The recent decision of the New York Court of Appeals in In re New York City Asbestos Litigation, ___ N.E.3d ___, 2016 WL 3495191 (N.Y. June 28, 2016) (“NYCAL”), was not too good for asbestos defendants – as it permitted, under certain circumstances, non-manufacturers to be sued for failure to warn of a risk that the product they manufactured didn’t have (exposure to asbestos), where they “encourage[ed]” the use of products containing that risk with their products and thereby benefitted economically:

[A] manufacturer’s duty to warn of combined use of its product with another product depends in part on whether the manufacturer’s product can function without the other product, as it would be unfair to allow a manufacturer to avoid the minimal cost of including a warning about the perils of the joint use of the products when the manufacturer knows that the combined use is both necessary and dangerous. And, the justification for a duty to warn becomes particularly strong if the manufacturer intends that customers engage in the hazardous combined use of the products at issue.

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[W]here a manufacturer creates a product that cannot be used without another product as a result of the design of the product, the mechanics of the product or the absence of economically feasible alternative means of enabling the product to function as intended, the manufacturer has a substantial, albeit indirect, role in placing the third-party product in the stream of commerce. . . . Specifically, when the manufacturer produces a product that requires another product to function, the manufacturer naturally opens up a profitable market for that essential component, thereby encouraging the other company to make that related product and place it in the stream of commerce.

NYCAL, 2016 WL 3495191, at *__ (for some reason there is no Westlaw star paging at the moment). This opinion is very bad news for the affected companies, who are now sucked into the maw of interminable asbestos litigation on the basis of products they didn’t even make, but it should not open the door to innovator liability type claims against our medical product manufacturer clients, and it’s good on causation, too.

Here’s why.

First, the court’s rationale for recognizing a limited duty to warn of the risks of other manufacturer’s products excludes any possibility of innovator liability in New York. That theory (that innovator companies can be liable for inadequate generic drug warnings) was pretty darn dead already in New York. See In re Darvocet, Darvon, & Propoxyphene Products Liability Litigation, 756 F.3d 917, 949 (6th Cir. 2014) (applying New York law); Goldych v. Eli Lilly & Co., 2006 WL 2038436, at *3-8 (N.D.N.Y. July 19, 2006); Weese v. Pfizer, Inc., 2013 WL 5691993, at *2 (Sup. N.Y. Co. Oct. 8, 2013) – all rejecting innovator liability under New York law. However, innovator liability is also 100% contrary to the economic rationale followed by the court in NYCAL.

In the case of generic drug labeling, the “same” FDA-approved branded labeling is mandated for generic drugs due to operation of federal law, as discussed in PLIVA v. Mensing, 564 U.S. 604, 612-13 (2011) (analyzing 21 U.S.C. §§ 355(j)(2)(A)(v) and 355(j)(4)(G)). In this regard, unlike NYCAL, branded drug companies possess no “intent” to “encourage” anything – least of all that their products be driven off the market by cheaper generic products. The only intent is that of Congress. Ditto the economic rationale that NYCAL found persuasive, that the non-manufacturer defendant was “open[ing] up a profitable market for [an] essential component” required for the operation of its own product, 2016 WL 3495191, at *__, is thus entirely inapplicable. The opposite is true in innovator liability cases. Generic drugs are not used in in conjunction with innovator drugs, but rather replace them. An innovator drug manufacturer receives no direct or indirect economic benefit from having an identically labelled generic product substituted for its branded medication.

The Court of Appeals in NYCAL also emphasized that its “sensibly confined” duty would have “a balanced and manageable economic impact” and would “not impose[] extreme or unreasonable financial liability on manufacturers” or “saddle [them] with an untenable financial burden.” 2016 WL 3495191, at *__. As we’ve pointed out from the outset, innovator liability is just the opposite – potentially imposing liability in perpetuity (even after an innovator leaves the market) upon innovator manufacturers for generic drugs’ 80%+ of the market, although innovator manufacturers neither profit from generic sales nor can in any way control how generic manufacturers make or market their products.

Thus, both the liability test and the underlying jurisprudential principles in NYCAL are utterly incompatible with New York ever adopting innovator liability. So, like Schrödinger’s cat (Erwin Schrödinger was born on this date, back in 1887), non-manufacturer failure-to-warn liability is both alive (in asbestos) and dead (as to innovator liability) under New York law.

Second, there was also a warning causation issue in NYCAL, about whether under New York law juries should be instructed with a pro-plaintiff presumption, recognized in some states in inadequate warning cases, that if a plaintiff had received some hypothetical “adequate” warning s/he would have heeded it. We’ve already discussed in depth the morass that courts trying to apply New York law had made on the heeding presumption question in the absence of any definitive guidance from the Court of Appeals. We’re pleased to point out that some guidance has been provided in NYCAL. Although the court found that existence, or not, of a heeding presumption had been waived because the defendant “did not raise this argument” at trial, it did not stop there. 2016 WL 3495191, at *__. Rather, the Court strongly suggested that no heeding presumption existed in New York and that traditional causation principles applied in product liability warning cases:

[Defendant’s] current complaint about the court’s instructions on the presumption is unpreserved. Of course, our rejection of [defendant’s] claim on preservation grounds should not be taken as an acceptance or rejection of the trial court’s heeding instructions on the merits, and regardless of the propriety of those instructions, trial courts must continue to ensure that their jury instructions honor the principle that the burden of proving proximate causation, which in a case like this one includes the burden of demonstrating that the injured party would have heeded warnings, falls squarely on plaintiffs.

Id. at *__ (emphasis added). For this proposition the court cited Sosna v. American Home Products, 748 N.Y.S.2d 548 (N.Y.A.D. 2002). Sosna just happens to be – as we discussed in our prior post – the leading case in New York rejecting the existence of any heeding presumption.

Thus, although the court’s observation in NYCAL on the heeding presumption is dictum (due to waiver), that the court saw fit to go out of its way to reiterate that the burden of proving warning causation “falls squarely on plaintiffs” provides strong guidance to to courts going forward that no heeding presumption exists in New York.

For these two reasons, unlike asbestos defendants, manufacturers of prescription medical products are better off in New York product liability litigation after the Court of Appeals decision in NYCAL.