Drive.

By: Eliina Viele Pritzker Jump & Associates, P.C., Chicago

Federal Magistrate Judge Morton Denlow’s Presentation Federal Magistrate Judge Morton Denlow presented to a packed house on October 14th. Two dozen young lawyers attended his lunch time presentation on best practices for conducting effective settlement conferences. Magistrate Judge Denlow is an experienced jurist and practitioner who has written extensively on the topic of settlement conferences. Thanks go out to Magistrate Judge Denlow for taking the time to share his expertise with the Young Lawyers Division (YLD), to Geoffrey Waguespack for all the work he did to make the presentation possible, and to CremerSpina for hosting the event.

Eliina and Sarah proudly display the donations of a very successful Toy Drive. Additional photos from the Annual Holiday Party start on page 56.

School Drive Thank you to all of those who donated to this fall’s school drive benefitting Scammon Elementary School in Chicago and two elementary school classrooms in Granite City. The Chicago area drive focused on winter clothing, and the YLD donated almost 100 items of warm winter clothing to the students, including coats, hats, and gloves. The downstate drive, led by Mandi K. Ferguson of HeplerBroom, focused on classroom supplies, and the YLD donated games, books, calendars, notebooks, stamp pads, phonics games, markers, and other items.

YLD Happy Hour The YLD held a holiday happy hour at Elephant and Castle on Thursday, November 18th. Watch your email for news about upcoming YLD social events.

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About the Author

Eliina Viele Pritzker is an attorney with the law offices of Jump & Associates, P.C. in Chicago, where she focuses on construction litigation and insurance defense. She is a Co-Chair of the IDC’s Young Lawyers Division, and is a member of the Chicago Bar Association, ISBA, and DRI. Eliina received her undergraduate degree from Northwestern University in 2002, and her law degree from DePaul University College of Law in 2008.

First Quarter 2011 Fourth Quarter 2010

The IDC is proud to welcome the following members to the Association: David M. Alt Bates Carey Nicolaides, LLP, Chicago Thomas N. Anger City of Evanston Law Department, Evanston John P. Arranz Swanson, Martin & Bell, LLP, Chicago Raymond L. Asher Law Offices of Raymond L. Asher, Ltd., Chicago Craig M. Bargher Chittenden, Murday & Novotny, LLC, Chicago Justin K. Beyer Seyfarth Shaw, LLP, Chicago Stephen Blecha University of Illinois College of Law, Savoy Edgar A. Blumenfeld Attorney at Law, Chicago Alexandra Buck Bartlit Beck Herman Palenchar & Scott, LLP, Chicago Elizabeth M. Chiarello Sidley Austin, LLP, Chicago Shayna S. Cook Bartlit Beck Herman Palenchar & Scott, LLP, Chicago Ian A. Cooper Brady, Connolly & Masuda, P.C., Chicago Jeanne M. Cullen Perkins Coie, Chicago Michael DiSantis Tressler, LLP, Chicago Traci Gill Prairie States Administrative Service, Chicago

Brad M. Gordon Grotefeld Hoffman Schleiter Gordon & Ochoa, Chicago Jill M. Hutchison Jenner & Block, Chicago Stephanie Jean-Jacques Jenner & Block, Chicago Christopher M. Kahler Clausen Miller, P.C., Chicago Laura Lally Caring Communities Shared Services, Libertyville Mindy M. Medley Clausen Miller, P.C., Chicago Nicolas C. Mesco Tressler, LLP, Chicago Nicholas Robert Novak McDonald & McCabe, LLC, Chicago Michael Allen Schlechtweg Knell & Poulos, P.C., Chicago Diane Dickett Smart Wiedner & McAuliffe, Ltd., Chicago James F. Smith Butler Pappas, Chicago Jill C. Taylor Ungaretti & Harris, LLP, Chicago Hugh Totten Valorem Law Group, Chicago Paula L. Velde Hennessy & Roach, Springfield ■ Sponsored by: Frederick Velde

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IDC Quarterly

IDC Holiday Reception Association News Dorn Appointed to IDC Board Bruce Dorn of Bruce Farrel Dorn & Associates in Chicago has been appointed to serve as an IDC Director at Large. Bruce’s term will expire in 2011. Bruce received a B.S. degree from the University of Illinois in 1971. He received his J.D. from John Marshall Law School in 1975 and was admitted to the Illinois Bar in 1975 and the Federal Bar in 1976. Bruce worked as an associate with the firm of Goldenson, Kiesler, Berman & Brenner from 1975-1980, and as a partner with the firms of Brenner & Dorn and Brenner, Mavrias, Dorn & Alm prior to joining State Farm as the first Managing Attorney in Chicago. Bruce has been an Adjunct Professor of Law at the John Marshall Law School since 1988, where he teaches Conflict of Laws and Litigation Drafting. In addition to the IDC, Bruce is a member of the Illinois Bar Association and the Chicago Bar Association. Bruce is also a member of the TIPS section and the Staff Counsel section of the American Bar Association. Bruce sits as a commission member of the Highland Park, Illinois Civil Service Commission.

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We would like to thank the IDC Young Lawyers Division for organizing a wonderful Holiday Reception and our most successful Toy Drive yet!

First Quarter 2011

Holiday Reception (Continued)

Special Thanks to our Holiday Reception Sponsors:

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IDC Quarterly

Notice of Election In accordance with the By-Laws of the Illinois Association of Defense Trial Counsel, an election must be held to fill the vacancies of the following six (6) directors, whose terms will expire at the Annual Meeting in June of 2011: C. Wm. Busse, Jr., Busse, Busse & Grassé, PC Barbara Fritsche, Rammelkamp Bradney Kevin Luther, Heyl Royster Voelker & Allen

William McVisk, Johnson & Bell, Ltd. Bradley C. Nahrstadt, Williams, Montgomery & John, Ltd. Robert Varney, Robert T. Varney & Associates

All individual members of the Association are eligible for election to the Board of Directors unless otherwise excluded by the Bylaws. Corporate, Educator and Law Student members are not eligible to serve on the Board of Directors. The Board of Directors shall be representative of all areas of the State of Illinois, and to this end, two Districts are declared: “Cook County” and for all remaining counties, “Statewide”. No more than four of the six directors elected each year shall office within the same District, and regardless of votes cast, only the four persons receiving the most votes may be elected from within the District. If all individual members filing Nominating Petitions are from the same District, only four shall be elected and the board shall seek out and appoint two directors from the other District. No more than two voting members of the combined Executive Committee and Board of Directors shall be partners or associates or otherwise practice together in the same law firm. The filing of a Nominating Petition for election as a director shall consist of: 1. The Nominating Petition. Each individual nominated must be supported by the signatures of three (3) members in good standing. 2. A statement by that member of his availability and commitment to serve actively on the board.

3.

vailability and Statement of A ample Commitment S ________ ____________ __ __ __ __ __ ____ od standing of I, __________ a member in go am I at th e ar cl ounsel and I do , hereby de Defense Trial C of on ti ia oc ss mmitment to the Illinois A y ability and co m rm fi af d an Illinois Ashereby warrant irectors of the D of rd oa B e on th serve actively nsel. ense Trial Cou ef D sociation of __, 2011. ____________ __ __ __ of y ___ da Dated this ____ _______ ____________ __ __ __ __ __ ______ ____________ Signature

Nominating Pet

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A black and white head and shoulders picture (high resolution jpg format, preferred). 4. A short biography (1-2 paragraphs maximum). 5. A statement of no more than 200 words on why you think you should be elected to the Board of Directors. A sample copy of the Nominating Petition and Commitment to Serve Statement are included for your reference below. Nominations must be sent electronically to IDC Secretary/ Treasurer David H. Levitt of Hinshaw & Culbertson, LLP at [email protected] and IDC Executive Director Sandra J. Wulf, CAE, IOM at [email protected] Nominations must be accompanied with the five items listed above. All candidates will be featured with their biography, statement of candidacy and picture in the IDC Quarterly, and this same feature will be mailed to the membership with the ballots if more than six petitions are received. All nominating petitions must arrive at the IDC office no later than Monday, February 28, 2011. All candidates who have filed a complete nominating petition are eligible to receive an electronic copy of the IDC membership listing, upon request.

ition Sample

We, the unders igned, hereby de clare that we ar in good standing e members of the Illinois A ssociation of D Trial Counsel. efense We, the unders igned, further no minate (name of (firm name, ad person) of dress, city, stat e, zip code) for th Director of the e position of Illinois Associa tion of Defense Trial Counsel. John Doe (sig nature) Jane Doe (sig nature) Jack Doe (sig nature) Dated this ____ __ day of ____ ____________ __, 2011.

First Quarter 2011

Index of IDC Monograph and Feature Articles Volume 20 The IDC Quarterly has a rich tradition of presenting thought-provoking, timely, educational articles to the defense bar of Illinois. This award winning legal journal is a well-respected piece of the legal landscape in Illinois and the country. Our reputation for excellence is based upon years of excellent submissions from our members. Following is an index of the Feature Articles and Monographs that have appeared in the Quarterly in the past year. All of these submissions are available on our website, www.iadtc.org, and may be searched in our Library according to the Volume, Issue, and Page Number key listed with the article title. For example, when you search the IDC Quarterly archives using key 20.1.M1, your search will generate the Monograph “Life in the ER: The Trauma of Emergency Exception Defense to Medical Battery.” We are very fortunate to have had the opportunity to present these pieces and many others to you over the years. We offer our sincere thanks to the many editors and authors who have made this journal what it is today.

MONOGRAPH Life in the ER: The Trauma of the Emergency Exception Defense to Medical Battery (20.1.M1) Written By: Barry C. Brotine, Matushek, Nilles, & Sinars, LLC, Chicago Proper Claims Practices to Preserve Defenses (20.2.M1) Written By: David M. Lewin, Lewin Law Group The Conflict of the Positional Risk Doctrine in Illinois: Its Rejection and Adoption (20.4.M1) Written By: R. Mark Cosimini, Rusin Maciorowski & Friedman, Ltd., Champaign; Eric S. Chavonec, Thomas, Mamer & Haughey, LLP, Champaign; Brad A. Elward, Heyl, Royster, Voelker & Allen, Peoria; Bruce E. Warren, Thomas, Mamer & Haughey, LLP, Champaign; and Julie A. Webb, Craig & Craig, Mt. Vernon Wrongful Conviction Claims (20.3.M1) Written By: Michael E. Kujawa, Erika G. Baldonado, Kyle T. Gray, and Dustin S. Fisher, Judge, James & Kujawa, LLC, Park Ridge

FEATURE ARTICLES Dual Sole Proximate Causes: Asserting an Effective Oxymoronic Defense (20.4.22) Written By: Lindsay Drecoll Brown, Cassiday Schade, LLP, Chicago Good News for Employers: Disgruntled Employees Can Be Forced to Arbitrate Disputes with You! (20.2.43) Written By: Matthew K. Wollin, Johnson & Bell, Ltd., Chicago Jury Trials in the Circuit Court for Emplyment Claims Under the Illinois Human Rights Act and Federal Statutes, for Retaliation and Punitive Damages (20.1.24) Written By: James P. DeNardo, McKenna Storer, LLC, Chicago Lawyer Beware: The New Rules of Professional Responsibility (20.2.57) Written By: Bradley C. Nahrstadt, Williams, Montgomery & John, Ltd., Chicago (Continued on next page) 59

IDC Quarterly

Index Volume 20 (Continued) Mechanics Liens: What Conduct Constitutes Waiver of Contractual Right to Arbitrate? (20.2.32) Written By: Robert D. Boroff, SmithAmundsen, LLC, Chicago Proposed Amendments to Federal Rule of Civil Procedure 26 to Substantially Change Expert Witness Disclosure and Discovery Requirements (20.4.5) Written By: Michael C. McCutcheon and Kate Ó Súilleabháin, Baker & McKenzie, LLP, Chicago The Seventh Circuit Electronic Discovery Pilot Program — Hope for the Future (20.2.16) Written By: Steven M. Puiszis, Hinshaw & Culbertson, LLP, Chicago View from the Bench: Opening Statements (20.2.5) Written By: Paul R. Lynch, Craig & Craig, Mt. Vernon, William K. McVisk, Johnson & Bell, Ltd., Chicago, and John F. Watson, Craig & Craig, Mattoon View from the Bench: Voir Dire (20.1.6) Written By: Paul R. Lynch, Craig & Craig, Mt. Vernon, William K. McVisk, Johnson & Bell, Ltd., Chicago, Al Pranaitis, Hoagland, Fitzgerald, Smith &Pranaitis, Alton, and John W. Robertson, Robertson, Wilcox & Statham, P.C., Galesburg

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First Quarter 2011

The Illinois Association of Defense Counsel and the Illinois Insurance Association are proud to present the Annual Spring Symposium. This conference will present a lively and freewheeling debate between the giants in the Illinois legal and business communities on the issues of whether Cook County is truly a difficult venue, whether discovery is too long and expensive and whether there is really any rhyme or reason to picking a jury. The Symposium will also offer nine different Roundtable topics, such as reducing litigation costs, dealing with difficult people and investigative techniques. These Roundtable discussions will offer an opportunity for participants to engage in smaller break-out sessions that will allow everyone to walk away with real-world, practical tips. In addition to the dynamic debates and topical breakout sessions, the Symposium will also feature an exhibit hall and a valuable networking reception at the end of the day. We hope you can join us for what promises to be one of the year’s best conferences.

Sponsors We would like to thank the following companies for their generous support of the 2011 Spring Symposium:

Presented by

Symposium Leadership Kenneth F. Werts — Craig & Craig 2010-2011 IDC President Gordon Walker — Pekin Insurance 2011 IIA Chairman Richard W. Lenkov — Bryce Downey & Lenkov LLC, Symposium Chair Scott D. Stephenson — Litchfield Cavo LLP Symposium Co-Chair Jeremy T. Burton — Williams, Montgomery & John, Ltd. Maria S. Doughty — Allstate Insurance R. Sean Hocking — Craig & Craig Heather R. Watterson — Kopon Airdo, LLC

(Continued on next page) 61

Allstate Insurance Company No matter how much time one spends on preparing to select a jury, it often seems as though the process relies more on luck than science. Can litigants really help their cause by trying to pick jurists who best suit their preconceptions? Or is it best to simply get twelve people in the box and present the best possible case? You will hear opinions and answers to these and other questions in this engaging debate.

Schedule of Events 7:30 – 8:30

Registration

8:30 – 9:00

Welcome & Introductions

11:45 – 12:15 Keynote Address Speaker: TBA

9:00 – 9:45

Debate: Is Cook County A Difficult Venue for Defendants?

12:15 – 12:45 Lunch Sponsored by Rimkus Consulting Group, Inc.

Moderator: Scott Stephenson, Litchfield Cavo, LLP Panelists: Glen Amundsen, SmithAmund-sen, LLC; Thomas A. Demetrio, Corboy & Demetrio; Hon. Kathy Flanagan, Circuit Court of Cook County

12:45 – 1:45

Bad Faith / Punitive Damages This break-out session will focus on bad faith insurance claims. We will discuss the various types of bad faith claims, proving and defending against a bad faith claim and the available remedies/penalties involved in bad faith claims.

Cook County is often seen as one of the more difficult venues in the country for defendants. However, is that perception true? Are defendants automatically in trouble because they are facing Cook County judges and juries? This debate will tackle the reality behind these presumptions head-on. 9:45 – 10:00

Dealing with Difficult People This break-out session will focus on the varying types of personalities that we may face in the legal profession, whether it be a client, co-worker, opposing counsel or a judge. We will discuss the obstacles that a person dealing with an individual with a difficult personality may face and strategies for overcoming those obstacles.

Refreshment Break

10:00 – 11:00 Debate: The Discovery Process is a Mess: Too Long, Too Expensive and Too Liberal?

Retail Liability During this break-out session, we will discuss all aspects of retail-liability, including limiting liability, defenses, accident reports, spoliation of evidence, tender, risk shifting opportunities and strategies for handling the more complex retail case.

Moderator: R. Sean Hocking, Craig & Craig Panelists: David V. Dorris, Dorris Law Firm, P.C.; Hon. William Maddux, Circuit Court of Cook County; Matt Morrison, QBE; and, Larry E. Hepler, HeplerBroom LLC Why does getting through discovery take so long? Why does it take so long to get to trial? Why aren’t judges tougher on litigants who fail to move the case forward? These and other questions will be debated by a veteran team of panelists. 11:00 – 11:45 Debate: Picking A Jury is a Science and Not Just Pure Luck Moderator: Richard W. Lenkov, Bryce, Downey & Lenkov Panelists: Louis C. Cairo, Goldberg Weisman & Cairo Ltd.; Hon. Jennifer Duncan-Brice, Circuit Court of Cook County; William V. Johnson, Johnson & Bell, Ltd.; Christine A. Sullivan, 62

BREAKOUT SESSIONS:

1:45– 2:00

Refreshment Break

2:00 – 3:00

BREAKOUT SESSIONS: Workers’ Compensation This session will cover recent case law, trends and legislative changes to the workers’ compensation system. Reducing Litigation Costs Exchange methods for keeping costs low and satisfying clients. Learn how attorneys and industry representatives view litigation tasks with respect

Featured Speakers

to the costs incurred from those tasks. Topics will include alternative billing methods, managing vendors and experts and getting results quickly and efficiently. Employment In this session, we will discuss how new laws, recent decisions, and ongoing economic changes have impacted state and federal employment claims. We will also learn about the effects of social media on employment claims and litigation and share the latest trends in employment claims filed with the Illinois Human Rights Commission and the EEOC. 3:00 – 3:15

Refreshment Break

3:15 – 4:15

BREAKOUT SESSIONS: Legislative Update This session will cover recent changes to both Illinois and Federal Rules affecting litigation for Illinois practitioners, including important changes to the Illinois Rules of Evidence and Federal Rules of Evidence as well as new bills and laws on a variety of other upcoming legal hot topics. Investigative Techniques This session will cover traditional methods of investigation such as hiring private investigators and other vendors. It will also cover more modern modes of electronic investigation and their limits including the pitfalls of using social networking sites as investigative tools. Issues Facing Young Professionals This session will be an interactive presentation and will offer young attorneys and other young professionals practical tips and advice on the issues of networking, professional image, and marketing.

4:30 – 6:00

Cocktail Reception Sponsored by ISBA Mutual Insurance Co.

Glen Amundsen, Chairman and CEO of SmithAmundsen in Chicago, is an experienced trial lawyer having tried over 80 cases to verdict and frequently serves as lead trial counsel for the firm’s most complex and highest profile matters. Glen is regularly retained to represent the interests of business enterprises, governmental entities, and various professionals in federal and state courts and administrative forums and he also performs monitoring work and associates as coordinating counsel at the request of clients in complex litigation matters. In addition to his litigation work, Glen is frequently invited to teach other lawyers and speak on trial practice techniques and best practices in the courtroom. He has testified before the Illinois General Assembly regarding proposed amendments to the Code of Civil Procedure and on evidentiary issues relating to the admission of expert testimony in court. Glen was named to the Illinois Super Lawyers list for 2005 – 2010, is AV rated by Martindale-Hubbell for his legal ability and ethics, and was named a Leading Lawyer in various areas of litigation practice by the Law Bulletin Publishing Company. Louis Cairo is the managing partner of Goldberg, Weisman & Cairo in Chicago, Illinois’ largest personal injury and workers compensation law firm. Louis received his law degree at Loyola University School of Law in Chicago in 1983. He is a member of ITLA’s Board of Managers, and is a member of the Justinian Society of Italian Lawyers, the American Association for Justice, the Society of Trial Lawyers, Chicago Bar Association and Illinois State Bar Association. His practice concentrates on representing clients who have suffered all types of catastrophic injuries and death. He has successfully tried cases in multiple states involving construction negligence, product liability, trucking accidents, Federal Employer Liability Act cases and automobile accidents. Louis has established record settlements and verdicts in Lake, Kane, DeKalb, Sycamore and Jo Davies Counties. And in the last 2 years he has successfully resolved 2 construction wrongful death cases for $9M and $10M. (Continued on next page)

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P.C. handles individual tort cases with heavy concentration on heavy truck litigation, medical malpractice and significant automobile cases. The firm also does a more limited amount of products liability cases.

Thomas A. Demetrio of Corboy & Demetrio is a trial lawyer with an emphasis on medical negligence, airplane crash, product liability and commercial litigation on behalf of plaintiffs. He is Past President of the Chicago Bar Association and Illinois Trial Lawyers Association. He is a fellow of The American College of Trial Lawyers, The International Academy of Trial Lawyers and The Inner Circle of Advocates. Tom has been listed in Best Lawyers in America since its inception in 1987 and was named by Best Lawyers as the Chicago Medical Malpractice Lawyer of the Year for 2011. Since 2003, Tom has been voted by his peers in the top ten of all lawyers in Illinois by the “Leading Lawyers Network,” and since 2007, he has been named in the top five of the state’s 80,000-plus lawyers by “Leading Lawyers Network.” Tom has done extensive teaching and lecturing worldwide in the field of trial techniques and has authored numerous continuing legal education articles in the field of civil litigation. Tom has negotiated over $1 billion in settlements and has acquired over $130 million in jury verdicts which includes the largest personal injury verdict ever upheld by the Illinois Supreme Court. All of Tom’s verdicts have been paid. He has never lost an appeal. David V. Dorris has practiced law in Illinois since 1973. After a short stint as an assistant state’s attorney in McLean County, Illinois he has devoted his practice exclusively to representing plaintiffs in personal injuries throughout the state of Illinois and even on occasion in nearby states. It is estimated that he has tried to verdict between 125 and 150 cases in over 25 Illinois counties, federal courts and venues in other states. He also has experience at the appellate level in the third fourth and fifth districts, the Illinois Supreme Court, the Indiana Court of Appeals and the Indiana Supreme Court. He is licensed in the United States Supreme Court. David practiced with noted trial attorney Jerome Mirza for almost 30 years before establishing his own law firm, Dorris Law P.C. 10 years ago. Dorris Law Firm,

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Hon. Jennifer Duncan-Brice graduated from John Marshall Law School in 1976. She started working at the Corporation Counsel’s Office for the City of Chicago as law clerk in 1975 and held various positions ultimately becoming Deputy Corporation Counsel of the Torts Division. In 1992, she was elected as a Judge of the Circuit Court of Cook County and was assigned to the Law Division. For the last 15 years, Judge Duncan-Brice has been assigned to a General Calendar Call where she hears cases from the beginning to the end, i.e. case manage the lawsuit, rule on motions, mediate the pre-trials, and conduct the trials. Judge Duncan-Brice is co-author of Illinois Pretrial Practice, an approximately 1,200 page book offering nuts and bolts information on how to prepare a civil case for trial. From 1988 to 1989, she served as president of the Chicago Chapter of the Federal Bar Association.

Hon. Kathy Flanagan

Larry E. Hepler is a managing partner of HeplerBroom LLC. Mr. Hepler focuses his practice on the defense of complex, multiparty civil cases and class actions involving a wide range of subjects, including all aspects of consumer fraud, personal injury, products liability, pharmaceutical, commercial, toxic torts, construction and insurance litigation. Mr. Hepler has represented clients in numerous jurisdictions throughout the United States, with primary emphasis in Illinois and Missouri. He is a Fellow of the American College of Trial Lawyers and a member of ABOTA. He has been selected repeatedly over the years as an Illinois Super Lawyer, Leading Lawyer in Illinois and Missouri, one of the Best Lawyers in St. Louis and America, and is an Advisory Board Member of the Leading Lawyers Network. He is also a member of The Federation of Defense & Corporate Counsel, Illinois Defense Counsel, and The American Bar Association. He has been a frequent lecturer for numerous national and international legal organizations. He was featured in an article in the January 2009 issue of Leading Lawyer Magazine. He is licensed to

as the Presiding Judge of the Law Division in the Circuit Court of Cook County. He is a member of the American College of Trial Lawyers, Society of Trial Lawyers, American Bar Association, Illinois State Bar Association and the Chicago Bar Association.

practice in the Courts of Illinois, Missouri, Federal Courts of Missouri and Illinois, 7th Circuit Court of Appeals, and the United States Supreme Court.

William V. Johnson, co-founder and president of Johnson & Bell, Ltd., is an acclaimed litigator who has tried many high-profile catastrophic injury and mass tort cases in Chicago and across the United States. During his tenure as president since 1979, the highly-regarded firm has grown to 120 attorneys. Over the years, Mr. Johnson has tried virtually every type of civil injury case. He has also defended many commercial liability, professional liability and trade secrets cases during his career. Mr. Johnson has been listed in The Best Lawyers in America since 1989, Who’s Who in American Law since 1987 and The International Who’s Who of Product liability Defense Lawyers. He is a fellow of the International Academy of Trial Lawyers, the International Society of Barristers and the American College of Trial Lawyers, among other groups and is a past president of the Chicago Society of Trial Lawyers. Hon. William D. Maddux graduated from the University of Notre Dame, Notre Dame, Indiana where he received his Bachelor of Arts degree in 1957. He continued his education at the Georgetown Law Center, Washington D.C. He graduated from Georgetown Law in 1959 with a Juris Doctor degree. He then began his legal career in 1960 as a partner with the firm of Kirkland & Ellis. In 1975 he started his own firm, William D. Maddux Ltd. (now Johnson & Bell). In 1979 he practiced as William D. Maddux & Associates (now Kralovec, Jambois & Schwartz) on the side of plaintiffs. In 1991, he was appointed to the Circuit Court of Cook County, and elected to a six year term, November, 1992. He served as Supervising Judge, Abuse and Neglect, Juvenile Division of Circuit Court from February 1994, to February 1995. From February 1995 to October 2001 he served in the Circuit Court with an individual calendar in the Law Division. From October 2001 to the present he serves

Matthew S. Morrison, Vice President Claims Legal QBE the Americas, has years of experience focusing on complex litigation and insurance coverage from both the perspective of an insurer as well an attorney in private practice. In his current position with QBE the Americas he is responsible for providing legal counsel on complex insurance coverage issues, management of extra contractual litigation and litigation management programs. He is also responsible for management of Environmental/Mass Tort claims as well Staff Counsel operations. He is admitted to practice before the state courts of Illinois and Wisconsin and the United States District Court for the Northern District of Illinois. He is a member of the Illinois State Bar Association, the Wisconsin State Bar Association and The Council on Litigation Management. Christine A. Sullivan, CPCU, AIM, began her career with Allstate Insurance Company in 1973 and was promoted to Assistant Vice President in Claims in 2000. She has responsibility for first and third party casualty claim-handling processes, practices, and procedures on a countrywide basis. She is currently responsible for Compliance for the Claim Department. Chris earned her bachelor’s degree in economics and political science from the University of New Hampshire in 1974. She earned her MBA degree in finance and marketing from the University of Illinois at Chicago in 1998. Chris holds the AIM designation and earned a Distinguished Graduate Award from the Insurance Institute in 1982. She earned her CPCU designation in 1989. In September 2004, Chris was named Claims Professional of the Year by the Editorial Advisory Board of Claims Magazine. Chris is currently a member of the Insurance Research Council Advisory Board, serving as Chairperson. She is also serving on the advisory committees for the INS, AIC, and CPCU programs for the Insurance Institute of America/the American Institute for CPCU. She was also on the Board of Directors for the Insurance School of Chicago (1995 – 1998) and the Executive Advisory Committee, Katie School of Insurance, Illinois State University (1995 – 1998). (Continued on next page) 65

2011 Spring Symposium April 14, 2011 ■ Standard Club of Chicago ✔

Live Presentation

Webcast

Reception Only

IDC Members

$250*

$150

$75

Non-Members

$350*

$250

$75

Governmental Attorneys

$200

$125

Comp

Insurance or Corporate Professionals

$75

$75

Comp

Judges & Law School Students

$25

$25

Comp

Seminar Fees

Private Practice Attorneys

Continuing Legal Education Credit – Live Attendance For those registrants attending the Symposium in person, the program has been approved by the Illinois MCLE Board for 6.0 hours of continuing legal education (CLE) credit. We will apply for the following “live” CLE Credit in other states: Indiana: 6.0 Missouri: 7.2 Wisconsin: 7.2 Continuing Legal Education Credit – Webcast Attendance The Symposium will be webcast from 8:30 a.m. – 12:15 p.m. For those registrants attending via webcast, the program has been approved by the Illinois MCLE Board for 3.0 hours of continuing legal education (CLE) credit. We will apply for the following webcast CLE Credit in other states: Indiana: 3.0 Missouri: 3.6 Wisconsin: 3.6

Refund Policy Refunds must be requested in writing and will be made according to the following schedule: 100% Refund Through March 18, 2011 50% Refund March 19 – April 1, 2011 No Refund April 2 – 14, 2011 Substitutions for your registration may be made. However, only one copy of seminar materials will be offered per registration. Please submit substitution information in advance of the event.

* Register for the Live Presentation and bring one client for just $50. I will attend the:

Live Presentation

Webcast

I plan to attend the following breakout session(s): Session One: Bad Faith Punitive Damages Session Dealing with Difficult People Three: Retail Liability Session Two: Workers’ Compensation Reducing Litigation Costs Employment

Attendee: Badge Name: Firm: Address: City, State, Zip Code: Direct Line: Email: ARDC Number: IL: IN:

Legislative Update Investigative Techniques Issues Facing Young Professionals

Member ID:

MO: WI:

Special Dietary/Accessibility Needs:



All Private Practice Attorneys may bring a client for a reduced registration fee of $50. Please list your client’s name and contact information below. Indicate here if you will NOT have a guest in attendance

Can’t Attend in Person? This program will also be offered as a live webcast from 8:30 a.m. – 12:15 p.m. We will also offer the seminar for purchase as video CD-ROMs, audio CDs, MP3-CDs, and DVDs. Contact the IDC office at 800-232-0169 or [email protected] for more information. Questions? Phone: 800-232-0169, Fax: 217-585-0886 Email: [email protected]

Please complete this registration form and return it as soon as possible to: Illinois Association of Defense Trial Counsel PO Box 3144 ■ Springfield, IL 62708-3144 66

Client Name: Company: Address: City, State, Zip Code: Email: Special Dietary/Accessibility Needs:

Direct Line:

Payment Information is enclosed for $ ❑ My check, number ❑ Please charge $ to my: ❑ Visa ❑ MasterCard ❑ AmEx ❑ Discover Card Number: Exp. Date: Security Code: Name as it appears on credit card: Credit Card Billing Address:

.

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Illinois Association of Defense Trial Counsel

MEMBERSHIP APPLICATION

Membership in the Illinois Association of Defense Trial Counsel is open to Individuals, Corporations, Educators, Law Students. For a list of qualifications, visit www.iadtc.org or phone the IDC office at 800-232-0169. Applicants shall be admitted to membership upon a majority vote of the Board of Directors. I am (We are) applying for membership as a(an) (Select Only One):

Individual Attorney, in practice: ❍ Less than 3 years ($100) ❍ 3-5 years ($150) ❍ 5-10 years ($225) ❍ 10+ years ($250)

Governmental Attorney, in practice: ❍ Less than 3 years ($75) ❍ 3-5 years ($100) ❍ 5-10 years ($160) ❍ 10+ years ($190)



❍ Educator ($75)

Student ($20)

Corporation, with: ❍ 1-2 Affiliates ($250) ❍ 3-5 Affiliates ($500) ❍ 6-10 Affiliates ($750) ❍ 11-15 Affiliates ($1,000) ❍ 16-20 Affiliates ($1,500)

Individual Applicant Information – Attorneys & Governmental Attorneys Prefix

First

Middle

Last

Suffix

Designation

Firm or Government Agency Address City

State

Firm or Agency Line

Zip Code

County

Direct Line

Fax Line

Email

Website

Area of Practice

# of Attorneys in Firm

IDC Sponsor Name and Firm Law School

Admitted to the Bar in the State of

Home Address

Year

ARDC #

City, State, Zip Code

Home Phone

Alternate Email Address

Corporate Applicant Information Corporation Name

Business or Service Provided

Address

City, State, Zip Code

Phone Fax Website On a separate sheet of paper, please list all individuals that are to be affiliated with this Corporate Membership. Be sure to include Name, Address (if different than the corporate address), Phone, Fax and Email Address for all affiliates.

Educator and Law Student Applicant Information Prefix

First

Middle

Last

Suffix

Law School Address

Designation

Anticipated Graduation Date City, State, Zip Code

Email Address

Phone

Biographical Information IDC is committed to the principle of diversity in its membership and leadership. Accordingly applicants are invited to indicate which one of the following may best describe them: Race

Gender

Birth Date

Free DRI Membership In addition to joining the IDC, you can take advantage of the DRI Free Membership Promotion! As a new member of IDC and if you’ve never been a member of DRI, you qualify for a 1 year free DRI Membership. If you are interested please mark the box below and we will copy this application and send it to DRI. Also, if you have been admitted to the bar 5 years or less, you will also qualify to receive a Young Lawyer Certificate which allows you one complimentary admission to a DRI Seminar of your choice.

❍ Yes, I am interested in the Free DRI Membership!

(Application continued on next page)

Illinois Association of Defense Trial Counsel

COMMITTEE INVOLVEMENT

All substantive law Committees are open to any IDC member. Event and Administrative Committees are generally small committees and members are often appointed by the Board of Directors. Substantive Law Committees are responsible for writing the Monograph for the IDC Quarterly and may submit other Feature Articles. Committees keep abreast of current legislation and work with the IDC Legislative Committee, as warranted. Committees also serve as a resource to seminar committees for speakers and subjects and, if and when certain issues arise that would warrant a specific “topical” seminar, the committee may produce such a seminar.

Please select below the committees to which you would like to apply for membership:

❍ Civil Practice & Procedure ❍ Commercial Litigation ❍ Employment Law

❍ Insurance Law ❍ Medical Liability ❍ Municipal Law

❍ Products Liability ❍ Professional Liability ❍ Workers’ Compensation

❍ Trial Academy

❍ Fall Conference

❍ IDC Quarterly ❍ Legislative

❍ Membership ❍ Young Lawyers

Event Committees

❍ Spring Defense Tactics Seminar Administrative Committees

❍ Amicus / Appellate Law ❍ Diversity Membership Commitment

By providing a fax number and email address you are agreeing to receive faxes and emails from the association that may be of a commercial nature. I certify that : ❍ As an Individual Attorney, I am actively engaged in the practice of law, that at the present time a substantial portion of my litigation practice in personal injury and similar matters is devoted to the defense. ❍ As a Corporate Member, we will support the purpose and mission of the Association. ❍ I am currently a Professor or Associate Professor of law at an ABA accredited law school. ❍ I am currently a Student enrolled in an ABA accredited law school. Signed

Date

Membership Investment

*

Recommended Amount: