Dechert Re:Torts - Key Developments in Product Liability and Mass Torts

Issue 5 - May 2023

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

In this issue:

New State Laws Restrict Social Media Use by Minors
FDA Publishes Guidance on Submissions for Medical Devices That Are Artificial Intelligence / Machine-Learning (“AI/ML”)-Enabled
FDA Issues Draft Guidance on Decentralized Clinical Trials
EPA’s PFAS Enforcement Authority Expands Into A New Area
Momentum Builds on Third-Party Litigation Funding Disclosure
On the Record: Discoverability of Remote Meetings
Sixth Circuit: State Court Pleadings Satisfy Federal CAFA Jurisdiction
Snappy Decisions

Regulatory Review

New State Laws Restrict Social Media Use by Minors

Legislatures are increasingly enacting and considering laws to restrict social media use by minors despite guidance from courts suggesting such laws run afoul of the Constitution.

Two states have enacted such legislation within the last few months. For example, in April, Arkansas enacted the Social Media Safety Act, which requires parental consent before a minor may use social media and prevents companies from retaining a minor’s personal identifying information. And in March, Utah enacted the Social Media Regulation Amendments with similar restrictions. Both Arkansas and Utah provide for private rights of action to enforce the legislation; Arkansas also empowers the Attorney General and local prosecutors to enforce its provisions, while Utah provides the Division of Consumer Protection with enforcement authority. Last September, California’s governor signed the California Age-Appropriate Design Act, which regulates the collection, storage, and processing of children’s personal data.

Additional legislation aimed at making the Internet safer for children has also been introduced. For example, bills are pending in California, Iowa, Louisiana, New York, North Carolina, and Texas to regulate minors’ social media use in a similar fashion as Utah and Arkansas. In addition, Congress has also introduced bills geared toward children’s online privacy and social media use, including Restricting the Emergence of Security Threats that Risk Information and Communications Technology Act, STOP CSAM, Eliminating Abusive and Rampant Neglect of Interactive Technologies Act, the Cooper Davis Act, and “Protecting Kids on Social Media Act.”

Despite the growing legislative trend toward age restrictions on social media and other content, courts have found similar restrictions unconstitutional. In Reno v. ACLU, the Supreme Court construed a provision of the Communications Decency Act that criminalized engaging in indecent or patently offensive online speech if it could be viewed by a minor but allowed websites to defend themselves by imposing age verification measures. 521 U.S.844 (1997). And in Garden District Book Shop, Inc. v. Stewart, a federal district court considered a Louisiana law that required websites to age-verify users before providing access to non-obscene material that could be deemed harmful to a minor. 184 F. Supp. 3d 331 (M.D. La. 2016). In both cases, the courts concluded the laws were an unconstitutional content-based restriction of free speech, including because a less restrictive alternative would be to require content filters on computers.

Eventual lawsuits challenging social media laws will almost certainly feature other arguments as well, including that the laws are invalid under the Fourteenth Amendment, the Commerce Clause, and 47 U.S.C. § 230.

Takeaway: States are focusing their regulatory efforts on social media by imposing age verification and other requirements. The efforts reflect the larger trend of concern with the Internet’s effect on children, but the constitutionality of such efforts is questionable.

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FDA Publishes Guidance on Submissions for Medical Devices That Are Artificial Intelligence / Machine-Learning (“AI/ML”)-Enabled

On April 3, 2023, FDA issued draft guidance entitled “Marketing Submission Recommendations for a Predetermined Change Control Plan for Artificial Intelligence/Machine Learning (AI/ML)-Enabled Device Software Functions.” The draft guidance proposes a science-based approach to ensuring that AI/ML-enabled medical devices can be safely, effectively, and rapidly modified, updated, and improved in response to new data. The guidance sets forth recommendations for any device that a manufacturer intends to modify over time and that includes machine learning-enabled device software functions (“ML-DSFs”). ML-DSFs are a type of AI that can learn through data without being explicitly programmed, and for which modifications are implemented automatically by software or manually with human input. Because ML-DSFs use ML algorithms and can improve their performance through iterative modifications, they may evolve automatically in ways that are not transparent to the user, causing potential tension with FDA’s traditional framework for premarket review of changes to a medical device.

FDA addresses this challenge by building on its proposed approach from a 2019 discussion paper and its 2021 action plan which introduced the concept of a Predetermined Change Control Plan (“PCCP”) that would enable FDA to authorize modifications to device software products during the premarket review process. FDA gained express authority for PCCPs with the passage of Section 515C of the Federal Food, Drug, and Cosmetic Act in December 2022. Section 515C also authorizes FDA to require that a PCCP include labeling for the safe and effective use of a device as the ML-DSFs change.

For purposes of the guidance, a PCCP refers to a plan that includes device modifications that would otherwise require a premarket approval supplement, de novo submission, or a new premarket notification. A plan with only minor modifications that would not require a new submission is outside the scope of this guidance. On the other hand, FDA has stated that any modifications in a PCCP that change the device’s intended use or indications for use do not allow the device to remain safe and effective, and thus, are not permitted.

Under the draft guidance, FDA provides recommendations on the marketing submission content for a PCCP, which generally includes: 1) a detailed description of the specific, planned device modifications; 2) the associated methodology to develop, validate, and implement those modifications in a manner that ensures the continued safety and effectiveness of the device; and 3) an impact assessment to describe the assessment of the benefits and risks of the planned modifications and risk mitigations.

The comment period for the draft guidance closes on July 3, 2023.

Takeaway: FDA’s guidance seeks to allow manufacturers to make improvements in ML-DSF components of devices available to health care providers and patients faster than under the traditional marketing authorization process. A successful PCCP submission would allow device manufacturers to pre-authorize future device modifications, without additional marketing submissions.

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FDA Issues Draft Guidance on Decentralized Clinical Trials

On May 2, FDA fulfilled its requirement under the Food and Drug Omnibus Reform Act to release new draft guidance on decentralized clinical trials (“DCTs”) for drugs, biological products, and devices. The guidance is intended to clarify best practices and promote the use of DCTs to support the development of medical products in an increasingly remote, technologically connected world.

In a DCT, some or all of the trial-related activities occur at locations other than traditional clinical trial sites, such as participants’ homes or local healthcare providers. While many clinical trials already incorporate some decentralized elements, expanded use of DCTs—including fully remote trials—will enable greater and more diverse participation by bringing trial activities closer (or even directly) to the participant. For example, participants may be able to use telehealth to minimize the need for in-person visits to clinical trial sites. Or DCTs may enlist local healthcare providers who are close to trial participants’ homes. Digital health technologies may also be used to remotely obtain trial-related data from participants. DCTs not only have the potential to expand access to more diverse patient populations but also to facilitate research on rare diseases affecting populations with limited mobility or access to traditional trial sites.

FDA acknowledges that there may be challenges to implementing DCTs and that not all clinical trials may be well-suited for a decentralized model. Remote assessments, whether by the participants or local healthcare providers, may be less controlled than an assessment conducted by dedicated trial personnel, rendering data more variable and less precise. DCTs may also require more planning to minimize these risks, including additional training, coordination, and procedures. The new guidance, however, recognizes that the benefits of DCTs largely outweigh these risks. FDA recommends that specific issues related to the feasibility, design, implementation, or analysis of a DCT should be discussed early with the relevant FDA review division.

Takeaway: FDA recently released draft guidance encouraging the use of decentralized clinical trials. By bringing trial-related activities closer to participants, FDA hopes that researchers will be able to access more diverse patient populations and improve engagement and retention among participants unable to access traditional clinical trial sites.

Learn about Dechert's Product Liability and Mass Torts services.

Environmental Edit

EPA’s PFAS Enforcement Authority Expands Into A New Area

On April 26, 2023, EPA announced its first-ever Clean Water Act enforcement action to address per- and polyfluoroalkyl substances (“PFAS”) in wastewater and stormwater discharges. The action not only indicates EPA’s continued focus on remediation efforts at legacy sites, but is a further indication of EPA’s plan to use all available tools at its disposal to address PFAS.

Specifically, EPA’s April 26 Administrative Order on Consent (the “Order”) addressed PFOA and HFPO Dimer Acid, a PFAS often referred to as a “GenX” chemical, which were used in a site’s fluoropolymer production operation. The facility’s permit provided for limits on PFOA and HFPO Dimer Acid in the wastewater and stormwater discharge, and the company’s monitoring reports showed exceedances of these limits. Based on those permit violations, EPA conducted an inspection and, pursuant to its authority under the Clean Water Act, EPA issued the Order.

The Order requires implementation of a sampling plan and a plan to treat or minimize the discharge of PFAS, which may include the use of additional treatment technologies. The continued regulatory focus—this time with an enforcement action not previously used in this specific context—is a reminder of the potential for long-term scrutiny and mandatory remediation for companies who may have used PFAS.

Moreover, EPA’s application of its authority into a new area is a potential harbinger of EPA’s expanded use of its authority. As stated in EPA’s announcement here, EPA staff have been directed “to use every enforcement tool at [their] disposal” to “characterize, control, and clean up ongoing and past PFAS contamination.” Indeed, EPA’s authority is expected to expand with the adoption of its proposed rule, currently under review, to designate PFOA and PFOS as hazardous substances under the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”). EPA currently is seeking input on the adoption of a similar CERCLA designation for other PFAS.

Takeaway: EPA’s increased focus on PFAS continues, as evidenced by a first-of-its-kind Clean Water Act enforcement action to address PFAS and recent statements that EPA will “use every enforcement tool” available to address PFAS contamination.

Learn more about PFAS development on Dechert’s PFAS website.

Hot Topics

Momentum Builds on Third-Party Litigation Funding Disclosure

This month, litigation financers succeeded in altering California State Senator Anna Caballero’s Senate Bill 581, which would have required disclosure of litigation funding. At the federal level, industry groups continue to push for such disclosure.

Senator Caballero’s bill proposed reforms targeting litigation funders including registration with the state, lender fee caps, and surety bond requirements. Most critically, SB 581 required any individual with a civil claim who is party to a litigation financing transaction to disclose the existence of that agreement within 30 days of a request made by a party to the claim. Additionally, those agreements were to be rebuttably presumed discoverable. Due to lobbying, the bill was substantially altered. The bill now provides for in camera review of a litigation funding contract where the court has “good cause to believe that a litigation financing transaction involving litigation before the court is being conducted in violation of” SB 581—for example, if a Court believes that an unregistered litigation financer is financing the litigation.

On the federal front, thirty-five industry groups, including the United States Chamber of Commerce, sent a letter to the Committee on Rules of Practice and Procedure proposing new Federal Rule 26(a)(1)(A)(v). The Rule provides for a new category of initial disclosure for “any agreement under which any person other than an attorney permitted to charge a contingent fee. . . has a right to receive compensation that is contingent on, and sourced from, any proceeds of the civil action, by settlement, judgment or otherwise.” In explaining this provision’s necessity, the signatories cited Burford Capital’s recent third-party funding dispute with Sysco Corporation and myriad other litigation funding agreements where the parties may or may not have had the ability to make final decisions in their cases.

Takeaway: While litigation funders succeeded in diluting California’s disclosure efforts, at the federal level, the push for greater disclosure is growing.

Learn about Dechert's Product Liability and Mass Torts services.

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On the Record: Discoverability of Remote Meetings

The proliferation of virtual meetings over the past few years has led to a host of new logistical concerns: am I on mute? Can I leave my camera off? Is my screen desktop visible? Businesses should be mindful of an additional logistical issue: is a recording of this meeting discoverable? The answer in some instances will be “yes.”

Recorded video communications have long been subject to discovery requests in litigation, like other forms of electronically stored information (“ESI”). Yet the widespread integration of virtual meetings into everyday business practice has increased the volume of potentially discoverable ESI, particularly as popular video platforms enable meetings to be recorded with a single click of the mouse.

Recordings of virtual meetings increasingly form the basis of allegations in litigation and are targeted for discovery. For example, a putative class in a recent Title IX action alleged that school officials made threatening and retaliatory statements during a recorded Zoom meeting. Fisk v. Bd. of Trustees of Cal. State Univ., 2023 WL 2919317, at *3 (S.D. 2023). Awareness that recorded meetings might be discoverable can help legal and business professionals better manage their risks and ensure compliance with discovery obligations.

Implementing best practices for preserving and managing recorded video communications can mitigate both the risks and costs of discovery. Policies should provide guidance on when meetings should be recorded, how they should be retained, and how long they should be preserved. Businesses should also consider training employees on the importance of maintaining professional conduct during video calls.

Takeaway: Businesses that integrate virtual meetings into their everyday practices should be aware that meeting recordings can be subject to discovery requests and should establish clear policies and best practices for preserving and managing such recordings.

Learn about Dechert's Product Liability and Mass Torts services.

Jurisdictional Jabber

Sixth Circuit: State Court Pleadings Satisfy Federal CAFA Jurisdiction

The Sixth Circuit held that two state court complaints with 700 plaintiffs in total are subject to federal jurisdiction under CAFA because the complaints implicitly proposed “mass actions.” Adams, et al. v. 3M Co., et al., 65 F. 4th 802, 803 (6th Cir. 2023). Writing for the court, Chief Judge Sutton explained that the suits met the criteria under CAFA, which allows removal of any lawsuit where 100 or more plaintiffs “propose[]” to try their claims together. Id.

The two complaints were filed in Kentucky state court, claiming that the manufacture and sale of allegedly defective products caused lung disease. The substance of the complaints mirrored each other and sought “a trial by jury on all issues so triable.” Id. After removal, the federal district court granted remand to state court and the defendant appealed.

The Sixth Circuit examined CAFA’s requirement of a “proposed” joint trial on “common questions of law or fact.” Id. The court explained that the plaintiffs’ decision to file the claims jointly satisfies the need for proposed “common questions of law or fact” because the plaintiffs “assert[ed] parallel claims on behalf of more than 100 plaintiffs, all proceeding on the theory that the claims are similar enough to merit adjudication in tandem.” Id. at 804. The plaintiffs’ argument that each plaintiff’s claims are distinct and may not meet the standard for common questions of law or fact did not help them avoid federal jurisdiction because “an unwarranted proposal remains a proposal.” Id. at 805. Even if a state court might eventually decline a proposal for a joint trial, that does not change the fact that the plaintiffs offered a basis for one.

The plaintiffs also argued that their suits met CAFA’s local controversy exception because they named local Kentucky retailers who sold the products. But the Sixth Circuit rejected that argument, holding that the “core” of the suit targets the products’ manufacturer and the local sellers’ alleged liability is derivative of the manufacturer’s alleged liability. Id. at 806.

In reversing the district court, the Sixth Circuit acted in accordance with other circuits that have found that a single complaint with more than 100 plaintiffs raising common questions of law and fact constitutes an implicit proposal for a joint trial. Those cases include, among others, the Third Circuit’s decision in Ramirez v. Vintage Pharms, which held that such a complaint creates a “presumption” that a joint trial has been proposed unless an intent to try the cases together is expressly disclaimed. 852 F.3d 324, 329 (3d Cir. 2017).

Takeaway: The Sixth Circuit ruled that complaints with 100+ plaintiffs implicitly propose “mass actions” under CAFA, making them subject to federal jurisdiction. The decision confirms that a single complaint, proceeding on the theory that the claims are similar enough to merit adjudication in tandem, warrants an implicit proposal for a joint trial.

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Snappy Decisions

Defense counsel generally prefer to litigate in federal court rather than state court, and therefore will employ all available mechanisms to remove cases to federal court—including the “snap removal.” Under federal diversity jurisdiction, a party can remove a case to federal court when there is complete diversity (i.e., no plaintiff shares the same state of citizenship as any defendant) and the amount in controversy exceeds $75,000. See 28 U.S.C. § 1332. But even where complete diversity exists, removal is precluded if any defendant is a citizen of the forum state (i.e., the state where the case was filed). As written, however, the “forum defendant rule” applies only when the forum defendant is “properly joined and served.” 28 U.S.C. § 1441(b)(2). A “snap removal” relies on this language to remove a case to federal court after the case has been filed, but before the forum defendant is served.

While not all circuits have weighed in on the validity of snap removals, those that have are split, resulting in inconsistent federal practice. The Second, Third, Fifth, and Sixth Circuits have approved the use of snap removals, primarily relying on the plain language of the forum defendant rule. See, e.g., McCall v. Scott, 239 F.3d 808, 813 n.2 (6th Cir. 2001) (in dicta); Encompass Ins. Co. v. Stone Mansion Rest. Inc., 902 F.3d 147, 151 (3d Cir. 2018); Gibbons v. Bristol-Myers Squibb Co., 919 F.3d 699, 705 (2d Cir. 2019); Texas Brine Co. v. Am. Arbitration Assoc., 955 F. 3d 482, 487 (5th Cir. 2020). The Tenth and Eleventh Circuits, on the other hand, have rejected them pointing to the gamesmanship that results from allowing defendants to remove cases solely based on the timing of service. See, e.g., Woods v. Ross Dress for Less, Inc., 833 Fed. App’x 754, 755 (10th Cir. 2021); Goodwin v. Reynolds, 757 F.3d 1216, 1221 (11th Cir. 2014) (in dicta).

The Eighth Circuit has not yet weighed in on snap removals, and in a recent decision, M & B Oil, Inc. v. Federated Mutual Insurance Co, et al., rejected the invitation to do so. No. 21-3817, 2023 WL 3163326 (8th Cir. May 1, 2023). The Eighth Circuit found that it need not reach the question of the viability of snap removals because the forum defendant who had not yet been served was not diverse (i.e., the plaintiff was also a citizen of the forum state). In vacating the underlying order denying remand, the Court indicated that “[e]ven if [it] assume[d]” other circuit courts “are right” in their allowance of snap removals generally, snap removals cannot overcome the complete diversity requirement. The Court sent the case back to the magistrate judge for reconsideration to determine whether the non-diverse defendant was fraudulently joined, which would cure the lack of complete diversity.

Takeaway: The federal circuit courts continue to be divided on the legitimacy of snap removals, and the Eighth Circuit’s recent decision offers no additional clarity (although it suggests alignment with the Second, Third, Fifth, and Sixth Circuits where snap removals remain viable). The decision did make clear, however, that snap removals cannot cure a lack of complete diversity.

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