[co-author: Shane Sanderson]

Dechert Re:Torts is a monthly newsletter covering news and developments related to product liability and mass torts litigation.

Inside this issue:

• Cal/OSHA Emergency Temporary Stay Order Issued for Workers Exposed to Respirable Crystalline Silica
• “It’s important enough to get it right”: Federal Appellate Courts Ask State Supreme Courts to Decide Opioid Public Nuisance Question
• The Continuing Ethical and Legal Quandaries in Obscured Litigation Funding
• “Proxy” Testing Insufficient at Pleadings Stage in PFAS Litigation
• Regulators and Legislators Target Tech

Hot Topics

Cal/OSHA Emergency Temporary Stay Order Issued for Workers Exposed to Respirable Crystalline Silica

A growing number of silicosis lawsuits and regulatory actions focused on the engineered stone countertop industry has swept the nation. A recent article by our team explores available litigation strategies and defenses for companies involved in manufacturing or distributing silica-containing products should this trend continue. Companies that use silica in their operations should familiarize themselves with defense strategies that they may be able to use to navigate current and future silicosis litigation.

Please see our Law360 article for further information.

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“It’s important enough to get it right”: Federal Appellate Courts Ask State Supreme Courts to Decide Opioid Public Nuisance Question

In January, the Fourth Circuit was asked to decide whether West Virginia law permits a public nuisance claim against national pharmaceutical companies. See City of Huntington, W. Va. v. Amerisourcebergen Drug Corp., No. 22-1918 (4th Cir). Plaintiffs appeal a decision from the Southern District of West Virginia denying a public nuisance claim against pharmaceutical companies involved in the opioid litigation under West Virginia law. In the 2022 decision below, the District Court held that, although “[t]he Supreme Court of Appeals of West Virginia has not ruled on the issue,” the sale and marketing of a product is not consistent with the traditional conceptions of public nuisance. City of Huntington, W. Va. v. Amerisourcebergen Drug Corp, Nos. 3:17-01362-01665, Dkt. No. 1530 at 153 (S.D.W. Va. July 4, 2022).

This is not the first time a state law public nuisance question has reached a circuit court. In Trumball County v. Purdue Pharma L.P., Nos. 22-3750-3751-3753-3841-3843-3844, the Sixth Circuit was asked to decide whether Ohio law permits a public nuisance claim against national pharmaceutical companies who plaintiffs allege “created, perpetuated, and maintained” the opioid epidemic. At trial, a jury concluded that the defendants created a public nuisance in two Ohio counties, leading to a $650 million abatement order. Dkt. No. 90-3 at 2.

On appeal, the Sixth Circuit sua sponte certified to the Ohio Supreme Court the question of whether Ohio law permits such claims. The Sixth Circuit acknowledged that, “when presented with an issue concerning the interpretation of a state law, a federal court’s normal course is to. . . determine how a state supreme court, if presented with the issue, would resolve it.” Id. at 8 (citations omitted). Yet the court was not “convinced that there [was] a reasonably clear and principled course to follow in lieu of certification.” Id. at 10 (citation omitted). “Put bluntly,” the court stated, “certification ensures that federal courts will properly apply state law.” Id. at 8 (citations omitted).

At oral argument, the Fourth Circuit raised the prospect of similarly certifying the question to the Supreme Court of West Virginia. See Oral Argument, City of Huntington, W. Va. v. Amerisourcebergen Drug Corp. (Jan. 24, 2024) (No. 22-1918). As in Trumball County, neither side sought to certify the question to the West Virginia Supreme Court, asking the Fourth Circuit to rule based on existing law. Yet, at oral argument, the Fourth Circuit panel asked both sides why certification to the state supreme court was not more appropriate to decide whether West Virginia law permits such a claim. While the Fourth Circuit has yet to issue a ruling or certification, Judge Robert B. King pointedly asked “Why wouldn’t we want to find out what the law is?” “It’s important enough to get it right.” Id.

Takeaway: The Sixth and Fourth Circuits indicate a cautious approach toward deciding state law public nuisance questions. Whether federal referrals of state law public nuisance questions will set a precedent for other federal mass tort cases remains an open question.

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The Continuing Ethical and Legal Quandaries in Obscured Litigation Funding

A recent dispute between Houston lawyer Bill Ramey and patent litigation funder AiPi Inc. sheds further light on the often opaque world of litigation funding. In late 2023, Ramey, a plaintiff-side patent attorney, withdrew from dozens of patent cases pending in various federal courts, citing nonpayment of fees as the basis for withdrawal. Filings in each of the cases from which Ramey withdrew shared a common thread: all were linked to AiPi. Recent public reports reveal that the issue between Ramey and AiPi was not merely nonpayment, but the role of AiPi in the underlying litigation: while AiPi maintains it is not a law firm and provides only business consulting and support, Ramey alleges that AiPi improperly attempted to direct the cases.

The extent of litigation funders’ control over the litigations they back raises potential ethical and legal concerns. Most state ethics rules (and the model rules) limit the extent to which a non-lawyer, non-client such as a litigation funder can dictate litigation strategy or otherwise influence the litigation. However, the dispute between AiPi and Ramey highlights that these boundaries are often blurred. There, AiPi’s alleged involvement included not only directing litigation and settlement strategy, but also drafting court filings and work product. That funders might assert this level of control over a litigation without ever announcing their involvement reinforces the need for increased disclosure requirements.

While many jurisdictions now require disclosure of litigation funding sources, where such requirements are not yet in force, legal and ethical issues will continue to arise. For instance, undisclosed funders may override client directives. And if legal missteps occur, pinpointing the responsible party may prove difficult if the role of the funder is not fully understood or known.

Moreover, defendants that are unaware of a funder’s presence may not realize that resolution negotiations are being heavily influenced by a party that is not at the table. A funder’s involvement may indicate that a plaintiff has substantial resources to pursue a case, potentially affecting defendants’ approach to settlement or trial strategy. It could also influence defendants’ perception of a plaintiff’s intent to litigate, which could impact how defendants assess risk and potential costs of litigation. Therefore, it is crucial for defendants to seek disclosure of any litigation funding arrangements to ensure a level playing field and informed decision-making.

The AiPi case is a reminder of the pitfalls of obscured litigation funding. This is especially relevant in mass tort litigation where litigation funding enables plaintiff attorneys to pursue large inventories of claims. However, the funders are also seeking a return on their significant investment and their financial interest may alter the course of the litigation. As the field of litigation funding continues to evolve, legislatures and courts must establish clear rules to ensure that the interests of all parties are protected.

Takeaway: The Ramey/AiPi dispute underscores the need for greater transparency and stricter adherence to ethical guidelines in the field of litigation funding.

Environmental Edit

“Proxy” Testing Insufficient at Pleadings Stage in PFAS Litigation

The trend of putative class actions that assert misleading advertising claims based on the alleged presence of per- and polyfluoroalkyl substances (“PFAS”) in consumer products has continued. In some of these cases, the plaintiffs have relied on testing for fluorine as a “proxy” for the presence of PFAS, but a recent decision from the Northern District of California demonstrates the shortcomings with this pleading strategy. See Lowe v. Edgewell Pers. Care Co., No. 23-cv-834, 2024 WL 150758, at *1 (N.D. Cal. Jan. 12, 2024).

In Lowe, tampon users alleged that advertising the products as “organic” and “safe, gentle, and purified” was misleading because of the alleged presence of PFAS. Id. at *2. The plaintiffs’ complaint referred to third-party testing for the presence of fluorine, which the plaintiffs alleged was a proxy for the detection of specific PFAS. Id. at *1–2. The court dismissed the complaint because the plaintiffs did not plausibly allege that the products contained PFAS. Id. at *5–6.

Specifically, the plaintiffs’ testing only supported cursory allegations that some amount of fluorine—not any specific PFAS—was detected. Id. at *5. The plaintiffs further failed to specify whether the amount of fluorine detected was significant. Id. Additionally, the complaint did not indicate whether the source of fluorine could be natural or from other non-PFAS compounds. See id.

The Lowe case is part of a growing trend of plaintiffs’ use of third-party testing to attempt to meet their pleading burden in putative consumer class actions. Courts have dismissed cases in which the plaintiffs relied on insufficient testing for specific PFAS, but fluorine testing raises additional concerns for courts to address. This kind of testing requires a leap from the presence of fluorine, which the Lowe court pointed out may come from non-PFAS compounds, to the presence of PFAS. Courts also have dismissed cases relying on the “hypothesis” that PFAS “might be present” in a product based on tests for fluorine. Andrews v. Procter & Gamble Co., No. 19-cv-75, 2019 WL 6520045, at *3 (C.D. Cal. June 3, 2019); see also Dalewitz v. Procter & Gamble Co., No. 22-cv-7323, 2023 WL 6215329, at *3 (S.D.N.Y. Sept. 22, 2023). Because fluorine tests do not “in fact identify the presence of PFAS in the [p]roduct, let alone identify the presence of specific PFAS within the family” of thousands of PFAS, Dalewitz, 2023 WL 6215329, at *3, they cannot be used to “nudge” claims that a product contains PFAS “from possible to plausible” to defeat a motion to dismiss. Lowe, 2024 WL 150758, at *5.

Takeaway: Lowe and other cases point to courts’ skepticism that fluorine testing can be used to support allegations about PFAS in consumer products.

Regulatory Review

Regulators and Legislators Target Tech

Bipartisan momentum has been building to increase government restrictions and potential liability regarding how tech companies interact with children. Over the course of 2023, the Senate Judiciary Committee unanimously advanced five bills aimed at regulating child privacy online, which are now pending before the Senate. Contemporaneously, the Federal Trade Commission (“FTC”) has proposed significant changes to the rule that implements the Children’s Online Privacy Protection Act (“COPPA” or “COPPA Rule”), the primary law currently governing children’s data. On January 31, 2024, the Senate Judiciary Committee held a hearing with the CEOs of major social media platforms. These recent government developments follow years of academic discussions about whether social media and technology use harm children, state legislative enactments regulating social media use, and product liability and mass torts litigation alleging harm to children.

The five bills advanced out of the Judiciary Committee include features that address children’s online privacy in two major ways: First, the legislation would modify Section 230 of the Communications Decency Act, which immunizes online platforms from civil liability based on third-party content in certain circumstances. The proposed changes would allow civil liability to attach in connection with alleged sexual exploitation of minors. Second, the legislation would create additional criminal liability and increase law enforcement funding.

There are still some potential hurdles for federal legislators. Courts have previously invalidated federal laws that restricted internet communications deemed harmful to minors. See, e.g., Reno v. ACLU, 521 U.S. 844 (1997); ACLU v. Mukasey, 534 F.3d 181 (3rd Cir. 2008), cert. denied, 555 U.S. 1137 (2009). Previous versions of some now-pending legislation have failed to become law. And the bills that would modify Section 230 and create new federal crimes have not been called for a Senate vote. However, the Committee’s unanimous endorsement of the bills and its questioning of major stakeholders in January suggest that at least some legislation is likely to become law.

In addition, the FTC’s proposed changes would greatly modify the COPPA Rule. As currently drafted, the COPPA Rule requires operators of websites “directed to” children and operators with “actual knowledge” that their websites are used by children to provide notice to parents and obtain verifiable consent before collecting, using, or disclosing children’s personal information. Operators must also allow parents an opportunity to review the types of information collected, delete the information collected, and prevent further data collection or use, and are prohibited from making children’s participation in activities contingent on collection of more personal information than is “reasonably necessary.”

FTC’s proposed changes would add biometric data to the “personal information” governed by COPPA. The language of the proposed rule would bring into COPPA’s ambit fingerprints or handprints, retina and iris patterns, genetic data, and data derived from voice, gait or facial features. The agency notes that the aforementioned biometric identifiers are not an exhaustive list, but instead examples of “biometric identifier[s] that can be used for the . . . recognition of an individual,” all of which would be within the ambit of the new rule. The proposed rule would also codify an exception to parental consent in certain circumstances based on school-related authorizations. That change would codify FTC guidance that is to this point only attributable to an agency policy statement. Public comment on the proposed rule will close March 11.

Takeaway: Recent legislative and regulatory activities and continued litigation trends involving social media platforms suggest that stakeholders may soon have to abide by stricter rules surrounding minor users and their data.